Exhibit 10.1
AMERICAN PUBLIC EDUCATION, INC. 2011 OMNIBUS INCENTIVE PLAN
American Public Education, Inc., a Delaware corporation (the Company), sets forth herein the
terms of its 2011 Omnibus Incentive Plan, (the Plan), as follows:
1. PURPOSE
The Plan is intended to (a) provide eligible persons with an incentive to contribute to the
success of the Company and to operate and manage the Companys business in a manner that will
provide for the Companys long-term growth and profitability to benefit its shareholders and other
important stakeholders, including its employees and customers, and (b) provide a means of
obtaining, rewarding and retaining key personnel. To this end, the Plan provides for the grant of
awards of stock options, stock appreciation rights, restricted stock, deferred stock units,
unrestricted stock, dividend equivalent rights, performance shares and other performance-based
awards, other equity-based awards and cash bonus awards. Any of these awards may, but need not, be
made as performance incentives to reward the holders of such awards for the achievement of
performance goals in accordance with the terms of the Plan. 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 documents (including the Plan and Award Agreements), the
following definitions shall apply:
2.1
Affiliate
means any company or other entity 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 any Subsidiary. For purposes of grants of Options or Stock Appreciation Rights, an
entity may not be considered an Affiliate unless the Company holds a controlling interest in such
entity within the meaning of Treasury Regulation Section 1.414(c)-2(b)(2)(i),
provided
that (a)
except as specified in clause (b) below, an interest of at least 50 percent shall be used instead
of an interest of at least 80 percent in each case where at least 80 percent appears in
Treasury Regulation Section 1.414(c)-2(b)(2)(i) and (b) where the grant of Options or Stock
Appreciation Rights is based upon a legitimate business criterion, an interest of at least 20
percent shall be used instead of an interest of at least 80 percent in each case where at least
80 percent appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).
2.2
Applicable Laws
means the legal requirements relating to the Plan and the Awards under
(a) applicable provisions of the corporate, securities, tax and other laws, rules, regulations and
government orders of any jurisdiction applicable to Awards granted to residents therein and (b) the
rules of any Stock Exchange on which the Stock is listed.
2.3
Award
means a grant under the Plan of an Option, a Stock Appreciation Right, Restricted
Stock, a Deferred Stock Unit, Unrestricted Stock, a Dividend Equivalent Right, a Performance Share
or other Performance-Based Award, an Other Equity-Based Award, or cash.
2.4
Award Agreement
means the agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of an Award.
2.5
Award Stock
shall have the meaning set forth in
Section 17.
3(a)(ii)
.
2.6
Benefit Arrangement
shall have the meaning set forth in
Section 15
.
2.7
Board
means the Board of Directors of the Company.
2.8
Cause
means, with respect to any Grantee, as determined by the Committee and unless
otherwise provided in an applicable agreement between such Grantee and the Company or an Affiliate,
(i) gross negligence or willful misconduct in connection with the performance of duties; (ii)
conviction of a criminal offense (other than minor traffic offenses); or (iii) 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.
2.9
Corporate Transaction
means (i) the dissolution or liquidation of the Company or a
merger, consolidation, or reorganization of the Company with one or more other entities in which
the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the
Company to another person or entity, or (iii) any transaction (including without limitation a
merger or reorganization in which the Company is the surviving entity) which results in any person
or entity owning 50% or more of the combined voting power of all classes of stock of the Company.
2.10
Code
means the Internal Revenue Code of 1986, as amended, as now in effect or as
hereafter amended, and any successor thereto.
2.11
Committee
means a committee of, and designated from time to time by resolution of, the
Board, which shall be constituted as provided in
Section 3.1.2
and
Section 3.1.3
(or, if no
Committee has been so designated, the Board).
2.12
Company
means American Public Education, Inc., a Delaware corporation.
2.13
Covered Employee
means a Grantee who is a covered employee within the meaning of Code
Section 162(m)(3).
2.14
Deferred Stock Unit
means a bookkeeping entry representing the equivalent of one (1)
share of Stock awarded to a Grantee pursuant to
Section 10
that (a) is not subject to vesting or
(b) is subject to time-based vesting, but not to performance-based vesting. A Deferred Stock Unit
may also be referred to as a restricted stock unit.
2.15
Determination Date
means the Grant Date or such other date as of which the Fair Market
Value of a share of Stock is required to be established for purposes of the Plan.
2.16
Disability
means, with respect to rules regarding expiration of an Incentive Stock
Option following termination of the Grantees Service, the Grantee is unable to engage in any
substantial gainful activity by reason of a medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
2.17
Dividend Equivalent Right
means a right, granted to a Grantee pursuant to
Section 13
,
to receive cash, Stock, other Awards or other property equal in value to dividends or other
periodic payments paid or made with respect to a specified number of shares of Stock.
2.18
Employee
means, as of any date of determination, an employee (including an officer) of
the Company or an Affiliate.
2.19
Effective Date
means May 6, 2011, the date on which the Plan was approved by the
Companys shareholders.
2.20
Exchange Act
means the Securities Exchange Act of 1934, as amended, as now in effect or
as hereafter amended.
2.21
Fair Market Value
means the fair market value of a share of Stock for purposes of the
Plan, which shall be determined as of any Determination Date as follows:
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(a) If on such Determination Date the shares of Stock are listed on a Stock Exchange,
or are publicly traded on another established securities market (a Securities Market), the
Fair Market Value of a share of Stock shall be the closing price of the Stock as reported on
such Stock Exchange or such Securities Market (
provided
that, if there is more than one such
Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock
Exchange or Securities Market for purposes of the Fair Market Value determination). If
there is no such reported closing price on such Determination Date, the Fair Market Value of
a share of Stock shall be the closing price of the Stock on the next preceding day on which
any sale of Stock shall have been reported on such Stock Exchange or such Securities Market.
(b) If on such Determination Date the shares of Stock are not listed on a Stock
Exchange or publicly traded on a Securities Market, the Fair Market Value of a share of
Stock shall be the value of the Stock as determined by the Committee by the reasonable
application of a reasonable valuation method, in a manner consistent with Code Section 409A.
Notwithstanding this
Section 2.21
or
Section 18.3
, for purposes of determining taxable income
and the amount of the related tax withholding obligation pursuant to
Section 18.3
, for any shares
of Stock subject to an Award that are sold by or on behalf of a Grantee on the same date on which
such shares may first be sold pursuant to the terms of the related Award Agreement, the Fair Market
Value of such shares shall be the sale price of such shares on such date (or if sales of such
shares are effectuated at more than one sale price, the weighted average sale price of such shares
on such date).
2.22
Family Member
means, with respect to any Grantee as of any date of determination, (a) 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 such Grantee, (b)
any person sharing such Grantees household (other than a tenant or employee), (c) a trust in which
any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more
than fifty percent (50%) of the beneficial interest, (d) a foundation in which any one or more of
the persons specified in clauses (a) and (b) above (and such Grantee) control the management of
assets, and (e) any other entity in which one or more of the persons specified in clauses (a) and
(b) above (and such Grantee) own more than fifty percent (50%) of the voting interests.
2.23
Grant Date
means, as determined by the Committee, (a) the date as of which the
Committee completes the corporate action constituting the Award or (b) such date subsequent to the
date specified in clause (a) above as may be specified by the Committee.
2.24
Grantee
means a person who receives or holds an Award under the Plan.
2.25
Incentive Stock Option
means an incentive stock option within the meaning of Code
Section 422, or the corresponding provision of any subsequently enacted tax statute, as amended
from time to time.
2.26
Non-qualified Stock Option
means an Option that is not an Incentive Stock Option.
2.27
Option
means an option to purchase one or more shares of Stock pursuant to the Plan.
2.28
Option Price
means the exercise price for each share of Stock subject to an Option.
2.29
Other Agreement
shall have the meaning set forth in
Section 15
.
2.30
Outside Director
means a member of the Board who is not an Employee.
2.31
Other Equity-Based Award
means an Award representing a right or other interest that may
be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or
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related to, Stock, other than an Option, a Stock Appreciation Right, Restricted Stock, a
Deferred Stock Unit, Unrestricted Stock, a Dividend Equivalent Right or a Performance Share.
2.32
Performance-Based Compensation
means compensation under an Award that is intended to
satisfy the requirements of Code Section 162(m) for qualified performance-based compensation paid
to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall be construed to
mean that an Award which does not satisfy the requirements for qualified performance-based
compensation within the meaning of and pursuant to Code Section 162(m) does not constitute
performance-based compensation for other purposes, including the purposes of Code Section 409A.
2.33
Performance-Based Award
means an Award of Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock Units, Performance Shares or Other Equity-Based Awards made
subject to the achievement of performance goals (as provided in
Section 14
) over a Performance
Period specified by the Committee.
2.34
Performance Measures
means measures as specified in
Section 14
on which the performance
goals under Performance-Based Awards are based and which are approved by the Companys shareholders
pursuant to, and to the extent required by, the Plan in order to qualify such Performance-Based
Awards as Performance-Based Compensation.
2.35
Performance Period
means the period of time during which the performance goals under
Performance-Based Awards must be met in order to determine the degree of payout and/or vesting with
respect to any such Performance-Based Awards.
