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¨
Preliminary Proxy Statement
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¨
Confidential, For Use of the Commission Only(as permitted by Rule 14a-6(e)(2))
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x
Definitive Proxy Statement
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¨
Definitive Additional Materials
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¨
Soliciting Material Under Rule 14a-12
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1
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Title of each class of securities to which transaction applies:
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2
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Aggregate number of securities to which transaction applies:
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3
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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4
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Proposed maximum aggregate value of transaction:
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5
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Total fee paid:
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1
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Amount previously paid:
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2
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Form, Schedule or Registration Statement No.:
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3
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Filing Party:
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4
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Date Filed:
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1.
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BY INTERNET
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a.
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Go to the web site at www.proxyvote.com, 24 hours a day, seven days a week, through 11:59 p.m. (ET) on May 5, 2014.
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b.
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Please have your Notice and proxy card available and follow the instructions provided to obtain your records and to create an electronic voting instruction form.
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2.
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BY MAIL
(if you vote by Internet, please do not mail your proxy card)
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a.
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If you received a Notice, first request a paper or email copy of the proxy materials as directed in the Notice.
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b.
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Mark, sign and date your proxy card.
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c.
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Return it in the postage‑paid envelope provided.
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1.
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To elect the following nine individuals to our Board of Directors, to serve until the next annual meeting of shareholders and until their successors have been duly elected and qualified: J. Kevin Gilligan, Michael A. Linton, Michael L. Lomax, Jody G. Miller, Stephen G. Shank, Andrew M. Slavitt, David W. Smith, Jeffrey W. Taylor and Darrell R. Tukua.
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2.
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.
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3.
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To approve the 2014 Capella Education Company Equity Incentive Plan.
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4.
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To submit an advisory vote on the executive compensation of our named executive officers (Say-On-Pay).
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5.
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To transact other business that may properly be brought before the meeting.
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Table of Contents
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GENERAL INFORMATION
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
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Composition of Our Board of Directors
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Directors and Director Nominees
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Board of Directors Meetings and Attendance
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Director Independence
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Committees of Our Board of Directors
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Corporate Governance Principles
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Code of Business Conduct
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Corporate Governance Documents Available on Our Website
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Director Qualifications and Diversity
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Director Nomination Process
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Board Leadership Structure
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Role of Board in Risk Oversight
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Compensation Committee Interlocks and Insider Participation
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Communication with Our Board of Directors
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PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Approval of Independent Registered Public Accounting Firm Services and Fees
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AUDIT COMMITTEE REPORT
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PROPOSAL NO. 3 - VOTE TO APPROVE 2014 EQUITY INCENTIVE PLAN
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Introduction
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Size of Share Pool
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Shareholder Approval Requirement
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Key Compensation Practices
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Plan Description
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U.S. Federal Income Tax Consequences
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Plan Awards
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Required Vote
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PROPOSAL NO. 4 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY ON PAY)
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EXECUTIVE COMPENSATION
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Compensation Discussion and Analysis
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Introduction
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Executive Summary
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Philosophy and Goals of Our Executive Compensation Program
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Role of Compensation Consultants and Management
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Compensation Determination
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Compensation Elements and 2013 Executive Compensation Decisions
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2013 Plans and Executive Compensation
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2014 Variable Plans
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Policies and Practices
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COMPENSATION COMMITTEE REPORT
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Summary Compensation Table
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Grants of Plan-Based Awards in 2013
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Proposal
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Vote Required
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Broker Discretionary Voting Allowed
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Proposal 1 - Election of nine directors
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Plurality of votes cast
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No
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Proposal 2 - Ratification of auditors for fiscal year 2014
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Majority of the shares entitled to vote and present in person or represented by proxy
(1)
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Yes
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Proposal 3 - Approval of 2014 Capella Education Company Equity Incentive Plan
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Majority of the shares entitled to vote and present in person or represented by proxy
(1)
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No
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Proposal 4 - Advisory vote on executive compensation
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We will consider our shareholders to have approved our executive compensation if the number of votes FOR exceeds the number of votes AGAINST
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No
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(1)
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So long as the number of shares voted exceeds 25% of our outstanding shares.
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Name
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Age
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Position
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Committee Membership
(1)
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J. Kevin Gilligan
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59
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Chairman and Chief Executive Officer
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None
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Michael A. Linton
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57
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Director
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Audit, Compensation
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Michael L. Lomax
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66
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Director
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Governance
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Jody G. Miller
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56
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Director
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Finance, Governance (chair)
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Stephen G. Shank
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70
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Director
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Finance
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Andrew M. Slavitt
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47
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Director
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Compensation (co-chair)
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David W. Smith
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68
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Lead Director
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Compensation, Governance
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Jeffrey W. Taylor
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60
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Director
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Audit, Compensation (acting co-chair), Finance (chair)
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Darrell R. Tukua
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60
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Director
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Audit (chair), Finance
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(1)
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Each of our independent directors, or all of our current directors except Mr. Shank and Mr. Gilligan, serves on the Executive Committee.
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•
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the identification of director candidates by our Governance Committee based upon suggestions from current directors and senior management, recommendations by shareholders and/or use of a director search firm;
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•
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a review of the candidates' qualifications by our Governance Committee to determine which candidates best meet our Board of Directors' required and desired criteria;
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•
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interviews of interested candidates who best meet these criteria by the chair of the Governance Committee, the chair of our Board of Directors, and/or certain other directors;
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•
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recommendation by our Governance Committee for inclusion in the slate of directors for the annual meeting of shareholders or appointment by our Board of Directors to fill a vacancy during the intervals between shareholder meetings; and
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•
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formal nomination by our Board of Directors.
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Services Rendered
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2013
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2012
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Audit Fees
(1)
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$596,944
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$655,265
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||
Audit-Related Fees
|
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—
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—
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Tax Fees
(2)
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—
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8,100
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All Other Fees
(3)
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1,995
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1,995
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Total Fees
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$598,939
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$665,360
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(1)
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Audit Fees include fees associated with the integrated audit and quarterly reviews and services provided by the auditor in connection with statutory and regulatory filings.
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(2)
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In 2012, Tax Fees include fees relating to tax considerations pertinent to our subsidiary, Resource Development International (RDI).
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(3)
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All Other Fees relate to a license fee for an accounting database.
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Shares Subject
to Options
Outstanding
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Restricted Stock
Units Outstanding
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Market Stock
Units
Outstanding
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Shares Remaining
Available
for Future Grant
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726,234
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195,178
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103,972
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825,533
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Weighted-Average Exercise Price of Options
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$51.61
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Weighted-Average Remaining Term of Options
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6.13 years
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•
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Importance of Long-Term Equity Incentives.
Long-term equity incentives play a critical role in our executive compensation program, motivating executives to make decisions that focus on creating long-term value for our shareholders, aligning executives’ interests with the interests of shareholders and serving as an effective employment inducement and retention device. The Board of Directors considers our ability to continue to provide a competitive level of long-term equity incentives to be critical to our success.
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•
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Shareholder Value Transfer Test
. The Board of Directors asked Aon Hewitt to estimate the shareholder value transfer of the proposed share pool. Aon Hewitt evaluated the value of available shares and outstanding plan awards as a percentage of the Company’s market capitalization and determined that authorizing 480,000 shares of stock for issuance under the 2014 Plan, in addition to shares available for issuance under the 2005 Plan, was reasonable.
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•
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Overhang Percentage
. The Board of Directors has proposed a number of authorized shares for the 2014 Plan that would maintain our total projected overhang within standards typically considered acceptable by institutional investors for companies of our size. In determining the number of shares to recommend for authorization under the 2014 Plan, the Board considered that the overhang percentage represented by the number of shares currently underlying outstanding awards under the 2005 Plan and available for future awards under the 2005 Plan is above the median for our industry classification.
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•
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Historical Burn Rate
. We are committed to managing our use of equity incentives prudently to balance the benefits equity compensation brings to our compensation program with the dilution it causes our other shareholders. As part of its analysis when considering approval of the 2014 Plan, the Board of Directors considered our annual “burn rate,” or the number of shares subject to equity awards granted in each of the past three fiscal years divided by the weighted average number of shares outstanding for each of those fiscal years, and noted that our three-year average burn rate is below the suggested burn-rate cap published by Institutional Shareholder Services Inc., a leading proxy advisory service, for our industry classification.
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•
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Expected Duration.
The Board of Directors expects that if the 2014 Plan is approved by our shareholders, the shares available for future awards will be sufficient for currently anticipated needs for at least four years. Expectations regarding future share usage under the 2014 Plan are based on a number of assumptions such as future growth in the population of eligible participants, the rate of future compensation increases, the rate at which shares are returned to the 2014 Plan reserve upon awards’ expiration, forfeiture or cash settlement, and the future performance of our stock price. While the Board of Directors believes that the assumptions it used are reasonable, future share usage will differ from current expectations to the extent that actual events differ from the assumptions utilized.
