Attached files
file | filename |
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10-Q - FORM 10-Q - EDUCATION MANAGEMENT CORPORATION | l38002e10vq.htm |
EX-3.2 - EX-3.2 - EDUCATION MANAGEMENT CORPORATION | l38002exv3w2.htm |
EX-3.1 - EX-3.1 - EDUCATION MANAGEMENT CORPORATION | l38002exv3w1.htm |
EX-10.4 - EX-10.4 - EDUCATION MANAGEMENT CORPORATION | l38002exv10w4.htm |
EX-10.3 - EX-10.3 - EDUCATION MANAGEMENT CORPORATION | l38002exv10w3.htm |
EX-31.2 - EX-31.2 - EDUCATION MANAGEMENT CORPORATION | l38002exv31w2.htm |
EX-31.1 - EX-31.1 - EDUCATION MANAGEMENT CORPORATION | l38002exv31w1.htm |
EX-10.1 - EX-10.1 - EDUCATION MANAGEMENT CORPORATION | l38002exv10w1.htm |
EX-32.2 - EX-32.2 - EDUCATION MANAGEMENT CORPORATION | l38002exv32w2.htm |
EX-32.1 - EX-32.1 - EDUCATION MANAGEMENT CORPORATION | l38002exv32w1.htm |
Exhibit 10.2
EDUCATION MANAGEMENT CORPORATION
OMNIBUS LONG-TERM INCENTIVE PLAN
OMNIBUS LONG-TERM INCENTIVE PLAN
EDUCATION MANAGEMENT CORPORATION, a Pennsylvania corporation (the Company), sets forth
herein the terms of its Omnibus Long-Term Incentive Plan (the Plan), as follows:
1. PURPOSE
The Plan is intended to enhance the Companys and its Affiliates (as defined herein) ability
to attract and retain highly qualified officers, non-employee members of the Board, key employees,
consultants and advisors, and to motivate such officers, non-employee members of the Board, key
employees, consultants and advisors to serve the Company and its Affiliates and to expend maximum
effort to improve the business results and earnings of the Company, by providing to such persons an
opportunity to acquire or increase a direct proprietary interest in the operations and future
success of the Company. To this end, the Plan provides for the grant of stock options, stock
appreciation rights, restricted stock, restricted stock units, unrestricted stock, other
stock-based awards and cash awards. Any of these awards may, but need not, be made as performance
incentives to reward attainment of performance goals in accordance with the terms hereof. Stock
options granted under the Plan may be non-qualified stock options or incentive stock options, as
provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:
2.1. Affiliate means any company or other trade or business that controls, is
controlled by or is under common control with the Company within the meaning of Rule
405 of Regulation C under the Securities Act, including, without limitation, any
Subsidiary.
2.2. Award means a grant of an Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, other Stock-based Award or cash award under the Plan.
2.3. Award Agreement means a written agreement between the Company and a Grantee,
or notice from the Company or an Affiliate to a Grantee that evidences and sets out the
terms and conditions of an Award.
2.4. Board means the Board of Directors of the Company.
2.5. Business Combination shall have the meaning set forth in Section 15.2.
2.6. Cause shall be defined as that term is defined in a Grantees offer letter or
other applicable employment agreement; or, if there is no such definition, Cause means,
as determined by the Company and unless otherwise provided in an applicable
Award Agreement with the Company or an Affiliate: (i) engaging in any act, or failing
to act, or misconduct that is injurious to the Company or its Affiliates; (ii) gross
negligence or willful misconduct in connection with the performance of duties; (iii)
conviction of (or entering a plea of guilty or nolo contendere to) a criminal offense
(other than minor traffic offenses); (iv) fraud, embezzlement or misappropriation of funds
or property of the Company or an Affiliate; (v) material breach of any term of any
employment, consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company or an
Affiliate; (vi) the entry of an order duly issued by any regulatory agency (including
federal, state and local regulatory agencies and self-regulatory bodies) having
jurisdiction over the Company or an Affiliate requiring the removal from any office held
by the Service Provider with the Company or prohibiting a Service Provider from
participating in the business or affairs of the Company or any Affiliate; or (vii) the
revocation or threatened revocation of any of the Companys or any Affiliates government
licenses, permits or approvals, which is primarily due to the Service Providers action or
inaction and such revocation or threatened revocation would be alleviated or mitigated in
any material respect by the termination of the Service Providers Services.
2.7. Change in Control shall have the meaning set forth in Section 15.2.
2.8. Code means the Internal Revenue Code of 1986, as now in effect or as hereafter
amended.
2.9. Committee means the Compensation Committee of the Board, or such other
committee as determined by the Board. The Compensation Committee of the Board may, in its
discretion, designate a subcommittee of its members to serve as the Committee (to the
extent the Board has not designated another person, committee or entity as the Committee).
Following the Companys initial public offering, (i) the Board will cause the Committee
to satisfy the applicable requirements of any stock exchange on which the Common Stock may
then be listed; (ii) for purposes of Awards to Covered Employees intended to constitute
Performance Awards, to the extent required by Code Section 162(m), Committee means all
of the members of the Compensation Committee who are outside directors within the
meaning of Section 162(m) of the Code; and (iii) for purposes of Awards to Grantees who
are subject to Section 16 of the Exchange Act, Committee means all of the members of the
Compensation Committee who are non-employee directors within the meaning of Rule 16b-3
adopted under the Exchange Act.
2.10. Company means Education Management Corporation, a Pennsylvania corporation,
or any successor corporation.