2.36
Performance Shares
means a Performance-Based Award representing a right or other
interest that may be denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock, made subject to the achievement of performance goals (as
provided in
Section 14
) over a Performance Period of up to ten (10) years.
2.37
Plan
means this American Public Education, Inc. 2011 Omnibus Incentive Plan, as amended
from time to time.
2.38
Prior Plans
means the American Public Education, Inc. 2002 Stock Incentive Plan, as
amended and the American Public Education, Inc. 2007 Omnibus Incentive Plan.
2.39
Reporting Person
means a person who is required to file reports under Section 16(a) of
the Exchange Act, or any successor provision.
2.40
Restricted Period
shall have the meaning set forth in
Section 10.2
.
2.41
Restricted Stock
means shares of Stock awarded to a Grantee pursuant to
Section 10
.
2.42
SAR Price
shall have the meaning set forth in
Section 9.1
.
2.43
Securities Act
means the Securities Act of 1933, as amended, as now in effect or as
hereafter amended.
2.44
Service
means service of a Grantee as a Service Provider to the Company or any
Affiliate. Unless otherwise provided in the applicable Award Agreement, a Grantees change in
position or duties with the Company or any Affiliate shall not result in interrupted or terminated
Service, so long as the Grantee continues to be a Service Provider to the Company or any Affiliate.
If the Service Providers employment or other service relationship is with an Affiliate and that
entity ceases to be an Affiliate, a termination of Service shall be deemed to have occurred when
the entity ceases to be an Affiliate unless the Service Provider transfers his or her employment or
other service relationship to the Company or its remaining Affiliates. Any determination by the
Committee whether a termination of Service shall have occurred for purposes of the Plan shall be
final, binding and conclusive.
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2.45
Service Provider
means, as of any date of determination, an Employee, officer, or
director of the Company or any Affiliate, or a consultant (who is a natural person) or adviser (who
is a natural person) to the Company or any Affiliate who provides services to the Company or any
Affiliate.
2.46
Stock
means the common stock, par value $0.01 per share, of the Company, or any
security which shares of Stock may be changed into or for which shares of Stock may be exchanged as
provided in
Section 17.1
.
2.47
Stock Appreciation Right
or
SAR
means a right granted to a Grantee pursuant to
Section 9
.
2.48
Stock Exchange
means the NASDAQ Stock Market or another established national or
regional stock exchange.
2.49
Subsidiary
means any corporation (other than the Company) or non-corporate entity with
respect to which the Company owns, directly or indirectly, fifty percent (50%) or more of the total
combined voting power of all classes of stock, membership interests or other ownership interests of
any class or kind ordinarily having the power to vote for the directors, managers or other voting
members of the governing body of such corporation or non-corporate entity. In addition, any other
entity may be designated by the Committee as a Subsidiary,
provided
that (a) such entity could be
considered as a subsidiary according to generally accepted accounting principles in the United
States of America, and (b) in the case of an Award of Options or Stock Appreciation Rights, such
Award would be considered to be granted in respect of service recipient stock under Code Section
409A.
2.50
Substitute Award
means an Award granted upon assumption of, or in substitution for,
outstanding awards previously granted under a compensatory plan by a business entity acquired or to
be acquired by the Company or an Affiliate or with which the Company or an Affiliate has combined
or will combine.
2.51
Ten Percent Shareholder
means a natural person who owns more than ten percent (10%) of
the total combined voting power of all classes of outstanding voting securities of the Company, the
Companys parent (if any) or any of the Companys Subsidiaries. In determining stock ownership,
the attribution rules of Code Section 424(d) shall be applied.
2.52
Unrestricted Stock
shall have the meaning set forth in
Section 11
.
Unless the context otherwise requires, all references in the Plan to including shall mean
including without limitation.
References in the Plan to any Code Section shall be deemed to include, as applicable,
regulations promulgated under such Code Section.
3. ADMINISTRATION OF THE PLAN
3.1. Committee.
3.1.1. Powers and Authorities.
The Committee shall administer the Plan and shall have such powers and authorities related to
the administration of the Plan as are consistent with the Companys articles of incorporation and
bylaws and Applicable Laws. Without limiting the generality of the foregoing, the Committee 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 which the Committee deems to be necessary or
appropriate to the administration of the Plan, any Award or any Award Agreement. All such actions
and determinations shall be made by (a) the affirmative vote of a
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majority of the members of the Committee present at a meeting at which a quorum is present, or
(b) the unanimous consent of the members of the Committee executed in writing in accordance with
the Companys articles of incorporation and bylaws and Applicable Laws. Unless otherwise expressly
determined by the Board, the Committee shall have the authority to interpret and construe all
provisions of the Plan, any Award and any Award Agreement, and any such interpretation or
construction, and any other determination contemplated to be made under the Plan or any Award
Agreement, by the Committee shall be final, binding and conclusive whether or not expressly
provided for in any provision of the Plan, such Award or such Award Agreement.
In the event that the Plan, any Award or any Award Agreement provides for any action to be
taken by the Board or any determination to be made by the Board, such action may be taken or such
determination may be made by the Committee constituted in accordance with this
Section 3.1
if the
Board has delegated the power and authority to do so to such Committee.
3.1.2. Composition of Committee.
The Committee shall be a committee composed of not fewer than two directors of the Company
designated by the Board to administer the Plan. Each member of the Committee shall be a
Non-Employee Director within the meaning of Rule 16b-3 under the Exchange Act, an outside
director within the meaning of Code Section 162(m)(4)(C)(i) and, for so long as the Stock is
listed on the NASDAQ Stock Market, an independent director within the meaning of Nasdaq Rule
4200(a)(15) (or, in each case, any successor term or provision);
provided
, that any action taken by
the Committee shall be valid and effective whether or not members of the Committee at the time of
such action are later determined not to have satisfied the requirements for membership set forth in
this
Section 3.1.2
or otherwise provided in any charter of the Committee. Without limiting the
generality of the foregoing, the Committee may be the Compensation Committee of the Board or a
subcommittee thereof if the Compensation Committee of the Board or such subcommittee satisfies the
foregoing requirements.
3.1.3. Other Committees.
The Board also may appoint one or more committees of the Board, each composed of one or more
directors of the Company who need not be Outside Directors, which may administer the Plan with
respect to Grantees who are not executive officers as defined in Rule 3b-7 under the Exchange Act
or directors of the Company, may grant Awards under the Plan to such Grantees, and may determine
all terms of such Awards, subject to the requirements of Rule 16b-3 under the Exchange Act, Code
Section 162(m) and, for so long as the Stock is listed on the NASDAQ Stock Exchange, the rules of
the NASDAQ Stock Exchange.
3.2. Board.
The Board from time to time may exercise any or all of the powers and authorities related to
the administration and implementation of the Plan, as set forth in
Section 3.1
and other applicable
provisions of the Plan, as the Board shall determine, consistent with the Companys articles of
incorporation and bylaws and Applicable Laws.
3.3. Terms of Awards.
3.3.1. Committee Authority.
Subject to the other terms and conditions of the Plan, the Committee shall have full and final
authority to:
(a) designate Grantees;
(b) determine the type or types of Awards to be made to a Grantee;
(c) determine the number of shares of Stock to be subject to an Award;
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(d) establish the terms and conditions of each Award (including 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, the treatment of an Award in the event of a Corporate Transaction (subject to
applicable agreements), and any terms or conditions that may be necessary to qualify Options as
Incentive Stock Options;
(e) prescribe the form of each Award Agreement evidencing an Award; and
(f) subject to the limitation on repricing in
Section 3.4
, amend, modify or supplement the
terms of any outstanding Award, which authority shall include the authority, in order to effectuate
the purposes of the Plan but without amending the Plan, to make Awards or to modify outstanding
Awards made to eligible natural persons who are foreign nationals or are natural persons who are
employed outside the United States to reflect differences in local law, tax policy, or custom,
provided
that, notwithstanding the foregoing, no amendment, modification or supplement of the terms
of any outstanding Award shall, without the consent of the Grantee thereof, impair the Grantees
rights under such Award.
The Committee shall have the right, in its discretion, to make Awards in substitution or
exchange for any award granted under another compensatory plan of the Company, any Affiliate, or
any business entity acquired or to be acquired by the Company or an Affiliate or with which the
Company or an Affiliate has combined or will combine.
3.3.2. Forfeiture; Recoupment.
The Committee may reserve the right in an Award Agreement to cause a forfeiture of the gain
realized by a Grantee with respect to an Award thereunder on account of actions taken by, or failed
to be taken by, such Grantee in violation or breach of or in conflict with any (a) employment
agreement, (b) non-competition agreement, (c) agreement prohibiting solicitation of Employees or
clients of the Company or any Affiliate, (d) confidentiality obligation with respect to the Company
or any Affiliate, or (e) other agreement, as and to the extent specified in such Award Agreement.
The Committee may annul an outstanding Award if the Grantee thereof is an Employee and is
terminated for Cause as defined in the Plan or the applicable Award Agreement or for cause as
defined in any other agreement between the Company or such Affiliate and such Grantee, as
applicable.
Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Grantee
to the Company to the extent the Grantee is, or in the future becomes, subject to any Company
clawback or recoupment policy that requires the repayment by such Grantee to the Company of
compensation paid to such Grantee by the Company or an Affiliate in the event that such Grantee
fails to comply with, or violates, the terms or requirements of such policy. Such policy may
authorize the Company to recover from a Grantee incentive-based compensation (including Options
awarded as compensation) awarded to or received by such Grantee during a period of up to three (3)
years, as determined by the Committee, preceding the date on which the Company is required to
prepare an accounting restatement due to material noncompliance by the Company, as a result of
misconduct, with any financial reporting requirement under the federal securities laws.
If the Company is required to prepare an accounting restatement due to the material
noncompliance by the Company, as a result of misconduct, with any financial reporting requirement
under the federal securities laws, and any Award Agreement so provides, any Grantee of an Award
under such Award Agreement who knowingly engaged in such misconduct, was grossly negligent in
engaging in such misconduct, knowingly failed to prevent such misconduct or was grossly negligent
in failing to prevent such misconduct, shall reimburse the Company the amount of any payment in
settlement of such Award earned or accrued during the period of twelve (12) months following the
first public issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document that contained information affected by such
material noncompliance.
Notwithstanding any other provision of the Plan or any provision of any Award Agreement, if
the Company is required to prepare an accounting restatement, then Grantees shall forfeit any cash
or Stock
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received in connection with an Award (or an amount equal to the Fair Market Value of such
Stock on the date of delivery thereof to the Grantee if the Grantee no longer holds the shares of
Stock) if pursuant to the terms of the Award Agreement for such Award, the amount of the Award
earned or the vesting in the Award was expressly based on the achievement of pre-established
performance goals set forth in the Award Agreement (including earnings, gains, or other performance
goals) that are later determined, as a result of the accounting restatement, not to have been
achieved.
3.4. No Repricing.
Except in connection with a corporate transaction involving the Company (including, without
limitation, any stock dividend, distribution (whether in the form of cash, shares of Stock, other
securities or other property), stock split, extraordinary cash dividend, recapitalization, change
in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of shares of Stock or other securities or similar transaction), the Company may not,
without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to
reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or
SARs in exchange for or substitution of Options or SARs with an exercise price that is less than
the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with
an exercise price above the current stock price in exchange for or substitution of cash or other
securities.
3.5. Deferral Arrangement.
The Committee may permit or require the deferral of any payment pursuant to any Award into a
deferred compensation arrangement, subject to such rules and procedures as it may establish, which
may include provisions for the payment or crediting of interest or Dividend Equivalent Rights and,
in connection therewith, provisions for converting such credits into Deferred Stock Units and for
restricting deferrals to comply with hardship distribution rules affecting tax-qualified retirement
plans subject to Code Section 401(k)(2)(B)(IV),
provided
that no Dividend Equivalent Rights may be
granted in connection with, or related to, an Award of Options or SARs. Any such deferrals shall
be made in a manner that complies with Code Section 409A.
3.6. No Liability.
No member of the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Award or Award Agreement.
3.7. Registration; Share Certificates.
Notwithstanding any provision of the Plan to the contrary, the ownership of the shares of
Stock issued under the Plan may be evidenced in such a manner as the Committee, in its sole
discretion, deems appropriate, including by book-entry or direct registration (including
transaction advices) or the issuance of one or more share certificates.
4. STOCK SUBJECT TO THE PLAN
4.1. Number of Shares of Stock Available for Awards.
(a) Subject to such additional shares of Stock as shall be available for issuance under the
Plan pursuant to
Sections 4.2
and
4.3
, and subject to adjustment pursuant to
Section 17
, the
maximum number of shares of Stock available for issuance under the Plan shall be equal to
two
million
(2,000,000) shares, plus the number of shares of Stock subject to awards outstanding under
the Prior Plans as of the Effective Date which thereafter terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of such shares.
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(b) The maximum number of shares of Stock available for issuance pursuant to Incentive Stock
Options shall be the same as the maximum number of shares available for issuance under the Plan
pursuant to
Section 4.1(a)
.
(c) Shares of Stock to be issued under the Plan shall be authorized but unissued shares, or,
to the extent permitted by Applicable Laws, shares of treasury stock or issued shares that have
been reacquired by the Company.
4.2. Adjustments in Authorized Shares of Stock.
In connection with mergers, reorganizations, separations, or other transactions to which Code
Section 424(a) applies, the Committee shall have the right to cause the Company to assume awards
previously granted under a compensatory plan by another business entity that is a party to such
transaction and to substitute Awards under the Plan for such awards. The number of shares of Stock
available for issuance under the Plan pursuant to
Section 4.
1(a)
shall be increased by the number
of shares of Stock subject to any such assumed awards and substitute Awards. Shares available for
issuance under a shareholder-approved plan of a business entity that is a party to such transaction
(as appropriately adjusted, if necessary, to reflect such transaction) may be used for Awards under
the Plan and shall not reduce the number of shares of Stock otherwise available for issuance under
the Plan, subject to applicable rules of any Stock Exchange on which the Stock is listed.
4.3. Share Usage.
(a) Shares of Stock subject to an Award shall be counted as used as of the Grant Date.
(b) Any shares of Stock that are subject to Awards shall be counted against the share issuance
limit set forth in
Section 4.
1(a)
as one (1) share of Stock for every one (1) share of Stock
subject to an Award. Any shares of Stock that are subject to Awards other than Options or Stock
Appreciation Rights, including shares of Stock acquired through dividend reinvestment pursuant to
Section 10.4
, shall be counted against the limit set forth in
Section 4.
1(a)
as 1.69 shares for
every one (1) share granted. With respect to SARs, the number of shares of Stock subject to an
award of SARs shall be counted against the aggregate number of shares of Stock available for
issuance under the Plan regardless of the number of shares of Stock actually issued to settle such
SARs upon exercise. The target number of shares issuable under a Performance Share grant shall be
counted against the share issuance limit set forth in
Section 4.
1(a)
as of the Grant Date, but such
number shall be adjusted to equal the actual number of shares issued upon settlement of the
Performance Shares to the extent different from such target number of shares.
(c) Notwithstanding anything to the contrary in
Section 4.
3(a)
or
Section 4.3(b)
, any shares
of Stock subject to Awards under the Plan or awards outstanding under the Prior Plans as of the
Effective Date which thereafter terminate by expiration, forfeiture, cancellation, or otherwise
without the issuance of such shares, shall be available again for issuance under the Plan,
provided
that any shares subject to an award granted under the Prior Plan shall be available for issuance
under the Plan in the same amount as such shares were counted against the share limits set forth in
the Prior Plan.
(d) Notwithstanding anything to the contrary in this
Section 4
, the number of shares of Stock
available for issuance under the Plan shall not be increased by the number of shares of Stock (i)
tendered or withheld or subject to an Award surrendered in connection with the purchase of shares
of Stock upon exercise of an Option as provided in
Section 12.2
, (ii) deducted or delivered from
payment of an Award in connection with the Companys tax withholding obligations as provided in
Section 18.3
or (iii) purchased by the Company with proceeds from Option exercises.
9
5. EFFECTIVE DATE; TERM; AMENDMENT AND TERMINATION
5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the
Companys stockholders within one year of the Effective Date. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made under the Plan on or after the
Effective Date shall be fully effective as if the stockholders of the Company had approved the Plan
on the Effective Date. If the stockholders fail to approve the Plan within one year of the
Effective Date, any Awards made hereunder shall be null and void and of no effect. Following the
Effective Date, no awards shall be made under the Prior Plans.
5.2. Term.
The Plan shall terminate automatically ten (10) years after the Effective Date and may be
terminated on any earlier date as provided in
Section 5.3
.
5.3. Amendment and Termination.
The Board may, at any time and from time to time, amend, suspend or terminate the Plan as to
any shares of Stock as to which Awards have not been made. The effectiveness of any amendment to
the Plan shall be contingent on approval of such amendment by the Companys shareholders to the
extent provided by the Board or required by Applicable Laws (including the rules of any Stock
Exchange on which the Stock is then listed),
provided
that no amendment shall be made to the
no-repricing provisions of
Section 3.4
or the Option pricing provisions of
Section 8.1
without the
approval of the Companys shareholders. No amendment, suspension or termination of the Plan shall
impair rights or obligations under any Award theretofore made under the Plan without the consent of
the Grantee thereof.
6. AWARD ELIGIBILITY AND LIMITATIONS
6.1. Eligible Grantees.
Subject to this
Section 6
, Awards may be made under the Plan to any Service Provider, as the
Committee shall determine and designate from time to time.
6.2. Limitation on Shares of Stock Subject to Awards and Cash Awards.
During any time when the Company has a class of equity securities registered under Section 12
of the Exchange Act:
(a) the maximum number of shares of Stock subject to Options or SARs that may be granted under
the Plan in a calendar year to any person eligible for an Award under
Section 6
is 275,000; and
(b) the maximum number of shares of Stock that may be granted under the Plan, other than
pursuant to Options or SARs, in a calendar year to any person eligible for an Award under
Section 6
is 275,000 shares.
(c) the maximum amount that may be paid as a cash-settled Performance-Based Award for a twelve
(12) month performance period to any person eligible for an Award shall be $2,000,000 and the
maximum amount that may be paid as a cash-settled Performance-Based Award in respect of a
performance period greater than twelve (12) months by any person eligible for an Award shall be
$3,000,000
.