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•
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No Repricing or Replacement of Underwater Options or Stock Appreciation Rights
. The 2014 Plan prohibits, without shareholder approval, actions to reprice, replace or repurchase options orSARs when the exercise price per share of an option or SAR exceeds the fair market value of the underlying shares.
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•
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No In-the-Money Option or Stock Appreciation Right Grants
. The 2014 Plan prohibits the grant of options or SARs with an exercise price less than the fair market value of our common stock on the date of grant (except in the limited case of “substitute awards” as described below).
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•
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No Single-Trigger Accelerated Vesting/Payment Following a Change in Control
. The 2014 Plan provides that accelerated vesting of or payment for outstanding awards in connection with a merger or acquisition will only be made if and to the extent that the surviving or successor entity does not continue, assume or replace such awards.
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•
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Independent Administration.
The Compensation Committee of our Board of Directors, which consists of only independent directors, will have overall administrative authority over the 2014 Plan if it is approved by shareholders, and only this committee may make awards to executive officers.
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•
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Dividend Restrictions
. Any dividends, distributions or dividend equivalents payable with respect to the unvested portion of a performance-based award will be subject to the same restrictions applicable to the underlying shares, units or share equivalents.
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•
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Compensation Recovery Policy
. Awards under the 2014 Plan may be made subject to compensation recovery policy adopted by our Board of Directors.
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•
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J. Kevin Gilligan, Chief Executive Officer
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•
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Steven L. Polacek, Senior Vice President- Chief Financial Officer
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•
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Scott L. Kinney, Senior Vice President- University President
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•
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Sally B. Chial, Senior Vice President- Human Resources
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•
|
Gregory W. Thom, Senior Vice President- General Counsel
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i.
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Attract, retain and motivate talent (tied to salary and annual adjustments);
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ii.
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Pay for performance (tied to annual and long-term incentive plans);
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iii.
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Align interests of business leaders with those of shareholders (tied to long-term incentive plans);
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iv.
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Align compensation with strategy (tied to annual and long-term incentive plans); and
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v.
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Discourage inappropriate risk taking (tied to all plans).
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•
|
Compile and assess market competitiveness for the compensation of our executives, consistent with our compensation philosophy;
|
•
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Provide counsel on Compensation Committee best practices, compensation risk management, market changes and responses to regulatory changes;
|
•
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Review and provide input on the companies included in our comparator group used for benchmarking purposes; and
|
•
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Provide input on the design of the annual and long-term incentive compensation programs.
|
•
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Ensure the consultants' understanding of executive positions to be benchmarked;
|
•
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Communicate on business objectives and priorities in designing the annual and long-term incentive plans; and
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•
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Provide input on the value and contributions of the executive officers.
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Plan Components and Measures
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Weights
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Company Financial Measures
|
80%
|
Revenue
|
40%
|
Operating Income
|
40%
|
Learner Satisfaction
|
20%
|
Capella University Learner Engagement Survey (CULES)
|
10%
|
End of Course Evaluations (EOCEs)
|
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Learner Success
|
10%
|
Incentive Opportunity for Achieving 100% of all Targets
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100%
|
•
|
The financial measures that drive annual incentive opportunities are our levels of revenue and operating income. We consider both to be key metrics that are aligned with shareholder interests.
|
•
|
A component that pays for achievement of key learner satisfaction improvements has again been included. Compared to 2013, we retired Capella University Learner Experience Survey (CULES) in favor of the third-party provided Priorities Survey for Online Learners (PSOL), plus End of Course Evaluations to measure our learners’ satisfaction, with each measured independently. They are an important differentiator for us in the marketplace of online education. The results achieved on these questions will be compared to the baseline results from the prior year.
|
•
|
A component that pays for improvement in learner success, a key strategic initiative for us, is again included. This component covers executives in policy-making roles on persistence initiatives. For the 2014 Management Incentive Plan, learner success will be measured by improvement in the trailing four quarter weighted average persistence of new learner cohorts versus the prior year baseline.
|
|
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Weights
|
Plan Components and Measures
|
|
Applicable to all Executives
|
Company Financial Measures
|
|
80%
|
Operating Income
|
|
40%
|
Revenue
|
|
40%
|
Learner Satisfaction
|
|
20%
|
Priorities Survey for Online Learners (PSOL) or
|
|
10%
|
End of Course Evaluations (EOCEs)
|
|
|
Learner Success
|
|
10%
|
Incentive for Achieving 100% of all Targets
|
|
100%
|
Position
|
Company Common Stock Value Equal to:
|
Chief Executive Officer
|
Four times annual salary
|
Chief Operating Officer
(1)
|
Three times annual salary
|
Senior Vice Presidents
|
Two times annual salary
|
Vice Presidents
|
One times annual salary
|
(1)
|
No one currently holds the title of Chief Operating Officer.
|
•
|
The general design philosophy of our compensation policies and practices for employees whose behavior would be most affected by the incentives established by our compensation policies and practices, as such policies and practices relate to or affect risk taking by employees on our behalf, and the manner of their implementation;
|
•
|
Our risk assessment and incentive considerations in structuring our compensation policies and practices or in awarding and paying compensation;
|
•
|
How our compensation policies and practices relate to the realization of risks resulting from the actions of employees in both the short term and the long term;
|
•
|
Our policies regarding adjustments to our compensation programs and practices to address changes in our risk profile; and
|
•
|
Material adjustments that we have made to our compensation policies and practices as a result of changes in our risk profile.
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Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
(1)
|
Option Awards ($)
(1)
|
Non-Equity Incentive Plan Compensation ($)
(2)
|
All Other Compensation ($)
(3)
|
Total ($)
|
|||||||
J. Kevin Gilligan
|
2013
|
686,200
|
|
—
|
|
3,045,489
|
|
520,842
|
|
710,903
|
|
10,678
|
|
4,974,112
|
|
Chief Executive Officer
|
2012
|
681,704
|
|
—
|
|
499,001
|
|
484,344
|
|
295,354
|
|
10,862
|
|
1,971,265
|
|
2011
|
664,250
|
|
—
|
|
523,490
|
|
1,017,909
|
|
278,780
|
|
10,960
|
|
2,495,389
|
|
|
Steven L. Polacek
|
2013
|
419,200
|
|
—
|
|
263,564
|
|
255,778
|
|
325,718
|
|
10,492
|
|
1,274,752
|
|
Senior Vice President and Chief Financial Officer
|
2012
|
416,454
|
|
—
|
|
219,108
|
|
212,565
|
|
135,324
|
|
10,527
|
|
993,978
|
|
2011
|
406,577
|
|
—
|
|
243,049
|
|
472,628
|
|
127,070
|
|
10,510
|
|
1,259,834
|
|
|
Scott L. Kinney
(4)
|
2013
|
375,000
|
|
—
|
|
135,976
|
|
132,002
|
|
194,250
|
|
10,461
|
|
847,689
|
|
University President
|
2012
|
330,289
|
|
—
|
|
191,181
|
|
185,634
|
|
77,737
|
|
10,425
|
|
795,265
|
|
|
|
|
|
|
|
|
|
||||||||
Sally B. Chial
|
2013
|
332,600
|
|
—
|
|
226,949
|
|
98,971
|
|
172,287
|
|
10,432
|
|
841,238
|
|
Senior Vice President - Human Resources
|
2012
|
330,419
|
|
—
|
|
92,818
|
|
90,099
|
|
71,579
|
|
10,418
|
|
595,334
|
|
2011
|
321,135
|
|
—
|
|
181,403
|
|
218,818
|
|
66,952
|
|
10,362
|
|
798,670
|
|
|
Gregory W. Thom
|
2013
|
315,200
|
|
—
|
|
91,135
|
|
88,438
|
|
163,274
|
|
10,420
|
|
668,466
|
|
Senior Vice President and General Counsel
|
2012
|
313,531
|
|
—
|
|
72,283
|
|
70,251
|
|
67,907
|
|
10,397
|
|
534,369
|
|
2011
|
306,577
|
|
—
|
|
155,632
|
|
174,482
|
|
59,291
|
|
10,336
|
|
706,319
|
|
(1)
|
Valuation based on the grant date fair value of the awards granted in each fiscal year, calculated in accordance with ASC Topic 718. See Note 10 to our consolidated financial statements for the year ended
December 31, 2013
for a description of the assumptions used in each year presented. The grant date fair value (
$2,508,844
) of the Market Stock Award (MSU) granted to Mr. Gilligan in 2013 is calculated by using the Monte Carlo simulation valuation model with the following assumptions: volatility of 45.72% and a risk free interest rate of 0.75%.
|
(2)
|
Based on
2013
company performance, incentive awards were paid out at
103.6
% of target incentive opportunity; for further information, see table under “Grants of Plan-Based Awards in
2013
” below.
|
(3)
|
Represents the value of our matching contribution to the 401(k) plan accounts of the named executive officers, and the premiums we paid for group term life insurance on behalf of the named executive officers. The amounts for
2013
include:
|
•
|
For Mr. Gilligan, a 401(k) matching contribution to his account of
$10,200
and life insurance premiums paid on his behalf in the amount of
$478
.
|
•
|
For Mr. Polacek, a 401(k) matching contribution to his account of
$10,200
and life insurance premiums paid on his behalf in the amount of
$292
.
|
•
|
For Mr. Kinney, a 401(k) matching contribution to his account of
$10,200
and life insurance premiums paid on his behalf in the amount of
$261
.
|
•
|
For Ms. Chial, a 401(k) matching contribution to her account of
$10,200
and life insurance premiums paid on her behalf in the amount of
$232
.
|
•
|
For Mr. Thom, a 401(k) matching contribution to his account of
$10,200
and life insurance premiums paid on his behalf in the amount of
$220
.
|
(4)
|
Mr. Kinney joined the Company on January 17, 2012.