2.11. Common Stock or Stock means a share of common stock of the Company, par
value $0.01 per share.
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2.12. Covered Employee means a Grantee who is a covered employee within the
meaning of Section 162(m)(3) of the Code as qualified by Section 12.4 herein.
2.13. Disability means as determined by the Company and unless otherwise provided
in an applicable Award Agreement with the Company or an Affiliate, the Grantee is unable
to perform each of the essential duties of such Grantees position by reason of a
medically determinable physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous period of not less than 12
months; provided, however, that, with respect to rules regarding
expiration of an Incentive Stock Option following termination of the Grantees Service,
Disability means permanent and total disability as set forth in Section 22(e)(3) of
the Code.
2.14. Effective Date means the effective date of the Companys Initial Public
Offering.
2.15. Exchange Act means the Securities Exchange Act of 1934, as now in effect or
as hereafter amended.
2.16. Fair Market Value of a share of Common Stock as of a particular date shall
mean (1) if the Common Stock is listed on a national securities exchange, the closing or
last price of the Common Stock on the composite tape or other comparable reporting system
for the applicable date, or if the applicable date is not a trading day, the trading day
immediately preceding the applicable date, or (2) if the shares of Common Stock are not
then listed on a national securities exchange or national market system, or the value of
such shares is not otherwise determinable, such value as determined by the Board in good
faith in its sole discretion (but in any event not less than fair market value within the
meaning of Section 409A); notwithstanding the foregoing, the Fair Market Value of a share
of Common Stock for purposes of determining Awards with a Grant Date as of the Companys
initial public offering shall be the price per share of Common Stock set in the final
prospectus for such initial public offering.
2.17. Family Member means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or
sister-in-law, including adoptive relationships, of the applicable individual, any person
sharing the applicable individuals household (other than a tenant or employee), a trust
in which any one or more of these persons have more than fifty percent of the beneficial
interest, a foundation in which any one or more of these persons (or the applicable
individual) control the management of assets, and any other entity in which one or more of
these persons (or the applicable individual) own more than fifty percent of the voting
interests.
2.18. Grant Date means, as determined by the Board, the latest to occur of (i) the
date as of which the Board approves an Award, (ii) the date on which the recipient of an
Award first becomes eligible to receive an Award under Section 6
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hereof, or (iii) such other date as may be specified by the Board in the Award
Agreement.
2.19. Grantee means a person who receives or holds an Award under the Plan.
2.20. Incentive Stock Option means an incentive stock option within the meaning
of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax
statute, as amended from time to time.
2.21. Incumbent Board shall have the meaning set forth in Section 15.2.
2.22. Initial Public Offering shall mean the initial public offering of shares of
Common Stock pursuant to a registration statement (other than a Form S-8 or successor
forms) filed with, and declared effective by, the SEC.
2.23. Non-qualified Stock Option means an Option that is not an Incentive Stock
Option.
2.24. Option means an option to purchase one or more shares of Stock pursuant to
the Plan.
2.25. Option Price means the exercise price for each share of Stock subject to an
Option.
2.26. Outside Director means a member of the Board who is not an officer or
employee of the Company or an Affiliate, determined in accordance with the requirements of
Section 162(m) of the Code.
2.27. Outstanding Company Common Stock shall have the meaning set forth in Section
15.2.
2.28. Outstanding Company Voting Securities shall have the meaning set forth in
Section 15.2.
2.29. Performance Award means an Award made subject to the attainment of
performance goals (as described in Section 12) over a performance period of from one (1)
to five (5) years.
2.30. Person shall have the meaning set forth in Section 15.2.
2.31. Plan means this Education Management Corporation Omnibus Long-Term Incentive
Plan.
2.32. Principal Stockholders means GS Capital Partners V Fund, L.P., a Delaware
limited partnership, GS Capital Partners V Offshore Fund, L.P., a Cayman Islands exempted
limited partnership, GS Capital Partners V GmbH & Co. KG, a limited partnership formed
under the laws of the Federal Republic of Germany, GS
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Capital Partners V Institutional, L.P., a Delaware limited partnership, Providence
Equity Partners V L.P., a Delaware limited partnership, Providence Equity Partners V-A
L.P., a Delaware limited partnership, Providence Equity Partners IV L.P., a Delaware
limited partnership, Providence Equity Operating Partners IV L.P., a Delaware limited
partnership and Leeds Equity Partners IV, L.P., a Delaware limited partnership.
2.33. Purchase Price means the purchase price for each share of Stock pursuant to a
grant of Restricted Stock.
2.34. Reporting Person means a person who is required to file reports under Section
16(a) of the Exchange Act.
2.35. Restricted Stock means shares of Stock awarded to a Grantee pursuant to
Section 10 hereof.
2.36. Restricted Stock Unit means a bookkeeping entry representing the equivalent
of shares of Stock, awarded to a Grantee pursuant to Section 10 hereof.
2.37. SAR Exercise Price means the per share exercise price of a SAR granted to a
Grantee under Section 9 hereof.
2.38. SEC means the United States Securities and Exchange Commission.
2.39. Section 409A shall mean Section 409A of the Code and all formal guidance and
regulations promulgated thereunder.
2.40. Securities Act means the Securities Act of 1933, as now in effect or as
hereafter amended.
2.41. Separation from Service means a termination of Service by a Service Provider,
as determined by the Board, which determination shall be final, binding and conclusive;
provided if any Award governed by Section 409A is to be distributed on a Separation from
Service, then the definition of Separation from Service for such purposes shall comply
with the definition provided in Section 409A.