The preceding limitations in this
Section 6.2
are subject to adjustment as provided in
Section
17
.
10
6.3. Stand-Alone, Additional, Tandem and Substitute Awards.
Subject to
Section 3.4
, Awards granted under the Plan may, in the discretion of the Committee,
be granted either alone or in addition to, in tandem with, or in substitution or exchange for, (a)
any other Award, (b) any award granted under another plan of the Company, any Affiliate, or any
business entity that has been a party to a transaction with the Company or any Affiliate, or (c)
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, or for an award granted under another plan
of the Company, any Affiliate, or any business entity that has been a party to a transaction with
the Company or any Affiliate, the Committee shall require the surrender of such other Award or
award under such other plan in consideration for the grant of such substitute or exchange Award.
In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash payments
under other plans of the Company or any Affiliate. Notwithstanding
Section 8.1
and
Section 9.1
,
but subject to
Section 3.4
, the Option Price of an Option or the grant price of an SAR that is a
Substitute Award may be less than one hundred percent (100%) of the Fair Market Value of a share of
Stock on the original Grant Date;
provided
that the Option Price or grant price is determined in
accordance with the principles of Code Section 424 for any Incentive Stock Option and consistent
with Code Section 409A for any other Option or SAR.
7. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, which shall
be in such form or forms as the Committee shall from time to time determine. Award Agreements
employed under the Plan 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 to
constitute 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 Committee and stated in the Award
Agreement evidencing such Option. Except in the case of Substitute Awards, the Option Price of
each Option shall be at least the Fair Market Value of one (1) share of Stock on the Grant Date;
provided
that in the event that a Grantee is a Ten Percent Shareholder, the Option Price of an
Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less
than one hundred ten percent (110%) of the Fair Market Value of one (1) 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
Sections 8.3
and
17.3
, each Option granted under the Plan shall become exercisable
at such times and under such conditions as shall be determined by the Committee and stated in the
Award Agreement, in another agreement with the Grantee or otherwise in writing.
8.3. Term.
Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock
thereunder shall cease, upon the expiration of ten (10) years from the Grant Date of such Option,
or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be
fixed by the Committee and stated in the Award Agreement relating to such Option;
provided,
that in
the event that the Grantee is a Ten Percent Shareholder, an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall not be exercisable after the expiration of five (5)
years from its Grant Date. If on the day preceding the date on which a Grantees Options would
otherwise terminate, the Fair Market Value of shares of stock underlying a Grantees Options is
greater than the Option Price of such Options, the Company shall,
11
prior to the termination of such Options and without any action being taken on the part of the
Grantee, consider such Options to have been exercised by the Grantee. The Company shall deduct
from the shares of Stock deliverable to the Grantee upon such exercise the number of shares of
Stock necessary to satisfy payment of the Option Price and all withholding obligations.
8.4. Termination of Service.
Each Award Agreement with respect to the grant of an Option shall set forth the extent to
which the Grantee thereof, if at all, shall have the right to exercise such Option following
termination of such Grantees Service. Such provisions shall be determined in the sole discretion
of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
8.5. 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, after the occurrence of an event referred to in
Section 17
which results in the
termination of such Option.
8.6. Method of Exercise.
Subject to the terms of
Section 12
and
Section 18.3
, an Option that is exercisable may be
exercised by the Grantees delivery to the Company or its designee or agent of notice of exercise
on any business day, at the Companys principal office or the office of such designee or agent, on
the form specified by the Company and in accordance with any additional procedures specified by the
Committee. Such notice shall specify the number of shares of Stock with respect to which such
Option is being exercised and shall be accompanied by payment in full of the Option Price of the
shares of Stock for which such 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 the
exercise of such Option.
8.7. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, a Grantee or other person holding
or exercising an Option shall have none of the rights of a shareholder of the Company (for example,
the right to receive cash or dividend payments or distributions attributable to the shares of Stock
subject to such Option, to direct the voting of the shares of Stock subject to such Option, or to
receive notice of any meeting of the Companys shareholders) until the shares of Stock subject
thereto are fully paid and issued to such Grantee or other person. Except as provided in
Section
17
, no adjustment shall be made for dividends, distributions or other rights with respect to any
shares of Stock subject to an Option for which the record date is prior to the date of issuance of
such shares of Stock.
8.8. Delivery of Stock.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price with respect thereto, such Grantee shall be entitled to receive such evidence of such
Grantees ownership of the shares of Stock subject to such Option as shall be consistent with
Section 3.7
.
8.9. Transferability of Options.
Except as provided in
Section 8.10
, during the lifetime of a Grantee of an Option, only such
Grantee (or, in the event of such Grantees legal incapacity or incompetency, such Grantees
guardian or legal representative) may exercise such Option. Except as provided in
Section 8.10
, no
Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will
or the laws of descent and distribution.
12
8.10. Family Transfers.
If authorized in the applicable Award Agreement and by the Committee, in its sole discretion,
a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Stock
Option to any Family Member. For the purpose of this
Section 8.10
, a transfer not for value is a
transfer which is (a) a gift, (b) a transfer under a domestic relations order in settlement of
marital property rights, or (c) unless Applicable Laws do not permit such transfer, a transfer to
an entity in which more than fifty percent (50%) of the voting interests are owned by Family
Members (and/or the Grantee) in exchange for an interest in such entity. Following a transfer
under this
Section 8.10
, any such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to such transfer, and the shares of Stock acquired
pursuant to such Option shall be subject to the same restrictions with respect to transfers of
shares as would have applied to the Grantee thereof. Subsequent transfers of transferred Options
shall be prohibited except to Family Members of the original Grantee in accordance with this
Section 8.10
or by will or the laws of descent and distribution. The provisions of
Section 8.4
relating to termination of Service shall continue to be applied with respect to the original
Grantee of the Option, following which such Option shall be exercisable by the transferee only to
the extent, and for the periods specified, in
Section 8.4
.
8.11. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (a) if the Grantee of such Option is
an Employee of the Company or any corporate Subsidiary, (b) to the extent specifically provided in
the related Award Agreement and (c) to the extent that the aggregate Fair Market Value (determined
at the time such 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 Company and its Affiliates) does not exceed $100,000.
Except to the extent provided in the regulations under Code Section 422, this limitation shall be
applied by taking Options into account in the order in which they were granted.
8.12. Notice of Disqualifying Disposition.
If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise
of an Incentive Stock Option under the circumstances provided in Code Section 421(b) (relating to
certain disqualifying dispositions), such Grantee shall notify the Company of such disposition
within ten (10) days thereof.
9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
9.1. Right to Payment and Grant Price.
A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise
thereof, the excess of (x) the Fair Market Value of one (1) share of Stock on the date of exercise
over (y) the per share exercise price of such SAR (the
SAR Price
) as determined by the Committee.
The Award Agreement for a SAR shall specify the SAR Price, which shall be no less than the Fair
Market Value of one (1) share of Stock on the Grant Date of such SAR. SARs may be granted in
tandem with all or part of an Option granted under the Plan or at any subsequent time during the
term of such Option, in combination with all or any part of any other Award or without regard to
any Option or other Award;
provided
that a SAR that is granted subsequent to the Grant Date of a
related Option must have a SAR Price that is no less than the Fair Market Value of one (1) share of
Stock on the Grant Date of such SAR; and
provided further
that a Grantee may only exercise either
the SAR or the Option with which it is granted in tandem and not both.
9.2. Other Terms.
The Committee shall determine, on the Grant Date or thereafter, the time or times at which and
the circumstances under which a 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 termination of Service or upon other
conditions, the method of
13
exercise, method of settlement, form of consideration payable in settlement, method by or
forms in which shares of Stock shall be delivered or deemed to be delivered to Grantees, whether or
not a SAR shall be granted in tandem or in combination with any other Award, and any and all other
terms and conditions of any SAR.
9.3. Term.
Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon
the expiration of ten (10) years from the Grant Date of such SAR or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated
in the Award Agreement relating to such SAR. If on the day preceding the date on which a Grantees
SAR would otherwise terminate, the Fair Market Value of shares of stock underlying a Grantees SAR
is greater than the SAR Price, the Company shall, prior to the termination of such SAR and without
any action being taken on the part of the Grantee, consider such SAR to have been exercised by the
Grantee.
9.4. Transferability of SARS.
Except as provided in
Section 9.5
, during the lifetime of a Grantee of a SAR, only the Grantee
(or, in the event of such Grantees legal incapacity or incompetency, such Grantees guardian or
legal representative) may exercise such SAR. Except as provided in
Section 9.5
, no SAR shall be
assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of
descent and distribution.