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards
|
Estimated Possible Payouts Under Equity Incentive Plan Awards
|
All Other Stock Awards: Number of Shares of Stock or Units
(7)
|
All Other Option Awards: Number of Securities Underlying Options (#)
(8)
|
Exercise or Base Price of Option Awards ($/Sh)
(9)
|
Grant Date Fair Value of Stock and Option Awards ($)
|
||||||||||||||||||||
Name
|
Grant Date
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
||||||||||||||||||||
J. Kevin Gilligan
|
|
171,550
|
|
(1)
|
681,704
|
|
(2)
|
1,363,408
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
130,200
|
|
(4)
|
520,800
|
|
(5)
|
1,208,256
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
16,635
|
|
|
|
536,645
|
|
||||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,785
|
|
32.26
|
|
520,842
|
|
|||||||
|
5/7/2013
|
|
|
|
|
|
|
—
|
|
(10)
|
103,972
|
|
(10)
|
103,972
|
|
(10)
|
|
|
|
2,508,844
|
|
||||||
Steven L. Polacek
|
|
78,600
|
|
(1)
|
312,340
|
|
(2)
|
624,681
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
63,950
|
|
(4)
|
255,800
|
|
(5)
|
593,456
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
8,170
|
|
|
|
263,564
|
|
||||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,520
|
|
32.26
|
|
255,778
|
|
|||||||
Scott L. Kinney
|
|
46,875
|
|
(1)
|
165,144
|
|
(2)
|
330,289
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
33,000
|
|
(4)
|
132,000
|
|
(5)
|
306,240
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
4,215
|
|
|
|
135,976
|
|
||||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,590
|
|
32.26
|
|
132,002
|
|
|||||||
Sally B. Chial
|
|
41,575
|
|
(1)
|
165,210
|
|
(2)
|
330,419
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
24,750
|
|
(4)
|
99,000
|
|
(5)
|
229,680
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
7,035
|
|
|
|
226,949
|
|
||||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,940
|
|
32.26
|
|
98,971
|
|
|||||||
Gregory W. Thom
|
|
39,400
|
|
(1)
|
156,765
|
|
(2)
|
313,531
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
22,100
|
|
(4)
|
88,400
|
|
(5)
|
205,088
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
2,825
|
|
|
|
91,135
|
|
||||||||
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,095
|
|
32.26
|
|
88,438
|
|
(1)
|
Reflects the cash incentive payout possible under the Management Incentive Plan for
2013
, assuming the minimum performance criteria for each component is satisfied, which was 25% of target incentive opportunity.
|
(2)
|
Reflects the target cash incentive payout possible under the Management Incentive Plan for
2013
for achievement of 100% of target.
|
(3)
|
Reflects the maximum cash incentive payout possible under the Management Incentive Plan for
2013
, for achievement in excess of 100% of target and up to the maximum, which was 200% of target incentive opportunity. Based on actual Management Incentive Plan achievement, a payout of
103.6
% was earned.
|
(4)
|
Reflects the cash incentive payout possible under the Long-Term Performance Cash Plan, assuming the minimum performance criteria for each component is satisfied, which is 25%.
|
(5)
|
Reflects the target cash incentive payout possible under the Long-Term Performance Cash Plan, which is 100%.
|
(6)
|
Reflects the maximum cash incentive payout possible under the Long-Term Performance Cash Plan, which is 232%.
|
(7)
|
Reflects restricted stock units granted under our annual executive grant program. These vest and are settled in the form of common stock on the third anniversary of the date of grant.
|
(8)
|
Reflects stock options granted under our annual executive grant program. These vest and become exercisable in 25% increments on each annual anniversary of the date of grant.
|
(9)
|
Reflects fair market value on the date of grant.
|
(10)
|
If the 90-day average closing price at the end of the five-year performance period is (i) at or below $32.09, then no shares will vest, (ii) at or above $48.09, then all of the shares will vest, and (iii) between $32.09 and $48.09, then shares will vest on straight line interpolation.
|
•
|
Award structure
: The MSUs will vest at different levels based on the 90-day average closing price for our common stock at the end of the Performance Period, plus the per share value of any dividends paid during the Performance Period ("Ending Value").
|
•
|
Minimum and Maximum Vest
: If the Ending Value is at or below $32.09 (the 90-day average closing price on the date of grant), then no shares will vest. The maximum number of shares that may vest is 103,972 which would occur if our Ending Value is at or above $48.09. If the Ending Value is between $32.09 and $48.09, shares will vest based on straight line interpolation.
|
◦
|
Voluntary Termination, including Retirement:
If Mr. Gilligan voluntarily resigns during the Performance Period, including retirement, then the MSUs will be forfeited.
|
◦
|
Death, Disability, or Involuntary Termination Not for Cause:
If Mr. Gilligan dies, becomes disabled or is terminated without cause during the Performance Period, then the MSUs will vest based on an abbreviated Performance Period.
|
◦
|
Change in Control:
In the event of a change in control, if Mr. Gilligan's employment is terminated without cause or he resigns for good reason, then the MSUs will vest in full.
|
|
|
Option Awards
|
|
Stock Awards
|
Equity Incentive Plan Awards
|
||||||||||||||
Name
|
Date of Grant
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
Option Exercise Price ($)
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have Not Vested ($)
|
|
Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
|
|
|||||||
J. Kevin Gilligan
|
5/11/2010
|
30,263
|
|
10,087
|
|
89.09
|
|
5/10/2017
|
(1)
|
|
|
|
|
|
|
||||
|
5/10/2011
|
26,690
|
|
26,690
|
|
50.53
|
|
5/9/2018
|
(1)
|
|
|
|
|
|
|
||||
|
2/22/2012
|
7,352
|
|
22,053
|
|
41.07
|
|
2/21/2022
|
(1)
|
|
|
|
|
|
|
||||
|
2/21/2013
|
|
41,785
|
|
32.26
|
|
2/20/2023
|
(1)
|
|
|
|
|
|
|
|||||
|
5/11/2010
|
|
|
|
|
|
5,610
|
|
372,728
|
|
(3)
|
|
|
|
|||||
|
5/10/2011
|
|
|
|
|
|
10,360
|
|
688,318
|
|
(2)
|
|
|
|
|||||
|
2/22/2012
|
|
|
|
|
|
12,150
|
|
807,246
|
|
(2)
|
|
|
|
|||||
|
2/21/2013
|
|
|
|
|
|
16,635
|
|
1,105,229
|
|
(2)
|
|
|
|
|||||
|
5/7/2013
|
|
|
|
|
|
|
|
|
103,972
|
|
6,907,900
|
|
(4)
|
|||||
Steven L. Polacek
|
5/10/2011
|
12,393
|
|
12,392
|
|
50.53
|
|
5/9/2018
|
(1)
|
|
|
|
|
|
|
||||
|
2/22/2012
|
3,227
|
|
9,678
|
|
41.07
|
|
2/21/2022
|
(1)
|
|
|
|
|
|
|
||||
|
2/21/2013
|
|
20,520
|
|
32.26
|
|
2/20/2023
|
(1)
|
|
|
|
|
|
|
|||||
|
5/10/2011
|
|
|
|
|
|
4,810
|
|
319,576
|
|
(2)
|
|
|
|
|||||
|
2/22/2012
|
|
|
|
|
|
5,335
|
|
354,457
|
|
(2)
|
|
|
|
|||||
|
2/21/2013
|
|
|
|
|
|
8,170
|
|
542,815
|
|
(2)
|
|
|
|
|||||
Scott L. Kinney
|
2/22/2012
|
2,818
|
|
8,452
|
|
41.07
|
|
2/21/2022
|
(1)
|
|
|
|
|
|
|
||||
|
2/21/2013
|
|
10,590
|
|
32.26
|
|
2/20/2023
|
(1)
|
|
|
|
|
|
|
|||||
|
2/22/2012
|
|
|
|
|
|
4,655
|
|
309,278
|
|
(2)
|
|
|
|
|||||
|
2/21/2013
|
|
|
|
|
|
4,215
|
|
280,045
|
|
(2)
|
|
|
|
|||||
Sally B. Chial
|
5/12/2009
|
8,000
|
|
|
|
51.21
|
|
5/11/2016
|
(1)
|
|
|
|
|
|
|
||||
|
5/11/2010
|
6,675
|
|
2,225
|
|
89.09
|
|
5/10/2017
|
(1)
|
|
|
|
|
|
|
||||
|
5/10/2011
|
5,738
|
|
5,737
|
|
50.53
|
|
5/9/2018
|
(1)
|
|
|
|
|
|
|
||||
|
2/22/2012
|
1,368
|
|
4,102
|
|
41.07
|
|
2/21/2022
|