2.42. Service means service as a Service Provider to the Company or an Affiliate.
Unless otherwise stated in the applicable Award Agreement, a Grantees change in position
or duties shall not result in interrupted or terminated Service, so long as such Grantee
continues to be a Service Provider to the Company or an Affiliate.
2.43. Service Provider means an employee, officer, non-employee member of the
Board, consultant or advisor of the Company or an Affiliate.
2.44. Stock Appreciation Right or SAR means a right granted to a Grantee under
Section 9 hereof.
2.45. Subsidiary means any subsidiary corporation of the Company within the
meaning of Section 424(f) of the Code.
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2.46. Substitute Award means any Award granted in assumption of or in substitution
for an award of a company or business acquired by the Company or a Subsidiary or with
which the Company or an Affiliate combines, shares issued or issuable.
2.47. Ten Percent Stockholder means an individual who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding stock of the
Company, its parent or any of its Subsidiaries. In determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be applied.
2.48. Termination Date means the date that is ten (10) years after the Effective
Date, unless the Plan is earlier terminated by the Board under Section 5.2 hereof.
2.49. Transaction shall have the meaning set forth in Section 15.1.
2.50. Transition Period means the period beginning with the consummation of an
Initial Public Offering and ending as of the earlier of (i) the date of the first annual
meeting of shareholders of the Company at which directors are to be elected that occurs
after the close of the third calendar year following the calendar year in which the
Initial Public Offering occurs and (ii) the expiration of the reliance period under
Treasury Regulation Section 1.162-27(f)(2).
3. ADMINISTRATION OF THE PLAN
3.1. General.
The Board shall have such powers and authorities related to the administration of the Plan as
are consistent with the Companys certificate of incorporation and bylaws and applicable law. The
Board shall have the power and authority to delegate its responsibilities hereunder to the
Committee, which shall have full authority to act in accordance with its charter, and with respect
to the authority of the Board to act hereunder, all references to the Board shall be deemed to
include a reference to the Committee, to the extent such power or responsibilities have been
delegated. Except as specifically provided in Section 14 or as otherwise may be required by
applicable law, regulatory requirement or the certificate of incorporation or the bylaws of the
Company, the Board shall have full power and authority to take all actions and to make all
determinations required or provided for under the Plan, any Award or any Award Agreement, and shall
have full power and authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan. Following the Companys initial public
offering, the Committee shall administer the Plan; provided that, the Board shall retain the right
to exercise the authority of the Committee to the extent consistent with applicable law and the
applicable requirements of any securities exchange on which the Common Stock may then be listed.
The interpretation and construction by the Board of any provision of the Plan, any Award or any
Award Agreement shall be final, binding and conclusive. Without limitation, the Board shall have
full and final authority, subject to the other terms and conditions of the Plan, to:
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(i) designate Grantees;
(ii) determine the type or types of Awards to be made to a Grantee;
(iii) determine the number of shares of Stock to be subject to an Award;
(iv) establish the terms and conditions of each Award (including, but not limited to, the
Option Price of any Option, the nature and duration of any restriction or condition (or provision
for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the
shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options);
(v) prescribe the form of each Award Agreement; and
(vi) amend, modify, or supplement the terms of any outstanding Award including the authority,
in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or
individuals who are employed outside the United States to recognize differences in local law, tax
policy, or custom.
To the extent permitted by applicable law, the Board may delegate its authority as identified
herein to any individual or committee of individuals (who need not be directors), including without
limitation the authority to make Awards to Grantees who are not subject to Section 16 of the
Exchange Act or who are not Covered Employees. To the extent that the Board delegates its
authority to make Awards as provided by this Section 3.1, all references in the Plan to the Boards
authority to make Awards and determinations with respect thereto shall be deemed to include the
Boards delegate. Any such delegate shall serve at the pleasure of, and may be removed at any time
by the Board.
3.2. Restrictions; No Repricing.
Notwithstanding the foregoing, no amendment or modification may be made to an outstanding
Option or SAR that causes the Option or SAR to become subject to Section 409A, without the
Grantees written prior approval. Notwithstanding any provision herein to the contrary, the
repricing of Options or SARs is prohibited without prior approval of the Companys stockholders.
For this purpose, a repricing means any of the following (or any other action that has the same
effect as any of the following): (A) changing the terms of an Option or SAR to lower its Option
Price or SAR Exercise Price; (B) any other action that is treated as a repricing under generally
accepted accounting principles; and (C) repurchasing for cash or canceling an Option or SAR at a
time when its Option Price or SAR Exercise Price is greater than the Fair Market Value of the
underlying shares in exchange for another Award, unless the cancellation and exchange occurs in
connection with a change in capitalization or similar change under Section 15. Such cancellation
and exchange would be considered a repricing regardless of whether it is treated as a repricing
under generally accepted accounting principles and regardless of whether it is voluntary on the
part of the Grantee.
3.3. Award Agreements.
The grant of any Award may be contingent upon the Grantee executing the appropriate Award
Agreement. The Company may retain the right in an Award Agreement to cause a
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forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in
violation or breach of or in conflict with any employment agreement, non-competition agreement, any
agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof
or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise
in competition with the Company or any Affiliate thereof, to the extent specified in such Award
Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is
terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.