9.5. Family Transfers.
If authorized in the applicable Award Agreement and by the Committee, in its sole discretion,
a Grantee may transfer, not for value, all or part of a SAR to any Family Member. For the purpose
of this
Section 9.5
, a transfer not for value is a transfer which is (a) a gift, (b) a transfer
under a domestic relations order in settlement of marital property rights or (c) unless Applicable
Laws do not permit such transfers, a transfer to an entity in which more than fifty percent (50%)
of the voting interests are owned by Family Members (and/or the Grantee) in exchange for an
interest in such entity. Following a transfer under this
Section 9.5
, any such SAR shall continue
to be subject to the same terms and conditions as were in effect immediately prior to such
transfer, and shares of Stock acquired pursuant to a SAR shall be subject to the same restrictions
on transfers of shares as would have applied to the Grantee or such SAR. Subsequent transfers of
transferred SARs shall be prohibited except to Family Members of the original Grantee in accordance
with this
Section 9.5
or by will or the laws of descent and distribution.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND DEFERRED STOCK UNITS
10.1. Grant of Restricted Stock or Deferred Stock Units.
Awards of Restricted Stock and Deferred Stock Units may be made for consideration or for no
consideration, other than the par value of the shares of Stock, which shall be deemed paid by past
Service or, if so provided in the related Award Agreement or a separate agreement, the promise by
the Grantee to perform future Service to the Company or an Affiliate.
10.2. Restrictions.
At the time a grant of Restricted Stock or Deferred Stock Units is made, the Committee may, in
its sole discretion, (a) establish a period of time (a
Restricted Period
) applicable to such
Restricted Stock or Deferred Stock Units and (b) prescribe restrictions in addition to or other
than the expiration of the Restricted Period, including the satisfaction of corporate or individual
performance goals, which may be applicable to all or any portion of such Restricted Stock or
Deferred Stock Units as provided in
Section 14
. Notwithstanding the foregoing, Awards of
Restricted Stock and Deferred Stock Units that vest solely by the passage of time shall not vest in
full in less than three (3) years from the Grant Date (but may vest pro-rata during such period on
a daily, monthly, annual or other basis), and Restricted Stock and Deferred Stock Units that vest
upon
14
achievement of performance goals shall not vest in full in less than one (1) year from the
Grant Date;
provided,
that (i) up to ten percent (10%) of the maximum number of shares of Stock
available for issuance under the Plan may be granted pursuant to the Plan without being subject to
the foregoing restrictions, and (ii) any dividends or Dividend Equivalent Rights, or other
distributions, issued in connection with any Award granted at any time under the Plan shall not be
subject to or counted for either such restrictions or such ten percent (10%) share issuance limit.
The foregoing ten percent (10%) share issuance limit shall be subject to adjustment consistent with
the adjustment provisions of
Section 17.2
and the share usage rules of
Section 4.3
. Awards of
Restricted Stock and Deferred Stock Units may not be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of
any other restrictions prescribed by the Committee with respect to such Awards.
10.3. Registration; Restricted Share Certificates.
Pursuant to
Section 3.7
, to the extent that ownership of Restricted Stock is evidenced by a
book-entry registration or direct registration (including transaction advices), such registration
shall be notated to evidence the restrictions imposed on such Award of Restricted Stock under the
Plan and the applicable Award Agreement. Subject to
Section 3.7
and the immediately following
sentence, the Company may issue, in the name of each Grantee to whom Restricted Stock has been
granted, share certificates representing the total number of shares of Restricted Stock granted to
the Grantee, as soon as reasonably practicable after the Grant Date of such Restricted Stock. The
Committee may provide in an Award Agreement that either (a) the Secretary of the Company shall hold
such certificates for such Grantees benefit until such time as such shares of Restricted Stock are
forfeited to the Company or the restrictions applicable thereto lapse and such Grantee shall
deliver a stock power to the Company with respect to each certificate, or (b) such certificates
shall be delivered to such Grantee,
provided
that such certificates shall bear legends that comply
with applicable securities laws and regulations and make appropriate reference to the restrictions
imposed on such Award of Restricted Stock under the Plan and such Award Agreement.
10.4. Rights of Holders of Restricted Stock.
Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock
shall have the right to vote such shares of Restricted Stock and the right to receive any dividends
declared or paid with respect to such shares of Restricted Stock. The Committee may provide that
any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not
be subject to the same vesting conditions and restrictions as the vesting conditions and
restrictions applicable to such Restricted Stock. All stock distributions, if any, received by a
Grantee with respect to Restricted Stock as a result of any stock split, stock dividend,
combination of stock, or other similar transaction shall be subject to the vesting conditions and
restrictions applicable to such Restricted Stock.
10.5. Rights of Holders of Deferred Stock Units.
10.5.1. Voting and Dividend Rights.
Holders of Deferred Stock Units shall have no rights as shareholders of the Company (for
example, the right to receive cash or dividend payments or distributions attributable to the shares
of Stock subject to such Deferred Stock Units, to direct the voting of the shares of Stock subject
to such Deferred Stock Units, or to receive notice of any meeting of the Companys shareholders).
The Committee may provide in an Award Agreement evidencing a grant of Deferred Stock Units that the
holder of such Deferred Stock Units shall be entitled to receive, upon the Companys payment of a
cash dividend on its outstanding shares of Stock, a cash payment for each such Deferred Stock Unit
which is equal to the per-share dividend paid on such shares of Stock. Such Award Agreement also
may provide that such cash payment shall be deemed reinvested in additional Deferred Stock Units at
a price per unit equal to the Fair Market Value of a share of Stock on the date that such cash
dividend is paid. Notwithstanding the foregoing, if a grantor trust is established in connection
with the Awards of Deferred Stock Units and shares of Stock are held in the grantor trust for
purposes of satisfying the Companys obligation to deliver shares of Stock in connection with such
Deferred Stock Units, the Award Agreement for such Deferred Stock Units may provide that such cash
payment shall be deemed reinvested in additional Deferred Stock Units at a price per unit equal to
the actual
15
price paid for each share of Stock by the trustee of the grantor trust upon such trustees
reinvestment of the cash dividend received.
10.5.2. Creditors Rights.
A holder of Deferred Stock Units shall have no rights other than those of a general unsecured
creditor of the Company. Deferred Stock Units represent an unfunded and unsecured obligation of
the Company, subject to the terms and conditions of the applicable Award Agreement.
10.6. Termination of Service.
Unless the Committee otherwise provides in an Award Agreement, in another agreement with the
Grantee or otherwise in writing after such Award Agreement is entered into, but prior to
termination of Grantees Service, upon the termination of such Grantees Service, any Restricted
Stock or Deferred Stock Units held by such Grantee that have not vested, or with respect to which
all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
Upon forfeiture of such Restricted Stock or Deferred Stock Units, the Grantee thereof shall have no
further rights with respect thereto, including any right to vote such Restricted Stock or any right
to receive dividends with respect to such Restricted Stock or Deferred Stock Units. If the
Committee accelerates vesting of Restricted Stock or Deferred Stock Units, except (a) in the case
of a Grantees death or disability, (b) acceleration required by binding commitments or agreements
entered into by the Company prior to the Effective Date or (c) as specified in
Section 17.3
, the
shares of Stock subject to such Restricted Stock or Deferred Stock Units shall be deducted from the
ten percent (10%) share issuance limit set forth in
Section 10.2
.
10.7. Purchase of Restricted Stock and Shares of Stock Subject to Deferred Stock
Units.
The Grantee shall be required, to the extent required by Applicable Laws, to purchase the
Restricted Stock or shares of Stock subject to vested Deferred Stock Units from the Company at a
Purchase Price equal to the greater of (x) the aggregate par value of the shares of Stock
represented by such Restricted Stock or Deferred Stock Units or (y) the Purchase Price, if any,
specified in the Award Agreement relating to such Restricted Stock or Deferred Stock Units. The
Purchase Price shall be payable in a form provided in
Section 12
or, in the sole discretion of the
Committee, in consideration for past or future Services rendered to the Company or an Affiliate.
10.8. Delivery of Shares of Stock.
Upon the expiration or termination of any Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to Restricted Stock or Deferred
Stock Units settled in shares of Stock shall lapse, and, unless otherwise provided in the
applicable Award Agreement, a book-entry or direct registration (including transaction advices) or
a share certificate evidencing ownership of such shares of Stock shall, consistent with
Section
3.7
, be issued, free of all such restrictions, to the Grantee thereof or such Grantees beneficiary
or estate, as the case may be. Neither the Grantee, nor the Grantees beneficiary or estate, shall
have any further rights with regard to a Deferred Stock Unit once the shares of Stock represented
by such Deferred Stock Unit have been delivered in accordance with this
Section 10.8
.
11.
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TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS
|
11.1. Unrestricted Stock Awards.
The Committee may, in its sole discretion, grant (or sell at the par value of a share of Stock
or such other higher purchase price determined by the Committee) an Award to any Grantee pursuant
to which such Grantee may receive shares of Stock free of any restrictions (Unrestricted Stock)
under the Plan, subject to the ten percent (10%) share issuance limit set forth in
Section 10.2
.
Unrestricted Stock Awards may be granted or sold to any Grantee as provided in the immediately
preceding sentence in respect of past or, if so
16
provided in the related Award Agreement or a separate agreement, the promise by the Grantee to
perform future Service to the Company or an Affiliate or other valid consideration, or in lieu of,
or in addition to, any cash compensation due to such Grantee.