(1)
|
|
|
|
|
|
|
||||
|
2/21/2013
|
|
7,940
|
|
32.26
|
|
2/20/2023
|
(1)
|
|
|
|
|
|
|
|||||
|
5/10/2011
|
|
|
|
|
|
3,590
|
|
238,520
|
|
(2)
|
|
|
|
|||||
|
2/22/2012
|
|
|
|
|
|
2,260
|
|
150,154
|
|
(2)
|
|
|
|
|||||
|
2/21/2013
|
|
|
|
|
|
7,035
|
|
467,405
|
|
(2)
|
|
|
|
|||||
Gregory W. Thom
|
8/12/2005
|
1,379
|
|
|
20.00
|
|
8/11/2015
|
(1)
|
|
|
|
|
|
|
|||||
|
8/9/2007
|
3,426
|
|
|
42.65
|
|
8/8/2014
|
(1)
|
|
|
|
|
|
|
|||||
|
8/14/2008
|
5,400
|
|
|
53.91
|
|
8/13/2015
|
(1)
|
|
|
|
|
|
|
|||||
|
5/12/2009
|
5,100
|
|
|
51.21
|
|
5/11/2016
|
(1)
|
|
|
|
|
|
|
|||||
|
5/11/2010
|
4,050
|
|
1,350
|
|
89.09
|
|
5/10/2017
|
(1)
|
|
|
|
|
|
|
||||
|
5/10/2011
|
4,576
|
|
4,574
|
|
50.53
|
|
5/9/2018
|
(1)
|
|
|
|
|
|
|
||||
|
2/22/2012
|
1,067
|
|
3,198
|
|
41.07
|
|
2/21/2022
|
(1)
|
|
|
|
|
|
|
||||
|
2/21/2013
|
|
7,095
|
|
32.26
|
|
2/20/2023
|
(1)
|
|
|
|
|
|
|
|||||
|
5/10/2011
|
|
|
|
|
|
3,080
|
|
204,635
|
|
(2)
|
|
|
|
|||||
|
2/22/2012
|
|
|
|
|
|
1,760
|
|
116,934
|
|
(2)
|
|
|
|
|||||
|
2/21/2013
|
|
|
|
|
|
2,825
|
|
187,693
|
|
(2)
|
|
|
|
(1)
|
Vests and becomes exercisable in 25% increments on each yearly anniversary of the date of the grant.
|
(2)
|
Vests on the third anniversary of the date of grant.
|
(3)
|
Vests on the fifth anniversary of the date of grant.
|
(4)
|
Vests as detailed in the Strategic Transformation Incentive Award portion of the Executive Agreement Provisions.
|
|
Option Awards
|
Stock Awards
|
||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise ($)
(1)
|
Number of Shares Acquired on Vesting (#)
|
Value Realized on Vesting ($)
(2)
|
||||
J. Kevin Gilligan
|
30,000
|
|
436,800
|
|
5,725
|
|
229,916
|
|
Steven L. Polacek
|
—
|
|
—
|
|
1,772
|
|
111,547
|
|
Scott L. Kinney
|
—
|
|
—
|
|
—
|
|
—
|
|
Sally B. Chial
|
30,000
|
|
80,214
|
|
1,265
|
|
50,802
|
|
Gregory W. Thom
|
1,679
|
|
27,284
|
|
765
|
|
30,722
|
|
(1)
|
The value realized on exercise is calculated as the multiple of (A) either (i) the actual sales price of the shares underlying the options exercised if the shares were immediately sold or (ii) the closing price of the shares underlying the options exercised if the shares were held, minus (B) the applicable exercise price of those options.
|
(2)
|
The value realized on vesting is calculated as the closing price of the shares on the date of vesting.
|
•
|
“
Cause” means (1) employee's commission of a crime or other act that could materially damage our reputation; (2) employee's theft, misappropriation, or embezzlement of our property; (3) employee's falsification of records maintained by us; (4) employee's failure substantially to comply with our written policies and procedures as they may be published or revised from time to; (5) employee's misconduct directed toward learners, employees, or adjunct faculty; or (6) employee's failure substantially to perform the material duties of employee's employment, which failure is not cured within 30 days after written notice from us specifying the act of non-performance.
|
•
|
“Good Reason” means (1) the demotion or reduction of the executive's job responsibilities upon a Change-in-Control; (2) executive's total target compensation is decreased by more than 10% in a 12 month period; or (3) a reassignment of executive's principal place of work, without their consent, to a location more than 50 miles from their principal place of work upon a Change-in-Control. To be eligible for benefits, the executive must terminate employment for Good Reason within 24 months after the date of the qualified Change-in-Control. In addition, the executive must have provided written notice to us of the asserted Good Reason not later than 30 days after the occurrence of the event on which Good Reason is based and at least 30 days prior to executive's proposed termination date. We may take action to cure executive's stated Good Reason within this 30-day period. If we take action, executive will not be eligible for Plan benefits if the executive voluntarily terminates.
|
•
|
A “Change in Control” shall be deemed to occur if any of the following occur:
|
(1)
|
Any person or entity acquires or becomes a beneficial owner, directly or indirectly, of securities of Capella representing 35% or more of the combined voting power of our then outstanding voting securities, subject to certain exceptions;
|
(2)
|
A majority of the members of our Board of Directors shall not be continuing directors, for which purpose continuing directors are generally those directors who were members of our board at the time we adopted the Plan and those directors for whose election our Board of Directors solicited proxies or who were elected or appointed by our Board of Directors to fill vacancies caused by death or resignation or to fill newly-created directorships;
|
(3)
|
Approval by our shareholders of a reorganization, merger or consolidation or a statutory exchange of our outstanding voting securities unless, immediately following such reorganization, merger, consolidation or exchange, all or substantially all of the persons who were the beneficial owners, respectively, of our voting securities and shares immediately prior to such reorganization, merger, consolidation or exchange beneficially own, directly or indirectly, more than 65% of, respectively, the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors and the then outstanding shares of common stock, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or exchange in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or exchange, of our voting securities and shares, as the case may be; or
|
(4)
|
Approval by the shareholders of (x) a complete liquidation or dissolution of our company or (y) the sale or other disposition of all or substantially all of our assets (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 65% of, respectively, the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and the then outstanding shares of common stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners, respectively, of our voting securities and shares immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of our voting securities and shares, as the case may be.
|
Name
|
Base Salary Payment Amount ($)
(1)
|
Target or Earned Bonus Compensation Payment Amount ($)
(2)
|
Value of Accelerated Awards ($)
|
|
Estimated Value of Outplacement Assistance ($)
|
Value of Insurance Premiums for Health, Dental and Life Insurance Continuation ($)
(3)
|
Total ($)
|
||||||
J. Kevin Gilligan
|
2,058,600
|
|
1,207,370
|
|
6,907,900
|
|
(4)
|
25,000
|
|
19,226
|
|
10,218,096
|
|
Steven L. Polacek
|
419,200
|
|
552,718
|
|
|
|
25,000
|
|
19,169
|
|
1,016,087
|
|
|
Scott L. Kinney
|
375,000
|
|
361,983
|
|
|
|
25,000
|
|
19,136
|
|
781,119
|
|
|
Sally B. Chial
|
332,600
|
|
265,354
|
|
|
|
25,000
|
|
13,868
|
|
636,822
|
|
|
Gregory W. Thom
|
315,200
|
|
239,541
|
|
|
|
25,000
|
|
17,080
|
|
596,821
|
|
(1)
|
Equal to 12 months of base salary in effect on
December 31, 2013
for all named executive officers, except equal to three times annualized base salary for Mr. Gilligan.
|
(2)
|
Equal to pro rata payment of Long-Term Performance Cash paid at target and annual incentive awards earned at
103.6
% of target incentive opportunity.
|
(3)
|
Reflects the employer share of the premiums for our insurance plans for 12 months.