If any of the Companys financial statements are required to be restated, the Company may
recover all or a portion of any Award made to any Grantee with respect to any fiscal year of the
Company the financial results of which are negatively affected by such restatement. The amount to
be recovered shall be the amount, as determined by the Committee, by which the affected Award
exceeds the amount that would have been payable had the financial statements been initially filed
as restated. In no event shall the amount to be recovered by the Company be less than the amount
required to be repaid or recovered as a matter of law.
3.4. Deferral Arrangement.
The Board may permit or require the deferral of any Award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish and in accordance with
Section 409A, which may include provisions for the payment or crediting of interest or dividend
equivalents, including converting such credits into deferred Stock units.
3.5. No Liability.
No member of the Board or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan, any Award or Award Agreement.
3.6. Book Entry.
Notwithstanding any other provision of this Plan to the contrary, the Company may elect to
satisfy any requirement under this Plan for the delivery of stock certificates through the use of
book-entry.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 15 hereof, the maximum number of shares of Stock
available for issuance under the Plan shall be 6,597,869, plus a number of shares equal to the
number of shares subject to stock options granted under the Companys 2006 Stock Plan that are
canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number
of shares underlying such stock options or otherwise terminated without delivery of shares to the
grantees, plus a number of shares equal to the number of shares reserved but not previously granted
under the Companys 2006 Stock Option Plan. 3,519,861 of such shares of Stock available for
issuance under the Plan shall be available for issuance pursuant to Incentive
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Stock Options. Stock issued or to be issued under the Plan shall be authorized but unissued
shares; or, to the extent permitted by applicable law, issued shares that have been reacquired by
the Company. Following the end of the Transition Period and subject to adjustments in accordance
with Section 15, the maximum number of each type of Award (other than cash-based Performance
Awards) intended to constitute performance-based compensation under Code Section 162(m) granted
to any Grantee in any thirty-six (36) month period shall not exceed the following: Options:
7,039,723; SARs: 7,039,723; Restricted Stock: 4,223,833; Restricted Stock Units: 4,223,833 and
other Stock-based Performance Awards : 3,519,861.
The Board may adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments
in accordance with Section 15. If the Option Price of any Option granted under the Plan, or if
pursuant to Section 17.3 the withholding obligation of any Grantee with respect to an Option or
other Award, is satisfied by tendering shares of Stock to the Company (by either actual delivery or
by attestation) or by withholding shares of Stock, the number of shares of Stock issued net of the
shares of Stock tendered or withheld shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the Plan. To the extent that an
Award under the Plan or a stock option granted under the Companys 2006 Stock Option Plan is
canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number
underlying the Award or stock option, or otherwise terminated without delivery of shares to the
Grantee, the shares retained by or returned to the Company will be available under the Plan; and
shares that are withheld from such an Award or stock option granted under the Companys 2006 Stock
Option Plan, or separately surrendered by the Grantee in payment of any exercise price or taxes
relating to such an Award or stock option shall be deemed to constitute shares not delivered to the
Grantee and will be available under the Plan. In addition, in the case of any Substitute Award,
such Substitute Award shall not be counted against the number of shares reserved under the Plan.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1. Term.
The Plan shall be effective as of the Effective Date and shall terminate automatically as of
the first meeting of stockholders at which directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which the initial public offering occurs
unless the Plan is approved by the stockholders of the Company prior to such meeting but subsequent
to the Effective Date. The Plan shall terminate automatically on the ten (10) year anniversary of
the Effective Date and may be terminated on any earlier date as provided in Section 5.2.
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5.2. Amendment and Termination of the Plan.
The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any Awards which have not been made. An amendment shall be contingent on approval of the Companys
stockholders to the extent stated by the Board, required by applicable law or required by
applicable stock exchange listing requirements. Notwithstanding the foregoing, any amendment to
Section 3.2 shall be contingent upon the approval of the Companys stockholders. No Awards shall
be made after the Termination Date. The applicable terms of the Plan, and any terms and conditions
applicable to Awards granted prior to the Termination Date shall survive the termination of the
Plan and continue to apply to such Awards. No amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, materially impair rights or obligations under any Award
theretofore awarded.
6. AWARD ELIGIBILITY AND LIMITATIONS
6.1. Service Providers.
Subject to this Section 6, Awards may be made to any Service Provider, including any Service
Provider who is an officer, Non-employee member of the Board, consultant or advisor of the Company
or of any Affiliate, as the Board shall determine and designate from time to time in its
discretion.
6.2. Successive Awards.
An eligible person may receive more than one Award, subject to such restrictions as are
provided herein.
6.3. Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards may, in the discretion of the Board, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an
Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate.
Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award
is granted in substitution or exchange for another Award, the Board shall have the right to require
the surrender of such other Award in consideration for the grant of the new Award. The Board shall
have the right, in its discretion, to make Awards in substitution or exchange for any other award
under another plan of the Company, any Affiliate, or any business entity to be acquired by the
Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including
in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the
value of Stock subject to the Award is equivalent in value to the cash compensation (for example,
Restricted Stock Units or Restricted Stock).
7. AWARD AGREEMENT
Each Award shall be evidenced by an Award Agreement, in such form or forms as the Board shall
from time to time determine. Without limiting the foregoing, an Award Agreement may be provided in
the form of a notice which provides that acceptance of the Award constitutes
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acceptance of all terms of the Plan and the notice. Award Agreements granted from time to
time or at the same time need not contain similar provisions but shall be consistent with the terms
of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the
absence of such specification such options shall be deemed Non-qualified Stock Options.