11.2. Other Equity-Based Awards.
The Committee may, in its sole discretion, grant Awards in the form of Other Equity-Based
Awards, as deemed by the Committee to be consistent with the purposes of the Plan. Awards granted
pursuant to this
Section 11.2
may be granted with vesting, value and/or payment contingent upon the
achievement of one or more performance goals. The Committee shall determine the terms and
conditions of Other Equity-Based Awards at the Grant Date or thereafter. Unless the Committee
otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise in
writing after such Award Agreement is issued, upon the termination of a Grantees Service, any
Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all
applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.
Upon forfeiture of any Other Equity-Based Award, the Grantee thereof shall have no further rights
with respect to such Other Equity-Based Award.
12. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
12.1. General Rule.
Payment of the Option Price for the shares of Stock 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.
12.2. Surrender of Shares of Stock.
To the extent that the applicable Award Agreement so provides, payment of the Option Price for
shares of Stock 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 or attestation to the Company of
shares of Stock, which shall be valued, for purposes of determining the extent to which such Option
Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise
or surrender.
12.3. Cashless Exercise.
To the extent permitted by Applicable Laws and to the extent the Award Agreement so provides,
payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option may
be made all or in part by delivery (on a form acceptable to the Committee) 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 proceeds of such sale to the Company in payment of such Option Price and
any withholding taxes described in
Section 18.3
, or, with the consent of the Company, by issuing
the number of shares of Stock equal in value to the difference between such Option Price and the
Fair Market Value of the shares of Stock subject to the portion of such Option being exercised.
12.4. Other Forms of Payment.
To the extent the Award Agreement so provides and/or unless otherwise specified in an Award
Agreement, payment of the Option Price for shares of Stock purchased pursuant to exercise of an
Option or the Purchase Price for Restricted Stock may be made in any other form that is consistent
with Applicable Laws, including (a) Service to the Company or an Affiliate and (b) net exercise.
17
13. TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
13.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient thereof to receive credits
based on cash distributions that would have been paid on the shares of Stock specified in such
Dividend Equivalent Right (or other Award to which such Dividend Equivalent Right relates) if such
shares of Stock had been issued to and held by the recipient of such Dividend Equivalent Right as
of the record date. A Dividend Equivalent Right may be granted hereunder to any Grantee,
provided
that no Dividend Equivalent Rights may be granted in connection with, or related to, an Award of
Options or SARs. The terms and conditions of Dividend Equivalent Rights shall be specified in the
Award Agreement therefor. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently (with or without being subject to forfeiture or a repayment obligation)
or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue
additional Dividend Equivalent Rights (with or without being subject to forfeiture or a repayment
obligation). Any such reinvestment shall be at the Fair Market Value thereof on the date of such
reinvestment. Dividend Equivalent Rights may be settled in cash or shares of Stock or a
combination thereof, in a single installment or in multiple installments, all as determined in the
sole discretion of the Committee. A Dividend Equivalent Right granted as a component of another
Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent
Right shall expire or be forfeited or annulled under the same conditions as such other Award. A
Dividend Equivalent Right granted as a component of another Award also may contain terms and
conditions which are different from the terms and conditions of such other Award,
provided
that
cash or shares of Stock credited pursuant to a Dividend Equivalent Right granted as a component of
another Award which vests or is earned based upon the achievement of performance goals shall not
vest unless such performance goals for such underlying Award are achieved.
13.2. Termination of Service.
Unless the Committee otherwise provides in an Award Agreement, in another agreement with the
Grantee, or otherwise in writing after such Award Agreement is issued, a Grantees rights in all
Dividend Equivalent Rights shall automatically terminate upon the Grantees termination of Service
for any reason.
14. TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS
14.1. Grant of Performance-Based Awards.
Subject to the terms and provisions of the Plan, the Committee, at any time and from time to
time, may grant Performance-Based Awards to a Plan participant in such amounts and upon such terms
as the Committee shall determine.
14.2. Value of Performance-Based Awards.
Each grant of a Performance-Based Award shall have an initial value or target number of shares
of Stock that is established by the Committee at the time of grant. The Committee shall set
performance goals in its discretion which, depending on the extent to which they are achieved,
shall determine the value and/or number of shares subject to a Performance-Based Award that will be
paid out to the Grantee thereof.
14.3. Earning of Performance-Based Awards.
Subject to the terms of the Plan, after the applicable Performance Period has ended, the
Grantee of Performance-Based Awards shall be entitled to receive a payout on the value or number of
the Performance-Based Awards earned by such Grantee over such Performance Period.
18
14.4. Form and Timing of Payment of Performance-Based Awards.
Payment of earned Performance-Based Awards shall be as determined by the Committee and as
evidenced in the applicable Award Agreement. Subject to the terms of the Plan, the Committee, in
its sole discretion, may pay earned Performance-Based Awards in the form of cash or shares of Stock
(or a combination thereof) equal to the value of the earned Performance-Based Awards and shall pay
the Awards that have been earned at the close of the applicable Performance Period, or as soon as
reasonably practicable after the Committee has determined that the performance goal or goals have
been achieved;
provided
that, unless specifically provided in the Award Agreement for such Awards,
such payment shall occur no later than the 15th day of the third month following the end of the
calendar year in which such Performance Period ends. Any shares of Stock paid out under such
Awards may be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards shall be set forth
in the Award Agreement for the Awards.
14.5. Performance Conditions.
The right of a Grantee to exercise or receive a grant or settlement of any Performance-Based
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. If and to the extent required
under Code Section 162(m), any power or authority relating to an Award intended to qualify under
Code Section 162(m) shall be exercised by the Committee and not by the Board.
14.6. Performance-Based Awards Granted to Designated Covered Employees.
If and to the extent that the Committee determines that a Performance-Based Award to be
granted to a Grantee should constitute qualified performance-based compensation for purposes of
Code Section 162(m), the grant, exercise and/or settlement of such Award shall be contingent upon
achievement of pre-established performance goals and other terms set forth in this
Section 14.6
.
14.6.1. Performance Goals Generally.
The performance goals for Performance-Based Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each such criteria, as
specified by the Committee consistent with this
Section 14.6
. Performance goals shall be objective
and shall otherwise meet the requirements of Code Section 162(m), 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 Awards
shall be granted, exercised and/or settled upon achievement of any single performance goal or that
two (2) or more of the performance goals must be achieved as a condition to grant, exercise and/or
settlement of such Awards. Performance goals may differ for Awards granted to any one Grantee or
to different Grantees.
14.6.2. Timing For Establishing Performance Goals.
Performance goals for any Performance-Based Award shall be established not later than the
earlier of (a) 90 days after the beginning of any Performance Period applicable to such Award, and
(b) the date on which twenty-five percent (25%) of any Performance Period applicable to such Award
has expired, or at such other date as may be required or permitted for compensation payable to a
Covered Employee to constitute Performance-Based Compensation.
14.6.3. Settlement of Awards; Other Terms.
Settlement of Performance-Based Awards shall be in cash, shares of Stock, other Awards or
other property, as determined in the sole discretion of the Committee. The Committee may, in its
sole discretion, reduce the amount of a settlement otherwise to be made in connection with such
Awards. The Committee
19
shall specify the circumstances in which such Performance-Based Awards shall be paid or
forfeited in the event of termination of Service by the Grantee prior to the end of a Performance
Period or settlement of such Awards.
14.6.4. Performance Measures.
The performance goals upon which the payment or vesting of a Performance-Based Award to a
Covered Employee that is intended to qualify as Performance-Based Compensation may be conditioned
shall be limited to the following Performance Measures, with or without adjustment:
(a) total stockholder return;
(b) such total stockholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard & Poors 500 Stock
Index;
(c) net income;
(d) pretax earnings;
(e) earnings before interest expense, taxes, depreciation and amortization, or other
identified expenses, including stock-based compensation expenses;
(f) pretax operating earnings after interest expense and before bonuses, service fees,
and extraordinary or special items;
(g) operating margin;
(h) earnings per share;
(i) return on equity;
(j) return on capital;
(k) return on investment;
(l) operating earnings;
(m) working capital;
(n) ratio of debt to stockholders equity;
(o) revenue;
(p) demonstrated sound financial, budgeting and operational practices;
(q) changes to processes, systems, technology and reporting models;
(r) student academic performance;
(s) improvements to student services;
(t) student satisfaction surveys or measures;
(u) quality measures, including ranking of the Company by third parties;
(v) acquisitions or new program developments;
(w) improvements to academic rigor, faculty qualifications and curriculum development;
(x) performance with respect to regulatory requirements, including compliance with
those promulgated by the Department of Education;
(y) regulatory approvals to operate in new states;
(z) maintenance of regional accreditation; and
(aa) maintaining or obtaining specialized accreditations.
Performance under any of the foregoing Performance Measures (a) may be used to measure the
performance of (i) the Company and its Subsidiaries and other Affiliates as a whole, (ii) the
Company, any Subsidiary, and/or any other Affiliate or any combination thereof, or (iii) any one or
more business units of the Company, any Subsidiary, and/or any other Affiliate, as the Committee,
in its sole discretion, deems appropriate and (b) may be compared to the performance of one or more
other companies or one or more published or special indices designated or approved by the Committee
for such comparison, as the Committee, in its sole discretion, deems appropriate. In addition, the
Committee, in its sole discretion, may select performance under Performance Measure clause (h)
above for comparison to performance under one or more stock market indices designated or approved
by the Committee. The Committee also shall have the authority to provide for accelerated vesting
of any Performance-Based Award based on the achievement of performance goals pursuant to the
Performance Measures specified in this
Section 14
.