|
•
|
For Mr. Gilligan, includes medical insurance premiums of
$17,992
; dental insurance premiums of
$879
; and life insurance premiums of
$355
.
|
•
|
For Mr. Polacek, includes medical insurance premiums of
$17,992
; dental insurance premiums of
$879
; and life insurance premiums of
$298
.
|
•
|
For Mr. Kinney, includes medical insurance premiums of
$17,992
; dental insurance premiums of
$879
; and life insurance premiums of
$266
.
|
•
|
For Ms. Chial, includes medical insurance premiums of
$13,630
; and life insurance premiums of
$236
.
|
•
|
For Mr. Thom, includes medical insurance premiums of
$15,976
; dental insurance premiums of
$879
; and life insurance premiums of
$224
.
|
(4)
|
Under the terms of Mr. Gilligan's MSU Award, the MSUs vest based on an abbreviated performance period in the event of involuntary termination other than for cause.
|
Name
|
Base Salary Payment Amount ($)
(1)
|
Target Bonus Compensation Payment Amount ($)
(2)
|
Value of Accelerated Options ($)
(3)(4)
|
Value of Accelerated Awards ($)
(5)
|
Estimated Value of Outplacement Assistance ($)
|
Value of Insurance Premiums for Health, Dental and Life Insurance Continuation ($)
(6)
|
Total ($)
|
|||||||
J. Kevin Gilligan
|
1,372,400
|
|
1,868,867
|
|
2,412,334
|
|
9,881,422
|
|
25,000
|
|
28,839
|
|
15,588,862
|
|
Steven L. Polacek
|
838,400
|
|
855,800
|
|
1,144,061
|
|
1,216,849
|
|
25,000
|
|
28,754
|
|
4,108,864
|
|
Scott L. Kinney
|
750,000
|
|
542,733
|
|
576,393
|
|
589,323
|
|
25,000
|
|
28,706
|
|
2,512,155
|
|
Sally B. Chial
|
665,200
|
|
425,667
|
|
466,733
|
|
856,079
|
|
25,000
|
|
20,800
|
|
2,459,479
|
|
Gregory W. Thom
|
630,400
|
|
391,467
|
|
396,413
|
|
509,263
|
|
25,000
|
|
25,619
|
|
1,978,162
|
|
(1)
|
Equal to 24 months of base salary in effect on
December 31, 2013
for all named executive officers. Amounts would be paid in bi-weekly installments over the term of the severance period (calculated as the number of months during which the participant is entitled to receive base salary), subject to any six month delay in payments to comply with Section 409A.
|
(2)
|
Equal to the pro rata payment of
2013
long-term performance cash award, paid at target based on truncated performance cycle, and two times the target annual incentive award for fiscal
2013
. Amounts would be paid in a lump sum upon termination, subject to any six month delay in payments to comply with Section 409A.
|
(3)
|
Based on the closing price of our common stock on
December 31, 2013
, the last trading day of fiscal
2013
, of
$66.44
.
|
(4)
|
Under the 2005 Stock Incentive Plan, options vest in full if a termination of employment occurs within three years of the change in control.
|
(5)
|
Under the 2005 Stock Incentive Plan, forfeiture provisions on restricted stock cease if a termination of employment occurs within two years of the change in control. In addition, Mr. Gilligan's MSUs vest in full if a termination of employment occurs following a change in control.
|
(6)
|
Reflects the employer share of the premiums for our insurance plans for 18 months, as follows:
|
•
|
For Mr. Gilligan, includes medical insurance premiums of
$26,988
; dental insurance premiums of
$1,319
; and life insurance premiums of
$532
.
|
•
|
For Mr. Polacek, includes medical insurance premiums of
$26,988
; dental insurance premiums of
$1,319
; and life insurance premiums of
$447
.
|
•
|
For Mr. Kinney, includes medical insurance premiums of
$26,988
; dental insurance premiums of
$1,319
; and life insurance premiums of
$399
.
|
•
|
For Ms. Chial, includes medical insurance premiums of
$20,446
; and life insurance premiums of
$355
.
|
•
|
For Mr. Thom, includes medical insurance premiums of
$23,964
; dental insurance premiums of
$1,319
; and life insurance premiums of
$336
.
|
•
|
70% of any unused paid time off balance at the time of termination will be paid out.
|
•
|
Under the terms of our stock option plans and stock incentive plan, all unvested options immediately vest upon termination, and the employee has up to one year post-termination to exercise options before expiration. If a termination due to disability had occurred on
December 31, 2013
, the value of the accelerated options for each named executive officer would have been as follows: Mr. Gilligan -
$2,412,334
; Mr. Polacek -
$1,144,061
; Mr. Kinney -
$576,393
; Ms. Chial -
$466,733
; and Mr. Thom -
$396,413
.
|
•
|
Under the terms of our stock incentive plan and our restricted stock unit (RSU) grant agreements, for any awards issued prior to 2012, a pro rata portion of the RSUs vest upon disability, calculated through the date the recipient ceases to be an employee. For any awards issued during or after 2012, the entire portion vests upon disability. If a termination due to disability had occurred on
December 31, 2013
, the value of the accelerated restricted stock awards each named executive officer would have been as follows: Mr. Gilligan -
$9,698,633
; Mr. Polacek -
$1,178,977
; Mr. Kinney -
$589,323
; Ms. Chial -
$827,814
; and Mr. Thom -
$485,012
.
|
•
|
Under the terms of our long-term disability insurance plan, assuming the executive has enrolled, the executive is entitled to receive 60% of their regular base salary, up to a maximum of $10,000 a month, for as long as they are
|
•
|
Under the terms of the Management Incentive Plan, a pro rata portion is earned of the final calculated payment, calculated through the number of months completed of the performance period. If a termination due to disability had occurred on
December 31, 2013
, the value of incentive awards paid would have been as follows: Mr. Gilligan -
$710,903
; Mr. Polacek -
$325,718
; Mr. Kinney -
$194,250
; Ms. Chial -
$172,287
; and Mr. Thom -
$163,274
.
|
•
|
70% of any unused paid time off balance at the time of termination will be paid out.
|
•
|
Under the terms of our 2005 Stock Incentive Plan, for any awards issued during or after 2012, unvested options and RSUs will continue to vest, and for option awards the employee may exercise until the expiration date of the awards. Under the terms of our 2005 Stock Incentive Plan, for any awards issued prior to 2012, the employee has up to one year post-termination to exercise any vested options which were vested as of the termination date. Under the terms of our 1999 Stock Option Plan, the employee has up to three months post-termination to exercise any options which were vested as of the termination date.
|
•
|
The executive will be eligible to take a distribution consistent with reaching normal retirement age, and the provisions specified in the 401(k) retirement savings plan, from his or her account balance.
|
•
|
Upon death, all stock options issued under the 1999 Stock Option Plan and the 2005 Stock Incentive Plan become immediately exercisable, and remain exercisable for up to one year following the event. If a termination due to death had occurred on
December 31, 2013
, the value of the accelerated options for each named executive officer would have been as follows: Mr. Gilligan -
$2,412,334
; Mr. Polacek -
$1,144,061
; Mr. Kinney -
$576,393
; Ms. Chial -
$466,733
; and Mr. Thom -
$396,413
.
|
•
|
Under the terms of our stock incentive plan and our restricted stock unit (RSU) grant agreements, for any awards issued prior to 2012, a pro rata portion of the RSUs vest upon death, calculated through the date of death. For any awards issued during or after 2012, the entire portion vests upon death. If a termination due to death had occurred on
December 31, 2013
, the value of the accelerated restricted stock awards each named executive officer would have been as follows: Mr. Gilligan -
$9,698,663
; Mr. Polacek -
$1,178,977
; Mr. Kinney -
$589,323
;Ms. Chial -
$827,814
; and Mr. Thom -
$485,012
.
|
•
|
Under the terms of the Management Incentive Plan, a pro rata portion is earned of the target award, calculated through the number of months completed of the performance period. If a termination due to death had occurred on
December 31, 2013
, the value of incentive awards paid would have been as follows: Mr. Gilligan -
$681,704
; Mr. Polacek -
$312,340
; Mr. Kinney -
$165,144
; Ms. Chial -
$165,210
; and Mr. Thom -
$156,765
.
|
Name
|
|
Fees Earned or Paid in Cash ($)
(1)
|
Stock Awards ($)
|
Total ($)
|
|||
Michael Linton
|
|
56,000
|
|
99,997
|
|
155,997
|
|
Michael Lomax
|
|
50,000
|
|
99,997
|
|
149,997
|
|
Jody Miller
|
|
56,000
|
|
99,997
|
|
155,997
|
|
Hilary Pennington
|
(2)
|
37,500
|
|
99,997
|
|
137,497
|
|
Stephen Shank
|
|
50,000
|
|
99,997
|
|
149,997
|
|
Andrew Slavitt
|
|
58,500
|
|
99,997
|
|
158,497
|
|
David Smith
|
|
65,000
|
|
99,997
|
|
164,997
|
|
Jeffrey Taylor
|
|
58,125
|
|
99,997
|
|
158,122
|
|
Darrell Tukua
|
|
67,000
|
|
99,997
|
|
166,997
|
|
(1)
|
Fees reflect annual retainer and committee chairperson fees which were paid quarterly. These fees were the only cash compensation paid to any director in
2013
.