8. TERMS AND CONDITIONS OF OPTIONS
8.1. Option Price.
The Option Price of each Option shall be fixed by the Board and stated in the related Award
Agreement. The Option Price of each Option (except those that constitute Substitute Awards) shall
be at least the Fair Market Value on the Grant Date of a share of Stock; provided,
however, that in the event that a Grantee is a Ten Percent Stockholder as of the Grant
Date, the Option Price of an Option granted to such Grantee that is intended to be an Incentive
Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the
Grant Date. In no case shall the Option Price of any Option be less than the par value of a share
of Stock.
8.2. Vesting.
Subject to Section 8.3 hereof, each Option shall become exercisable at such times and under
such conditions (including, without limitation, performance requirements) as shall be determined by
the Board and stated in the Award Agreement.
8.3. Term.
Each Option shall terminate, and all rights to purchase shares of Stock thereunder shall
cease, upon the expiration of ten (10) years from the Grant Date, or under such circumstances and
on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated
in the related Award Agreement; provided, however, that in the event that the
Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five (5)
years from its Grant Date.
8.4. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, (i) prior to the date the Plan is approved by the stockholders of the Company as
provided herein or (ii) after the occurrence of an event which results in termination of the
Option.
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8.5. Method of Exercise.
An Option that is exercisable may be exercised by the Grantees delivery to the Company of
written notice of exercise on any business day, at the Companys principal office, on the form
specified by the Company. Such notice shall specify the number of shares of Stock with respect to
which the Option is being exercised and shall be accompanied by payment in full of the Option Price
of the shares for which the Option is being exercised plus the amount (if any) of federal and/or
other taxes which the Company may, in its judgment, be required to withhold with respect to an
Award. The minimum number of shares of Stock with respect to which an Option may be exercised, in
whole or in part, at any time shall be the lesser of (i) the number set forth in the related Award
Agreement and (ii) the maximum number of shares available for purchase under the Option at the time
of exercise.
8.6. Rights of Holders of Options.
Unless otherwise stated in the related Award Agreement, an individual holding or exercising an
Option shall have none of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock or to direct the
voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid
and issued to him. Except as provided in Section 15 hereof or the related Award Agreement, no
adjustment shall be made for dividends, distributions or other rights for which the record date is
prior to the date of such issuance.
8.7. Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
8.8. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantees employer and its Affiliates)
does not exceed $100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
9.1. Right to Payment.
A SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i)
the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR Exercise
Price, as determined by the Board. The Award Agreement for an SAR shall specify the SAR Exercise
Price, which shall be fixed at the Fair Market Value of a share of Stock on the Grant
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Date. SARs may be granted alone or in conjunction with all or part of an Option or at any
subsequent time during the term of such Option or in conjunction with all or part of any other
Award. A SAR granted in tandem with an outstanding Option following the Grant Date of such Option
shall have a grant price that is equal to the Option Price; provided, however, that
the SARs grant price may not be less than the Fair Market Value of a share of Stock on the Grant
Date of the SAR.
9.2. Other Terms.
The Board shall determine at the Grant Date or thereafter, the time or times at which and the
circumstances under which an SAR may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or times at which
SARs shall cease to be or become exercisable following Separation from Service or upon other
conditions, the method of exercise, whether or not a SAR shall be in tandem or in combination with
any other Award, and any other terms and conditions of any SAR.
9.3. Term of SARs.
The term of a SAR granted under the Plan shall be determined by the Board, in its sole
discretion; provided, however, that such term shall not exceed ten (10) years.
9.4. Payment of SAR Amount.
Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in
cash or Stock, as determined by the Board) in an amount determined by multiplying:
(i) the difference between the Fair Market Value of a share of Stock on the date of
exercise over the SAR Exercise Price; by
(ii) the number of shares of Stock with respect to which the SAR is exercised.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS
10.1. Restrictions.
At the time of grant, the Board may, in its sole discretion, establish a period of time (a
restricted period) and any additional restrictions including the satisfaction of corporate or
individual performance objectives applicable to an Award of Restricted Stock or Restricted Stock
Units in accordance with Section 12.1 and 12.2. Each Award of Restricted Stock or Restricted Stock
Units may be subject to a different restricted period and additional restrictions. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of
any other applicable restrictions.
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10.2. Restricted Stock Certificates.
The Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been
granted, stock certificates or other evidence of ownership representing the total number of shares
of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date.
The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold
such certificates for the Grantees benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee;
provided, however, that such certificates shall bear a legend or legends that
comply with the applicable securities laws and regulations and makes appropriate reference to the
restrictions imposed under the Plan and the Award Agreement.
10.3. Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have rights as stockholders of the Company.
10.4. Rights of Holders of Restricted Stock Units.
10.4.1. Settlement of Restricted Stock Units.
Restricted Stock Units may be settled in cash or Stock, as determined by the Board and set
forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock
Units shall be settled (i) within the time period specified in Section 17.9.1 for short term
deferrals or (ii) otherwise within the requirements of Section 409A, in which case the Award
Agreement shall specify upon which events such Restricted Stock Units shall be settled.
10.4.2. Voting and Dividend Rights.
Unless otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units
shall not have rights as stockholders of the Company.
10.4.3. Creditors Rights.
A holder of Restricted Stock Units shall have no rights other than those of a general creditor
of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the
Company, subject to the terms and conditions of the applicable Award Agreement.