20
14.6.5. Evaluation of Performance.
The Committee may provide in any Performance-Based Award that any evaluation of performance
may include or exclude any of the following events that occur during a Performance Period: (a)
asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in
tax laws, accounting principles or other laws or provisions affecting reported results; (d) any
reorganization or restructuring programs; (e) extraordinary nonrecurring items; (f) acquisitions or
divestitures; (g) foreign exchange gains and losses; and (h) changes in governmental rules or
regulations applicable to the Company and its operations or rules and regulations of regulatory or
accrediting bodies or agencies. To the extent such inclusions or exclusions affect Awards to
Covered Employees that are intended to qualify as Performance-Based Compensation, such inclusions
or exclusions shall be prescribed in a form that meets the requirements of Code Section 162(m) for
deductibility.
14.6.6. Adjustment of Performance-Based Compensation.
The Committee shall have the sole discretion to adjust Awards that are intended to qualify as
Performance-Based Compensation, either on a formula or discretionary basis, or on any combination
thereof, as the Committee determines consistent with the requirements of Code Section 162(m) for
deductibility.
14.6.7. Committee Discretion.
In the event that Applicable Laws change to permit Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the Committee shall
have sole discretion to make such changes without obtaining shareholder approval,
provided
that the
exercise of such discretion shall not be inconsistent with the requirements of Code Section 162(m).
In addition, in the event that the Committee determines that it is advisable to grant Awards that
shall not qualify as Performance-Based Compensation, the Committee may make such grants without
satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other
than those set forth in
Section 14.6.4
.
14.7. Status of Awards Under Code Section
162(m)
.
It is the intent of the Company that Awards under
Section 14.6
granted to persons who are
designated by the Committee as likely to be Covered Employees within the meaning of Code Section
162(m) and the regulations promulgated thereunder shall, if so designated by the Committee,
constitute qualified performance-based compensation within the meaning of Code Section 162(m).
Accordingly, the terms of
Section 14.6
, including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code Section 162(m). If any
provision of the Plan or any agreement relating to any such Award does not comply or is
inconsistent with the requirements of Code Section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
15. PARACHUTE LIMITATIONS
If any Grantee is a disqualified individual, as defined in Code Section 280G(c), then,
notwithstanding any other provision of the Plan or of any other agreement, contract, or
understanding heretofore or hereafter entered into by such Grantee with the Company or an
Affiliate, except an agreement, contract, or understanding that expressly addresses Code Section
280G or Code Section 4999 (an
Other Agreement
), and notwithstanding any formal or informal plan
or other arrangement for the direct or indirect provision of compensation to the Grantee (including
groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a
Benefit Arrangement
), any right of the Grantee to any exercise, vesting, payment or benefit under
the Plan shall be reduced or eliminated:
21
(a) to the extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the Grantee under the Plan, all Other
Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment, or benefit to
the Grantee under the Plan to be considered a parachute payment within the meaning of Code
Section 280G(b)(2) as then in effect (a
Parachute Payment
); and
(b) if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts
received by the Grantee from the Company under the Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be received by the Grantee
without causing any such payment or benefit to be considered a Parachute Payment.
The Company shall accomplish such reduction by first reducing or eliminating any cash payments
(with the payments to be made furthest in the future being reduced first), then by reducing or
eliminating any accelerated vesting of Performance-Based Awards, then by reducing or eliminating
any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting
of Restricted Stock or Deferred Stock Units, then by reducing or eliminating any other remaining
Parachute Payments.
16. REQUIREMENTS OF LAW
16.1. General.
The Company shall not be required to offer, sell or issue any shares of Stock under any Award,
whether pursuant to the exercise of an Option or SAR or otherwise, if the offer, sale or issuance
of such shares of Stock would constitute a violation by the Grantee, the Company or an Affiliate,
or any other person, of any provision of Applicable Laws, including 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 of Stock 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 offering, issuance, sale or purchase of shares of Stock in
connection with any Award, no shares of Stock may be offered, issued or sold to the Grantee or any
other person under such Award, whether pursuant to the exercise of an Option or SAR or otherwise,
unless such listing, registration or qualification shall have been effected or 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 such Award. Without limiting the generality of the foregoing, upon the
exercise of any Option or any SAR that may be settled in shares of Stock or the delivery of any
shares of Stock underlying an Award, unless a registration statement under the Securities Act is in
effect with respect to the shares of Stock subject to such Award, the Company shall not be required
to offer, sell or issue such shares of Stock unless the Committee shall have received evidence
satisfactory to it that the Grantee or any other person exercising such Option or SAR or accepting
delivery of such shares may acquire such shares of Stock pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the Committee shall be final,
binding, and conclusive. The Company may register, but shall in no event be obligated to register,
any shares of Stock or other securities issuable pursuant to the Plan 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 a SAR or the issuance of shares of Stock or other securities issuable
pursuant to the Plan or any Award to comply with any Applicable Laws. As to any jurisdiction that
expressly imposes the requirement that an Option or SAR that may be settled in shares of Stock
shall not be exercisable until the shares of Stock subject to such Option or SAR are registered
under the securities laws thereof or are exempt from such registration, the exercise of such Option
or SAR 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.
16.2. 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 intention of the Company that Awards pursuant to the Plan and the
exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of
the Exchange Act shall qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
the extent that any
22
provision of the Plan or action by the Committee does not comply with the requirements of such
Rule 16b-3, such provision or action shall be deemed inoperative with respect to such Awards to the
extent permitted by Applicable Laws and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event that such Rule 16b-3 is revised or replaced, the Board may
exercise its discretion to modify the Plan in any respect necessary or advisable in its judgment to
satisfy the requirements of, or to permit the Company to avail itself of the benefits of, the
revised exemption or its replacement.
17. EFFECT OF CHANGES IN CAPITALIZATION
17.1. Changes in Stock.
If 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 of shares or kind of capital stock or other
securities of the Company on account of any recapitalization, reclassification, stock split,
reverse stock split, spin-off, combination of stock, exchange of stock, stock dividend or other
distribution payable in capital stock, or other increase or decrease in shares of Stock effected
without receipt of consideration by the Company occurring after the Effective Date, the number and
kinds of shares of stock for which grants of Options and other Awards may be made under the Plan,
including the share limits set forth in
Section 6.2
, shall be adjusted proportionately and
accordingly by the Committee. In addition, the number and kind of shares of stock for which Awards
are outstanding shall be adjusted proportionately and accordingly by the Committee so that the
proportionate interest of the Grantee therein immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment in outstanding
Options or SARs shall not change the aggregate Option Price or SAR Price payable with respect to
shares that are subject to the unexercised portion of such outstanding Options or SARs, as
applicable, but shall include a corresponding proportionate adjustment in the per share Option
Price or SAR Price, as the case may be. The conversion of any convertible securities of the
Company shall not be treated as an increase in shares effected without receipt of consideration.
Notwithstanding the foregoing, in the event of any distribution to the Companys shareholders of
securities of any other entity or other assets (including an extraordinary dividend, but excluding
a non-extraordinary dividend, declared and paid by the Company) without receipt of consideration by
the Company, the Board or the Committee constituted pursuant to
Section 3.1.2
shall, in such manner
as the Board or the Committee deems appropriate, adjust (a) the number and kind of shares of stock
subject to outstanding Awards and/or (b) the aggregate and per share Option Price of outstanding
Options and the aggregate and per share SAR Price of outstanding Stock Appreciation Rights as
required to reflect such distribution.
|
17.2.
|
|
Reorganization in Which the Company Is the Surviving Entity Which Does not
Constitute a Corporate Transaction.
|
Subject to
Section 17.3
, if the Company shall be the surviving entity in any reorganization,
merger or consolidation of the Company with one or more other entities which does not constitute a
Corporate Transaction, 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 per share Option Price or SAR
Price so that the aggregate Option Price or SAR Price thereafter shall be the same as the aggregate
Option Price or SAR Price of the shares of Stock remaining subject to the Option or SAR as in
effect immediately prior to such reorganization, merger, or consolidation. Subject to any contrary
language in an Award Agreement or in another agreement with the Grantee, or otherwise set forth in
writing, any restrictions applicable to such Award shall apply as well to any replacement shares
received by the Grantee as a result of such reorganization, merger or consolidation. In the event
of any reorganization, merger or consolidation of the Company referred to in this
Section 17.2
,
Performance-Based Awards shall be adjusted (including any adjustment to the Performance Measures
applicable to such Awards deemed appropriate by the Committee) solely to preserve the same benefits
of the Awards as intended prior to the reorganization, merger or consolidation.
23
17.3.