|
(2)
|
Ms. Pennington resigned from our Board of Directors effective August 22, 2013.
|
Name
|
Shares Underlying Outstanding Stock Option Awards (#)
|
Exercisable (#)
|
Unexercisable (#)
|
Shares Underlying Outstanding Stock Awards not Vested (#)
|
||||
Michael Linton
|
—
|
|
—
|
|
—
|
|
3,143
|
|
Michael Lomax
|
—
|
|
—
|
|
—
|
|
3,143
|
|
Jody Miller
|
4,431
|
|
4,431
|
|
—
|
|
3,143
|
|
Hilary Pennington
|
—
|
|
—
|
|
—
|
|
—
|
|
Stephen Shank
|
—
|
|
—
|
|
—
|
|
3,143
|
|
Andrew Slavitt
|
11,931
|
|
11,931
|
|
—
|
|
3,143
|
|
David Smith
|
1,931
|
|
1,931
|
|
—
|
|
3,143
|
|
Jeffrey Taylor
|
1,931
|
|
1,931
|
|
—
|
|
3,143
|
|
Darrell Tukua
|
1,931
|
|
1,931
|
|
—
|
|
3,143
|
|
•
|
each persons or entities, including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), who is known to own beneficially more than 5% of the outstanding shares of our common stock;
|
•
|
each current director and director nominee;
|
•
|
each of the named executive officers; and
|
•
|
all directors and executive officers as a group.
|
Name of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percent of
Common Stock
|
5% Shareholders (other than Mr. Shank)
|
|
|
BlackRock, Inc. (a)
40 East 52nd Street New York, NY 10022 |
1,035,269
|
8.38%
|
Renaissance Technologies (b)
800 Third Avenue New York, NY 10022 |
988,325
|
8.00%
|
AllianceBernstein (c)
1345 Avenue of the Americas New York, NY 10105 |
784,886
|
6.35%
|
The Vanguard Group, Inc. (d)
100 Vanguard Boulevard Malvern, PA 19355 |
710,555
|
5.75%
|
Makaira Partners, LLC (e)
7776 Ivanhoe Avenue #250 LaJolla, CA 92037 |
683,057
|
5.53%
|
RS Investment Management Co., LLC (f)
1 Bush Street, Suite 900 San Francisco, CA 94104 |
623,019
|
5.04%
|
Directors and Named Executive Officers
|
|
|
Sally B. Chial (g)
|
27,498
|
*
|
J. Kevin Gilligan (h)
|
107,858
|
*
|
Scott L. Kinney (i)
|
8,284
|
*
|
Michael A. Linton (j)
|
3,442
|
*
|
Michael L. Lomax (k)
|
1,773
|
*
|
Jody G. Miller (l)
|
11,538
|
*
|
Steven L. Polacek (m)
|
29,446
|
*
|
Stephen G. Shank (n)
|
1,276,113
|
10.17%
|
Andrew M. Slavitt (o)
|
15,613
|
*
|
David W. Smith (p)
|
21,203
|
*
|
Jeffrey W. Taylor (q)
|
13,567
|
*
|
Gregory W. Thom (r)
|
30,925
|
*
|
Darrell R. Tukua (s)
|
11,133
|
*
|
All directors and executive officers as a group (13 persons) (t)
|
1,558,393
|
12.42%
|
(a)
|
Based on an amended Schedule 13G/A filed under the Exchange Act on
January 28, 2014
, reporting beneficial ownership as of December 31, 2013. The securities are beneficially owned by BlackRock, Inc. and related subsidiaries. BlackRock, Inc. reports having sole voting and sole dispositive power over all
1,035,269
shares.
|
(b)
|
Based on a Schedule 13G/A filed under the Exchange Act on
February 14, 2014
, reporting beneficial ownership as of December 31, 2013. The securities are beneficially owned by Renaissance Technologies, LLC. on behalf of itself and its direct and indirect subsidiary, Renaissance Technologies Holdings Corporation.
|
(c)
|
Based on a Schedule 13G filed under the Exchange Act on
February 11, 2014
, reporting beneficial ownership as of December 31, 2013. The securities are beneficially owned by AllianceBernstein, LP, a majority owned subsidiary of AXA Financial, Inc. and an indirect majority owned subsidiary of AXA SA. AllianceBernstein operates under independent management and makes independent decisions from AXA and AXA Financial and their respective subsidiaries and AXA and AXA Financial calculate and report beneficial ownership separately from AllianceBernstein pursuant to guidance provided by the SEC in Release Number 34-39538 (January 12, 1998). AllianceBernstein may be deemed to share beneficial ownership with AXA reporting persons by virtue of 30,201 shares of common stock acquired on behalf of the general and special accounts of the affiliated entities for which AllianceBernstein serves as a subadvisor. Each of AllianceBernstein and the AXA entities reporting herein have acquired their shares of common stock for investment purposes in the ordinary course of their investment management and insurance businesses.
|
(d)
|
Based on a Schedule 13G/A filed under the Exchange Act on
February 11, 2014
, The Vanguard Group, Inc. reports having sole voting power over 17,139 shares, and shared dispositive power over 16,280 shares and sole dispositive power over 694,275 shares as of December 2013.
|
(e)
|
Based on a Schedule 13G filed under the Exchange Act on
January 13, 2014
, Makaira Partners, LLC, reports beneficial ownership as of December 31, 2013.
|
(f)
|
Based on a Schedule 13G filed under the Exchange Act on
February 14, 2014
, RS Investment Management Co. LLC, reports having sole voting power over 574,220 shares and sole dispositive power over 623,019 shares as of December 31, 2013.
|
(g)
|
Consists of (1) 2,364 shares held by Ms. Chial and (2) 25,134 shares underlying options granted to Ms. Chial that are exercisable within 60 days.
|
(h)
|
Consists of (1) 25,755 shares held by Mr. Gilligan and (2) 82,103 shares underlying options granted to Mr. Gilligan that are exercisable within 60 days.
|
(i)
|
Consists of 8,284 shares underlying options granted to Mr. Kinney that are exercisable within 60 days.
|
(j)
|
Consists of 3,442 shares held by Mr. Linton.
|
(k)
|
Consists of 1,773 shares held by Mr. Lomax.
|
(l)
|
Consists of (1) 7,107 shares held by Ms. Miller and (2) 4,431 shares underlying options granted to Ms. Miller that are exercisable within 60 days.
|
(m)
|
Consists of (1) 5,470 shares held by Mr. Polacek and (2) 23,976 shares underlying options granted to Mr. Polacek that are exercisable within 60 days.
|
(n)
|
Consists of (1) 761,825 shares beneficially held by the Stephen G. Shank Revocable Trust, of which Mr. Shank is a trustee; (2) 85,000 shares beneficially held by the Stephen G. Shank September 2013 7-Year Grantor Retained Annuity Trust, the trustee of which is Mary Shank Retzlaff, the reporting person's daughter; (3) 85,000 shares beneficially held by the Judith F. Shank September 2013 7-Year Grantor Retained Annuity Trust, the trustee of which is Susan Shank, the reporting person's daughter; (4) 166,850 shares beneficially held by the Shank Family 2011 Generation Skipping Trust, the trustees of which are Wells Fargo Bank, NA and Judith F. Shank, the reporting person's spouse; (5) 4,735 shares beneficially held by the Shank Family Foundation, of which Mr. Shank is a trustee; and (6) 172,703 shares beneficially held by the Judith F. Shank Revocable Trust, of which Mr. Shank is a trustee. As a result, Mr. Shank has shared voting and shared dispositive power over 1,276,113 shares.
|
(o)
|
Consists of (1) 3,682 shares held by Mr. Slavitt and (2) 11,931 shares underlying options granted to Mr. Slavitt that are exercisable within 60 days.
|
(p)
|
Consists of (1) 19,272 shares held by Mr. Smith and (2) 1,931 shares underlying options granted to Mr. Smith that are exercisable within 60 days.
|
(q)
|
Consists of (1) 11,636 shares held by Mr. Taylor and (2) 1,931 shares underlying options granted to Mr. Taylor that are exercisable within 60 days.
|
(r)
|
Consists of (1) 2,057 shares held by Mr. Thom, (2) 27,838 shares underlying options granted to Mr. Thom that are exercisable within 60 days and (3) 1,030 shares held by the Capella Retirement Savings Plan for Mr. Thom's account.