10.5. Purchase of Restricted Stock.
The Grantee shall be required, to the extent required by applicable law, to purchase the
Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if
any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase
Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a
form described in Section 11 or, in the discretion of the Board, in consideration for past Services
rendered.
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10.6. Delivery of Stock.
Upon the expiration or termination of any restricted period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or
Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award
Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantees beneficiary or estate, as the case may be.
11. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
11.1. General Rule.
Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to
the Company, except as provided in this Section 11.
11.2. Surrender of Stock.
To the extent the Award Agreement so provides, payment of the Option Price for shares
purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be
made all or in part through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price or Purchase Price for
Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or
surrender. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to
make payment in the form of already owned shares of Stock may be authorized only at the time of
grant.
11.3. Cashless Exercise.
With respect to an Option only (and not with respect to Restricted Stock), to the extent
permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may
be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction
to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver
all or part of the sales proceeds to the Company in payment of the Option Price and any withholding
taxes described in Section 17.3.
11.4. Other Forms of Payment.
To the extent the Award Agreement so provides, payment of the Option Price or the Purchase
Price for Restricted Stock may be made in any other form that is consistent with applicable laws,
regulations and rules, including, but not limited to, the Companys withholding of shares of Stock
otherwise due to the exercising Grantee.
12. TERMS AND CONDITIONS OF PERFORMANCE AWARDS
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12.1. Performance Conditions.
The right of a Grantee to exercise or receive a grant or settlement of any Award, and the
timing thereof, may be subject to such performance conditions as may be specified by the Committee.
The Committee may use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its discretion to reduce
the amounts payable under any Award subject to performance conditions, except as limited under
Section 12.2 hereof in the case of a Performance Award intended to qualify under Code Section
162(m).
12.2. Performance Awards Granted to Designated Covered Employees.
If and to the extent that the Committee determines that a Performance Award to be granted to a
Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as
performance-based compensation for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 12.2.
12.2.1. Performance Goals Generally.
The performance goals for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 12.2. Following the end of the Transition
Period, performance goals shall be objective and shall otherwise meet the requirements of Code
Section 162(m) and regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance goals being
substantially uncertain. The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one performance goal or that two or more
of the performance goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may, in the discretion of the Committee, be established
on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or
business segments, as applicable. Performance goals may be absolute or relative (to the
performance of one or more comparable companies or indices). Measurement of performance goals may
exclude (in the discretion of the Committee) the impact of charges for restructuring, discontinued
operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects
of tax or accounting changes (each as defined by generally accepted accounting principles and as
identified in the Companys financial statements or other SEC filings). Performance goals may
differ for Performance Awards granted to any one Grantee or to different Grantees.
12.2.2. Business Criteria.
One or more of the following business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance Awards: net sales; revenue; revenue growth or
product revenue growth; operating income (before or after taxes); pre-or after-tax
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income (before or after allocation of corporate overhead and bonuses; net earnings; earnings
per share; net income (before or after taxes); return on equity; total shareholder return; return
on assets or net assets; appreciation in and/or maintenance of, share price; market share; gross
profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings
before interest, taxes depreciation and amortization); economic value-added models or equivalent
metrics; comparisons with various stock market indices; reduction in costs; cash flow or cash flow
per share (before or after dividends); return on capital (including return on total capital or
return on invested capital; cash flow return on investment; improvement in or attainment of expense
levels or working capital levels; operating margins; gross margins or cash margin; year-end cash;
debt reductions; shareholder equity; regulatory performance; academic performances; student loan
performance; implementation, completion or attainment of measurable objectives with respect to
research, development, products or projects and recruiting and maintaining personnel and, prior to
the end of the Transition Period, any other business criteria established by the Committee.
12.2.3. Timing for Establishing Performance Goals.
Performance goals shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such other date as may be required
or permitted for performance-based compensation under Code Section 162(m).
12.2.4. Settlement of Performance Awards; Other Terms.
Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in
the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such Performance Awards. Following the end of
the Transition Period, the maximum amount of each cash-based Performance Award intended to
constitute performance-based compensation under Code Section 162(m) granted to any Grantee in any
twelve (12) month period shall not exceed One Million Dollars ($1,000,000).
12.3. Written Determinations.
All determinations by the Committee as to the establishment of performance goals, the amount
of any Performance Award pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards, shall be made in writing in the case of any
Award intended to qualify under Code Section 162(m), to the extent required by Code Section 162(m).
To the extent permitted by Code Section 162(m), the Committee may delegate any responsibility
relating to such Performance Awards.
12.4. Status of Section 12.2 Awards under Code Section 162(m).
It is the intent of the Company that Performance Awards under Section 12.2 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees within the meaning of
Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute
qualified performance-based compensation within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, the terms of Section 12.2, including the definitions of
Covered Employee and other terms used therein, shall be interpreted in a manner consistent with
Code Section 162(m) and regulations thereunder. The foregoing
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notwithstanding, because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the Committee, at the time
of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal
year. If any provision of the Plan or any agreement relating to such Performance Awards does not
comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder,
such provision shall be construed or deemed amended to the extent necessary to conform to such
requirements.