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|
Corporate Transaction in which Awards are not Assumed.
|
Except as otherwise provided in the applicable Award Agreement or in another agreement with
the Grantee, or as otherwise set forth in writing, upon the occurrence of a Corporate Transaction
in which outstanding Options, SARs, Restricted Stock, Deferred Stock Units, Dividend Equivalent
Rights or Other Equity-Based Awards are not being assumed or continued, the following provisions
shall apply to such Award, to the extent not assumed or continued:
(a) in each case with the exception of Performance-Based Awards, all outstanding Restricted
Stock shall be deemed to have vested, all Deferred Stock Units shall be deemed to have vested and
the shares of Stock subject thereto shall be delivered, and all Dividend Equivalent Rights shall be
deemed to have vested and the shares of Stock subject thereto shall be delivered, immediately prior
to the occurrence of such Corporate Transaction, and either of the following two actions shall be
taken:
(i) fifteen (15) days prior to the scheduled consummation of such Corporate
Transaction, all Options and SARs outstanding hereunder shall become immediately
exercisable and shall remain exercisable for a period of fifteen (15) days, or
(ii) the Committee may elect, in its sole discretion, to cancel any outstanding
Awards of Options, Restricted Stock, Deferred Stock Units, and/or SARs and pay or
deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or
securities having a value (as determined by the Committee acting in good faith), in the
case of Restricted Stock or Deferred Stock Units, equal to the formula or fixed price per
share paid to holders of shares of Stock pursuant to such Corporate Transaction and, in
the case of Options or SARs, equal to the product of the number of shares of Stock
subject to such Options or SARs (the
Award Stock
) multiplied by the amount, if any, by
which (x) the formula or fixed price per share paid to holders of shares of Stock
pursuant to such transaction exceeds (y) the Option Price or SAR Price applicable to such
Award Stock.
(b) For Performance-Based Awards denominated in Stock, if less than half of the Performance
Period has lapsed, such Performance-Based Awards shall be converted into Restricted Stock or
Performance Shares assuming target performance has been achieved (or into Unrestricted Stock if no
further restrictions apply). If more than half the Performance Period has lapsed, such
Performance-Based Awards shall be converted into Restricted Stock or Performance Shares based on
actual performance to date (or into Unrestricted Stock if no further restrictions apply). If
actual performance is not determinable, such Performance-Based Awards shall be converted into
Restricted Stock or Performance Shares assuming target performance has been achieved, based on the
discretion of the Committee (or into Unrestricted Stock if no further restrictions apply).
(c) Other Equity-Based Awards shall be governed by the terms of the applicable Award
Agreement.
With respect to the Companys establishment of an exercise window, (A) any exercise of an
Option or SAR during the fifteen (15)-day period referred to above shall be conditioned upon the
consummation of the applicable Corporate Transaction and shall be effective only immediately before
the consummation thereof, and (B) upon consummation of any Corporate Transaction, the Plan and all
outstanding but unexercised Options and SARs shall terminate. The Committee shall send notice of
an event that shall result in such a termination to all natural persons and entities who hold
Options and SARs not later than the time at which the Company gives notice thereof to its
shareholders.
17.4. Corporate Transaction in which Awards are Assumed.
Except as otherwise provided in the applicable Award Agreement or in another agreement with
the Grantee, or as otherwise set forth in writing, upon the occurrence of a Corporate Transaction
in which outstanding Options, SARs, Restricted Stock, Deferred Stock Units, Dividend Equivalent
Rights or Other
24
Equity-Based Awards are being assumed or continued, the following provisions shall apply to
such Award, to the extent assumed or continued:
The Plan and the Options, SARs, Deferred Stock Units, Restricted Stock and Other Equity-Based
Awards granted under the Plan shall continue in the manner and under the terms so provided in the
event of any Corporate Transaction to the extent that provision is made in writing in connection
with such Corporate Transaction for the assumption or continuation of such Options, SARs, Deferred
Stock Units, Restricted Stock and Other Equity-Based Awards, or for the substitution for such
Options, SARs, Deferred Stock Units, Restricted Stock and Other Equity-Based Awards of new common
stock options, stock appreciation rights, common stock units, restricted stock and other
equity-based awards relating to the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number of shares (disregarding any consideration that is not
common stock) and option and stock appreciation rights exercise prices. In the event a Grantees
Award is assumed, continued or substituted upon the consummation of any Corporate Transaction and
his employment is terminated without Cause within one year following the consummation of such
Corporate Transaction, the Grantees Award will be fully vested and may be exercised in full, to
the extent applicable, beginning on the date of such termination and for the one-year period
immediately following such termination or for such longer period as the Committee shall determine.
17.5. Adjustments
Adjustments under this
Section 17
related to shares of Stock or other securities of the
Company shall be made by the Committee, whose determination in that respect shall be final, binding
and conclusive. No fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share. The Committee shall determine the effect of a
Corporate Transaction upon Awards other than Options, SARs, Deferred Stock Units and Restricted
Stock, and such effect shall be set forth in the applicable Award Agreement, in another agreement
with the Grantee, or otherwise in writing. The Committee may provide in the applicable Award
Agreement at the time of grant, in another agreement with the Grantee, or otherwise in writing at
any time thereafter with the consent of the Grantee, for different provisions to apply to an Award
in place of those provided in
Sections 17.1, 17.2, 17.3
and
17.4
.
17.6. 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 (including all or any part of the business or
assets of any Subsidiary or other Affiliate) or engage in any other transaction or activity.
18. GENERAL PROVISIONS
18.1. Disclaimer of Rights.
No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or Service of the Company or an Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company or an
Affiliate either to increase or decrease the compensation or other payments to any natural person
or entity at any time, or to terminate any employment or other relationship between any natural
person or entity and the Company or an Affiliate. In addition, notwithstanding anything contained
in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, in another
agreement with the Grantee, or otherwise in writing, no Award granted under the Plan shall be
affected by any change of duties or position of the Grantee thereof, so long as such Grantee
continues to provide Service. The obligation of the Company to pay any benefits pursuant to the
Plan shall be interpreted as a contractual obligation to pay only those amounts provided herein, in
the manner and under the conditions prescribed herein. The Plan and Awards 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.
25
18.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the shareholders 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) as the Board in its discretion determines desirable.
18.3. 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 with respect to the vesting of or other lapse of restrictions applicable to an
Award or upon the issuance of any shares of Stock upon the exercise of an Option or pursuant to any
other Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the
Company or an Affiliate, as the case may be, any amount that the Company or such Affiliate may
reasonably determine to be necessary to satisfy such withholding obligation;
provided
that if there
is a same-day sale of shares of Stock subject to an Award, the Grantee shall pay such withholding
obligation on the day on which such same-day sale is completed. Subject to the prior approval of
the Company or an Affiliate, which may be withheld by the Company or such Affiliate, as the case
may be, in its sole discretion, the Grantee may elect to satisfy such withholding obligation, in
whole or in part, (a) by causing the Company or such Affiliate to withhold shares of Stock
otherwise issuable to the Grantee or (b) by delivering to the Company or such Affiliate shares of
Stock already owned by the Grantee. The shares of Stock so withheld or delivered shall have an
aggregate Fair Market Value equal to such withholding obligation. The Fair Market Value of the
shares of Stock used to satisfy such withholding obligation shall be determined by the Company or
such Affiliate as of the date on which the amount of tax to be withheld is to be determined. A
Grantee who has made an election pursuant to this
Section 18.3
may satisfy such Grantees
withholding obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements. The maximum number of shares of
Stock that may be withheld from any Award to satisfy any federal, state or local tax withholding
requirements upon the exercise, vesting, or lapse of restrictions applicable to any Award or
payment of shares of Stock pursuant to such Award, as applicable, may not exceed such number of
shares of Stock having a Fair Market Value equal to the minimum statutory amount required by the
Company or the applicable Affiliate to be withheld and paid to any such federal, state or local
taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of shares
of Stock. Notwithstanding
Section 2.21
or this
Section 18.3
, for purposes of determining taxable
income and the amount of the related tax withholding obligation pursuant to this
Section 18.3
, for
any shares of Stock subject to an Award that are sold by or on behalf of a Grantee on the same date
on which such shares may first be sold pursuant to the terms of the related Award Agreement, the
Fair Market Value of such shares shall be the sale price of such shares on such date (or if sales
of such shares are effectuated at more than one sale price, the weighted average sale price of such
shares on such date), so long as such Grantee has provided the Company, or its designee or agent,
with advance written notice of such sale.
18.4. Captions.
The use of captions in the Plan or any Award Agreement is for convenience of reference only
and shall not affect the meaning of any provision of the Plan or such Award Agreement.
18.5. Other Provisions.
Each Award granted under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Committee, in its sole discretion.
18.6. Number and Gender.
With respect to words used in the Plan, the singular form shall include the plural form and
the masculine gender shall include the feminine gender, as the context requires.
26
18.7. 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.
18.8. Governing Law.
The validity and construction of the Plan and the instruments evidencing the Awards hereunder
shall be governed by, and construed and interpreted in accordance with, the laws of the State of
Delaware, other than any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of the Plan and the instruments evidencing the Awards granted
hereunder to the substantive laws of any other jurisdiction.
18.9. Section 409A of the Code.
The Company intends to comply with Code Section 409A, or an exemption to Code Section 409A,
with regard to Awards hereunder that constitute nonqualified deferred compensation within the
meaning of Code Section 409A. To the extent that the Company determines that a Grantee would be
subject to the additional twenty percent (20%) tax imposed on certain nonqualified deferred
compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted
under the Plan, such provision shall be deemed amended to the minimum extent necessary to avoid
application of such additional tax. The nature of any such amendment shall be determined by the
Committee.
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