|
(s)
|
Consists of (1) 9,202 shares controlled by Mr. Tukua as trustee of the Darrell R. Tukua Revocable Trust and (2) 1,931 shares underlying options controlled by Mr. Tukua as trustee of the Darrell R. Tukua Revocable Trust that are exercisable within 60 days.
|
(t)
|
Includes (1) 189,490 shares underlying options granted to our directors and executive officers that are exercisable within 60 days and (2) 1,030 shares held by the Capella Retirement Savings Plan for the accounts of our executive officers.
|
•
|
payment of compensation by our company to a related person for the related person's service to our company as a director, officer or employee;
|
•
|
transactions available to all employees or all shareholders of our company on the same terms;
|
•
|
transactions, which when aggregated with the amount of all other transactions between our company and a related person (or any entity in which the related person has an interest), involve less than $120,000 in a fiscal year; and
|
•
|
transactions in the ordinary course of business at the same prices and on the same terms as are made available to customers of the company generally.
|
•
|
whether the terms are fair to our company;
|
•
|
whether the transaction is material to our company;
|
•
|
the role the related person has played in arranging the related person transaction;
|
•
|
the structure of the related person transaction; and
|
•
|
the interests of all related persons in the related person transaction.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans
|
|
||
Equity Compensation Plans Approved by Securityholders
|
882,051
|
|
(1)
|
$48.84
|
1,426,254
|
|
(2)
|
Equity Compensation Plans Not Approved by Securityholders
|
none
|
|
|
|
none
|
|
|
Total
|
882,051
|
|
(1)
|
$48.84
|
1,426,254
|
|
(2)
|
(1)
|
Includes
616,590
outstanding options to purchase shares of our common stock under the Capella Education Company 2005 Stock Incentive Plan and the Capella Education Company 1999 Stock Option Plan and
161,489
outstanding RSUs that will be settled with shares of our common stock under the Capella Education Company 2005 Stock Incentive Plan and
103,972
outstanding MSUs that will be settled with shares of our common stock according to the J. Kevin Gilligan Strategic Transformation Incentive Award.
|
(2)
|
Includes
976,254
shares available for future issuances under the Capella Education Company 2005 Stock Incentive Plan and
450,000
shares reserved for future issuance under an employee stock purchase plan that we may implement in the future.
|
1.
|
Purpose
.
The purpose of the Capella Education Company 2014 Equity Incentive Plan (the “Plan”) is to attract and retain the best available personnel for positions of responsibility with the Company, to provide additional incentives to them and align their interests with those of the Company’s stockholders, and to thereby promote the Company’s long-term business success.
|
2.
|
Definitions
.
In this Plan, the following definitions will apply.
|
a.
|
“Affiliate” means any entity that is a Subsidiary or Parent of the Company, or any other entity in which the Company owns, directly or indirectly, at least 20% of combined voting power of the entity’s Voting Securities and which is designated by the Committee as covered by the Plan.
|
b.
|
“Agreement” means the written or electronic agreement, notice or other document containing the terms and conditions applicable to each Award granted under the Plan. An Agreement is subject to the terms and conditions of the Plan.
|
c.
|
“Award” means a grant made under the Plan in the form of Options, Stock Appreciation Rights, Restricted Stock, Stock Units, or an Other Stock-Based Award.
|
d.
|
“Board” means the Board of Directors of the Company.
|
e.
|
“Cause” means what the term is expressly defined to mean in a then-effective written agreement (including an Agreement) between a Participant and the Company or any Affiliate, or in the absence of any such then-effective agreement or definition means (i) a Participant’s failure or refusal substantially to perform his duties to the full extent of his abilities for reasons other than death or disability, after written notice to the Participant of such failure or refusal providing the Participant 30 days to take corrective action; (ii) conviction of a felony crime, or commission of any act, the conviction for which would be a felony conviction; (iii) theft or misappropriation of the Company's property; or (iv) knowingly making a material false written statement to the Company's Board of Directors regarding the affairs of the Company.
|
f.
|
“Change in Control” means what the term (or a term of like import) is expressly defined to mean in a then-effective written agreement (including an Agreement) between a Participant and the Company or any Affiliate, or in the absence of any such then-effective agreement or definition means one of the following:
|
(1)
|
Any Exchange Act Person acquires or becomes a “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that the following shall not constitute a Change in Control:
|
A)
|
any acquisition or beneficial ownership by the Company or a subsidiary;
|
B)
|
any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more of its subsidiaries; or
|
C)
|
any acquisition or beneficial ownership by any corporation with respect to which, immediately following such acquisition, more than 65% of both the combined voting power of the Company’s then outstanding Voting Securities and the Shares of the Company is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and Shares of the Company immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and Shares, as the case may be, immediately prior to such acquisitions.
|
(2)
|
A majority of the members of the Board shall not be Continuing Directors.
|
(3)
|
Consummation of a Corporate Transaction unless, immediately following such Corporate Transaction, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and Shares of the Company immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 65% of, respectively, the combined voting power of the then outstanding Voting Securities and the then
|
(4)
|
Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
|
g.
|
“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, and the regulations promulgated thereunder.
|
h.
|
“Committee” means two or more Non‑Employee Directors designated by the Board to administer the Plan under Section 3, each member of which shall be (i) an independent director within the meaning of the rules and regulations of the Nasdaq Stock Market, (ii) a non-employee director within the meaning of Exchange Act Rule 16b-3, and (iii) an outside director for purposes of Code Section 162(m).
|
i.
|
“Company” means Capella Education Company, a Minnesota corporation, or any successor thereto.
|
j.
|
“Continuing Directors” shall mean: (A) individuals who, as of the effective date of the Plan, are directors of the Company, (B) individuals elected as directors of the Company subsequent to the effective date of the Plan for whose election proxies shall have been solicited by the Board or (C) any individual elected or appointed by the Board to fill a vacancy on the Board caused by death or resignation (but not by removal) or to fill a newly-created directorship.
|
k.
|
“Corporate Transaction” means (i) a sale or other disposition of all or substantially all of the assets of the Company (in one or a series of transactions), or (ii) a reorganization, merger, consolidation or statutory share exchange involving the Company, regardless of whether the Company is the surviving corporation.
|
l.
|
“Disability” means any physical or mental incapacitation whereby a Participant is unable for a period of twelve consecutive months or for an aggregate of twelve months in any twenty-four consecutive month period to perform his or her duties for the Company or any Affiliate.
|
m.
|
“Employee” means an employee of the Company or an Affiliate.
|
n.
|
“Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time.
|
o.
|
“Exchange Act Person” means any natural person, entity or Group other than (i) the Company or any Affiliate; (ii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate; (iii) an underwriter temporarily holding securities in connection with a registered public offering of such securities; or (iv) an entity whose Voting Securities are beneficially owned by the beneficial owners of the Company’s Voting Securities in substantially the same proportions as their beneficial ownership of the Company’s Voting Securities.
|
p.
|
“Fair Market Value” of a Share as of any date means the fair market value of a Share determined as follows:
|
(1)
|
If the Shares are then readily tradable on an established securities market (as determined under Code Section 409A), then Fair Market Value will be the closing sale price for a Share on the principal securities market on which it trades on such date, or if no sale of Shares occurred on that trading day, on the next preceding date on which a sale of Shares occurred, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
|
(2)
|
If the Shares are not then readily tradable on an established securities market (as determined under Code Section 409A), then Fair Market Value will be determined by the Committee as the result of a reasonable application of a reasonable valuation method that satisfies the requirements of Code Section 409A.
|
q.
|
“Full Value Award” means an Award other than an Option Award or Stock Appreciation Right Award, and for purposes of Section 4, includes an award under the Prior Plan that is neither an option award or stock appreciation right award.
|
r.
|
“Good Reason” for voluntary termination of a Participant’s Service following a Change in Control means the occurrence of one or more of the following events, so long as the Participant provided written notice to the Company of the event not later than 30 days after it occurred and the condition resulting from the event has not been remedied by the Company within 30 days after its receipt of such notice: (i) a material reduction of the Participant’s job responsibilities upon or after the Change in Control; (ii) a material diminution of the Participant’s base compensation; or (iii) a reassignment of the Participant’s principal place of work, without the Participant’s consent, to a location more than 50 miles from the Participant’s principal place of work upon or after the Change in Control.
|
s.
|
“Grant Date” means the date on which the Committee approves the grant of an Award under the Plan, or such later date as may be specified by the Committee on the date the Committee approves the Award.
|
t.
|
“Group” means two or more persons acting as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding, voting or disposing of securities of the Company.
|
u.
|
“Non-Employee Director” means a member of the Board who is not an Employee.
|
v.
|
“Option” means a right granted under the Plan to purchase a specified number of Shares at a specified price. An “Incentive Stock Option” or “ISO” means any Option designated as such and granted in accordance with the requirements of Code Section 422. A “Non‑Statutory Stock Option” means an Option other than an Incentive Stock Option.