13. OTHER STOCK-BASED AWARDS
13.1. Grant of Other Stock-based Awards.
Other Stock-based Awards, consisting of Stock units, or other Awards, valued in whole or in
part by reference to, or otherwise based on, Common Stock, may be granted either alone or in
addition to or in conjunction with other Awards under the Plan. Other Stock-based Awards may be
granted in lieu of other cash or other compensation to which a Service Provider is entitled from
the Company or may be used in the settlement of amounts payable in shares of Common Stock under any
other compensation plan or arrangement of the Company, including without limitation, the Companys
Incentive Compensation Plan. Subject to the provisions of the Plan, the Committee shall have the
sole and complete authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards,
and all other conditions of such Awards. Unless the Committee determines otherwise, any such Award
shall be confirmed by an Award Agreement, which shall contain such provisions as the Committee
determines to be necessary or appropriate to carry out the intent of this Plan with respect to such
Award.
13.2. Terms of Other Stock-based Awards.
Any Common Stock subject to Awards made under this Section 13 may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction, performance or deferral period lapses.
14. REQUIREMENTS OF LAW
14.1. General.
The Company shall not be required to sell or issue any shares of Stock under any Award if the
sale or issuance of such shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing, registration or
qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or
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obtained free of any conditions not acceptable to the Company, and any delay caused thereby
shall in no way affect the date of termination of the Award. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of Stock underlying
an Award, unless a registration statement under such Act is in effect with respect to the shares of
Stock covered by such Award, the Company shall not be required to sell or issue such shares unless
the Board has received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to
the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction
that expressly imposes the requirement that an Option shall not be exercisable until the shares of
Stock covered by such Option are registered or are exempt from registration, the exercise of such
Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of such an exemption.
14.2. Rule 16b-3.
During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act, it is the intent of the Company that Awards and the exercise of Options granted
to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent that any provision of the Plan or action by the Board or Committee does
not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan.
In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to
modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of
any features of, the revised exemption or its replacement.
15. EFFECT OF CHANGES IN CAPITALIZATION
15.1. Changes in Capitalization.
15.1.1. Changes in Stock.
If (i) the number of outstanding shares of Stock is increased or decreased or the shares of
Stock are changed into or exchanged for a different number or kind of shares or other securities of
the Company on account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date or (ii) there occurs any spin-off, split-up,
extraordinary cash dividend or other distribution of assets by the Company, the number and kinds of
shares for which grants of Options and other Stock-based Awards may be made under the Plan
(including the per-Grantee maximums set forth in Section 4) shall be equitably adjusted by the
Company; provided that any such adjustment shall comply with Section 409A. In addition, in the
event of any such increase or decrease in the number of outstanding shares or
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other transaction described in clause (ii) above, the number and kind of shares for which
Awards are outstanding and the Option Price per share of outstanding options and SAR Exercise Price
per share of outstanding SARs shall be equitably adjusted; provided that any such adjustment shall
comply with Section 409A.
15.1.2. Effect of Certain Transactions.
Except as otherwise provided in an Award Agreement, in the event of (a) the liquidation or
dissolution of the Company or (b) a reorganization, merger, exchange or consolidation of the
Company or involving the shares of Common Stock (a Transaction), the Plan and the Awards issued
hereunder shall continue in effect in accordance with their respective terms, except that following
a Transaction either (i) each outstanding Award shall be treated as provided for in the agreement
entered into in connection with the Transaction or (ii) if not so provided in such agreement, each
Grantee shall be entitled to receive in respect of each share of Common Stock subject to any
outstanding Awards, upon exercise or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each holder of a share of
Common Stock was entitled to receive in the Transaction in respect of a share of Common stock;
provided, however, that, unless otherwise determined by the Committee, such stock, securities,
cash, property or other consideration shall remain subject to all of the conditions, restrictions
and performance criteria which were applicable to the Awards prior to such Transaction. Without
limiting the generality of the foregoing, the treatment of outstanding Options and SARs pursuant to
this Section 15.1.2 in connection with a Transaction in which the consideration paid or distributed
to the Companys stockholders is not entirely shares of common stock of the acquiring or resulting
corporation may include the cancellation of outstanding Options and SARs upon consummation of the
Transaction as long as, at the election of the Committee, (x) the holders of affected Options and
SARs have been given a period of at least fifteen days prior to the date of the consummation of the
Transaction to exercise the Options or SARs (whether or not they were otherwise exercisable) or (y)
the holders of the affected Options and SARs are paid (in cash or cash equivalents) in respect of
each share of Stock covered by the Option or SAR being canceled an amount equal to the excess, if
any, of the per share price paid or distributed to stockholders in the transaction (the value of
any non-cash consideration to be determined by the Committee in its sole discretion) over the
Option Price or SAR Exercise Price, as applicable. For avoidance of doubt, (1) the cancellation of
Options and SARs pursuant to clause (y) of the preceding sentence may be effected notwithstanding
anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount
determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Option or
SAR may be cancelled without any payment therefore. The treatment of any Award as provided in this
Section 15.1.2 shall be conclusively presumed to be appropriate for purposes of Section 15.1.1.
15.2. Definition of Change in Control.
Change in Control means:
(1) | Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a Person) becomes the beneficial owner (within the meaning of Rule 13d 3 promulgated under the Exchange Act) of 30% or more of either (A) the then-outstanding shares of common stock of the Company (the |
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Outstanding Company Common Stock) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that, for purposes of this Section 15.2, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition pursuant to a transaction that complies with Sections 15.2(3)(A), (B) and (C) or (v) any acquisition by any of the Principal Stockholders other than in connection with a going private transaction within the meaning of Rule 13e-3 of the Exchange Act. | |||
(2) | Individuals who, as of the date hereof, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Companys stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; | ||
(3) | Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a Business Combination), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then- |
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outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or | |||
(4) | Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. |
Notwithstanding the foregoing, if it is determined that an Award hereunder is subject to the
requirements of Section 409A, the Company will not be deemed to have undergone a Change in Control
unless the Company is deemed to have undergone a change in control event pursuant to the
definition of such term in Section 409A.
15.3. Effect of Change in Control
The Board shall determine the effect of a Change in Control upon Awards, and such effect may
be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Board may
provide in the Award Agreements at the time of grant, or any time thereafter with the consent of
the Grantee, the actions that will be taken upon the occurrence of a Change in Control, including,
but not limited to, accelerated vesting, termination or assumption. The Board may also provide in
the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee,
for different provisions to apply to an Award in place of those described in Sections 15.1 and
15.2.
15.4. Reorganization Which Does Not Constitute a Change in Control.
If the Company undergoes any reorganization, merger, or consolidation of the Company with one
or more other entities which does not constitute a Change in Control, any Option or SAR theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Stock subject to such Option or SAR would have been entitled immediately
following such reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price
or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise
Price of the shares remaining subject to the Option or SAR immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement,
any restrictions applicable to such Award shall apply as well to any replacement shares received by
the Grantee as a result of the reorganization, merger or consolidation.
15.5. Adjustments.
Adjustments under this Section 15 related to shares of Stock or securities of the Company
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to any such
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adjustment, and any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share.
16. NO LIMITATIONS ON COMPANY
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.
17. TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN
17.1. Disclaimer of Rights.
No provision in the Plan or in any Award Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the
applicable Award Agreement, no Award granted under the Plan shall be affected by any change of
duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to
transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any Grantee or beneficiary under the terms of the Plan.
17.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals), including, without limitation, the granting of stock options
as the Board in its discretion determines desirable.
17.3. Withholding Taxes.
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments
of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by
law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to
an Award, (ii) upon the issuance of any shares of Stock upon the exercise of an Option or SAR, or
(iii) otherwise due in connection with an Award. At the time of such vesting, lapse, or exercise,
the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the
Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company or the Affiliate, which
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may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion,
the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company
or the Affiliate to withhold the minimum required number of shares of Stock otherwise issuable to
the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the
Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so
delivered or withheld shall have an aggregate Fair Market Value equal to such withholding
obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Company or the Affiliate as of the date that the amount of
tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section
17.3 may satisfy his or her withholding obligation only with shares of Stock that are not subject
to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
17.4. Captions.
The use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or any Award Agreement.
17.5. Other Provisions.
Each Award Agreement may contain such other terms and conditions not inconsistent with the
Plan as may be determined by the Board, in its sole discretion.
17.6. Number and Gender.
With respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.
17.7. Severability.
If any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
17.8. Governing Law.
The Plan shall be governed by and construed in accordance with the laws of the State of New
York without giving effect to the principles of conflicts of law, provided that the provisions set
forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988,
as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.
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17.9. Section 409A.
17.9.1. Short-Term Deferrals.
For each Award intended to comply with the short-term deferral exception provided for under
Section 409A, the related Award Agreement shall provide that such Award shall be paid out by the
later of (i) the 15th day of the third month following the Grantees first taxable year
in which the Award is no longer subject to a substantial risk of forfeiture or (ii) the
15th day of the third month following the end of the Companys first taxable year in
which the Award is no longer subject to a substantial risk of forfeiture.
17.9.2. Adjustments.
To the extent that the Board determines that a Grantee would be subject to the additional 20%
tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of
any provision of any Award, to the extent permitted by Section 409A, such provision shall be deemed
amended to the minimum extent necessary to avoid application of such additional tax. The Board
shall determine the nature and scope of such amendment.
17.10. Stockholder Approval; Effective Date of Plan.
The Plan shall be effective as of the Effective Date. Any Option that is designated as an
Incentive Stock Option shall be a Nonqualified Stock Option if the Plan is not approved by the
shareholders of the Company within twelve (12) months after the Effective Date of the Plan.
Following the end of the Transition Period, no award that is intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code shall be effective
unless and until the Plan is approved by the stockholders of the Company.
17.11. Separation from Service.
The Board shall determine the effect of a Separation from Service upon Awards, and such effect
shall be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Board
may provide in the Award Agreements at the time of grant, or any time thereafter with the consent
of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service,
including, but not limited to, accelerated vesting or termination, depending upon the circumstances
surrounding the Separation from Service.
17.12. Transferability of Awards.
17.12.1. Transfers in General.
Except as provided in Section 17.12.2, no Award shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and distribution, and,
during the lifetime of the Grantee, only the Grantee personally (or the Grantees personal
representative) may exercise rights under the Plan.
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17.12.2. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this
Section 17.12.2, a not for value transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) a transfer to
an entity in which more than fifty percent of the voting interests are owned by Family Members (or
the Grantee) in exchange for an interest in that entity. Following a transfer under this Section
17.12.2, any such Award shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited
except to Family Members of the original Grantee in accordance with this Section 17.12.2 or by will
or the laws of descent and distribution.
17.13. Dividends and Dividend Equivalent Rights.
If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled
to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the
Common Stock or other securities covered by an Award. The terms and conditions of a dividend
equivalent right may be set forth in the Award Agreement. Dividend equivalents credited to a
Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or
other securities of the Company at a price per unit equal to the Fair Market Value of a share of
Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion
of the Committee.
EDUCATION MANAGEMENT CORPORATION
By: | /s/ Todd S. Nelson | |||
Title: | Chief Executive Officer | |||
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