|
w.
|
“Other Stock-Based Award” means an Award described in Section 11 of this Plan.
|
x.
|
“Parent” means a “parent corporation,” as defined in Code Section 424(e).
|
y.
|
“Participant” means a person to whom an Award is granted in accordance with the Plan or who holds an outstanding Award.
|
z.
|
“Performance-Based Compensation” means an Award to a person who is, or is determined by the Committee to likely become, a “covered employee” (as defined in Section 162(m)(3) of the Code) and that is intended to constitute “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code.
|
aa.
|
“Plan” means this Capella Education Company 2014 Equity Incentive Plan, as amended and in effect from time to time.
|
ab.
|
“Prior Plan” means the Capella Education Company 2005 Stock Incentive Plan, as amended through the effective date of this Plan.
|
ac.
|
“Restricted Stock” means Shares issued to a Participant that are subject to such restrictions on transfer, forfeiture conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Agreement.
|
ad.
|
“Retirement” means, unless otherwise specified in an individual Agreement, termination of employment (other than for Cause) at or after the earlier of age 65 or age 55 with seven years of service.
|
ae.
|
“Service” means the provision of services by a Participant to the Company or any Affiliate in any Service Provider capacity. A Service Provider’s Service shall be deemed to have terminated either upon an actual cessation of providing services or upon the entity for which the Service Provider provides services ceasing to be an Affiliate. Except as otherwise provided in this Plan or any Agreement, Service shall not be deemed terminated in the case of (i) any approved leave of absence; (ii) transfers among the Company and any Affiliates in any Service Provider capacity; or (iii) any change in status so long as the individual remains in the service of the Company or any Affiliate in any Service Provider capacity.
|
af.
|
“Service Provider” means an Employee, a Non-Employee Director, or any consultant or advisor who is a natural person and who provides services (other than in connection with (i) a capital-raising transaction or (ii) promoting or maintaining a market in Company securities) to the Company or any Affiliate.
|
ag.
|
“Share” means a share of Stock.
|
ah.
|
“Stock” means the common stock, $0.01 par value per share, of the Company.
|
ai.
|
“Stock Appreciation Right” or “SAR” means the right to receive, in cash and/or Shares as determined by the Committee, an amount equal to the appreciation in value of a specified number of Shares between the Grant Date of the SAR and its exercise date.
|
aj.
|
“Stock Unit” means a right to receive, in cash and/or Shares as determined by the Committee, the Fair Market Value of one or more Shares, subject to such restrictions on transfer, forfeiture conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Agreement.
|
ak.
|
“Subsidiary” means a “subsidiary corporation,” as defined in Code Section 424(f), of the Company.
|
al.
|
“Substitute Award” means an Award granted upon the assumption of, or in substitution or exchange for, outstanding awards granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines.
|
am.
|
“Voting Securities” of an entity means the outstanding equity securities entitled to vote generally in the election of directors of such entity.
|
3.
|
Administration of the Plan
.
|
a.
|
Administration
. The authority to control and manage the operations and administration of the Plan shall be vested in the Committee in accordance with this Section 3.
|
b.
|
Scope of Authority
. Subject to the terms of the Plan, the Committee shall have the authority, in its discretion, to take such actions as it deems necessary or advisable to administer the Plan, including:
|
(1)
|
determining the Service Providers to whom Awards will be granted, the timing of each such Award, the types of Awards and the number of Shares covered by each Award, the terms, conditions, performance criteria, restrictions and other provisions of Awards, and the manner in which Awards are paid or settled;
|
(2)
|
cancelling or suspending an Award, accelerating the vesting or extending the exercise period of an Award, or otherwise amending the terms and conditions of any outstanding Award, subject to the requirements of Sections 6(b) and 15(d) and (e);
|
(3)
|
establishing, amending or rescinding rules to administer the Plan, interpreting the Plan and any Award or Agreement made under the Plan, and making all other determinations necessary or desirable for the administration of the Plan;
|
(4)
|
requiring or permitting the deferral of the settlement of an Award, and establishing the terms and conditions of any such deferral; and
|
(5)
|
taking such actions as are provided in Section 3(c) with respect to Awards to foreign Service Providers.
|
c.
|
Awards to Foreign Service Providers
. The Committee may grant Awards to Service Providers who are foreign nationals, who are located outside of the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory requirements of countries outside of the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to comply with applicable foreign laws and regulatory requirements and to promote achievement of the purposes of the Plan. In connection therewith, the Committee may establish such subplans and modify exercise procedures and other Plan rules and procedures to the extent such actions are deemed necessary or desirable, and may take any other action that it deems advisable to obtain local regulatory approvals or to comply with any necessary local governmental regulatory exemptions.
|
d.
|
Acts of the Committee; Delegation
. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee, and any act of a majority of the members present at any meeting at which a quorum is present or any act unanimously approved in writing by all members of the Committee shall be the act of the Committee.
|
e.
|
Finality of Decisions
. The Committee’s interpretation of the Plan and of any Award or Agreement made under the Plan and all related decisions or resolutions of the Board or Committee shall be final and binding on all parties with an interest therein.
|
f.
|
Indemnification
. Each person who is or has been a member of the Committee or of the Board, and any other person to whom the Committee delegates authority under the Plan, shall be indemnified by the Company, to the maximum extent permitted by law, against liabilities and expenses imposed upon or reasonably incurred by such person in connection with or resulting from any claims against such person by reason of the performance of the individual's duties under the Plan. This right to indemnification is conditioned upon such person providing the Company an opportunity, at the Company’s expense, to handle and defend the claims before such person undertakes to handle and defend them on such person’s own behalf. The Company will not be required to indemnify any person for any amount paid in settlement of a claim unless the Company has first consented in writing to the settlement. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person or persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise.
|
4.
|
Shares Available Under the Plan.
|
a.
|
Maximum Shares Available
. Subject to Section 4(b) and to adjustment as provided in Section 12(a), the number of Shares that may be the subject of Awards and issued under the Plan shall be
480,000,
plus any Shares remaining available for future grants under the Prior Plan on the effective date of this Plan. Shares issued under the Plan shall come from authorized and unissued shares. In determining the number of Shares to be counted against the Plan’s share reserve in connection with any Award, the following rules shall apply:
|
(1)
|
Where the number of Shares subject to an Award is variable on the Grant Date, the number of Shares to be counted against the share reserve prior to the settlement of the Award shall be the maximum number of Shares that could be received under that particular Award.
|
(2)
|
Where two or more types of Awards are granted to a Participant in tandem with each other, such that the exercise of one type of Award with respect to a number of Shares cancels at least an equal number of Shares of the other, the number of Shares to be counted against the share reserve shall be the largest number of Shares that would be counted against the share reserve under either of the Awards.
|
(3)
|
Substitute Awards shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year.
|
(4)
|
Awards that may be settled solely in cash shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year.
|
b.
|
Effect of Forfeitures and Other Actions
. Any Shares subject to an Award, or to an award granted under the Prior Plan that is outstanding on the effective date of this Plan (a “Prior Plan Award”), that is cancelled, forfeited or expires or is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award (including a payment in Shares on the exercise of a Stock Appreciation Right) shall, to the extent of such cancellation, forfeiture, expiration, cash settlement or non-issuance, again become available for Awards under this Plan, and the share reserve under Section 4(a) shall be correspondingly increased. In the event that (i) payment of the exercise price of any Award or Prior Plan Award is made through the tendering (either actually or by attestation) of Shares by the Participant or by the withholding of Shares by the Company, or (ii) satisfaction of any tax withholding obligations arising from any Award or Prior Plan Award occurs through the tendering (either actually or by attestation) of Shares by the Participant or by the withholding of Shares by the Company, then the Shares so tendered or withheld shall again become available for Awards under this Plan, and the total number of Shares available for grant under Section 4(a) shall be correspondingly increased.
|
c.
|
Effect of Plans Operated by Acquired Companies
. If a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan. Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Non-Employee Directors prior to such acquisition or combination.
|
d.
|
No Fractional Shares
. Unless otherwise determined by the Committee, the number of Shares subject to an Award shall always be a whole number. No fractional Shares may be issued under the Plan, and cash shall be paid in lieu of any fractional Share in settlement of an Award.
|
e.
|
Individual Option and SAR Limit
. The aggregate number of Shares subject to Options and/or Stock Appreciation Rights granted during any calendar year to any one Participant shall not exceed 500,000 Shares.
|
5.
|
Eligibility
.
Participation in the Plan is limited to Service Providers. Incentive Stock Options may only be granted to Employees.
|
6.
|
General Terms of Awards
.
|
a.
|
Award Agreement
. Except for any Award that involves only the immediate issuance of unrestricted Shares, each Award shall be evidenced by an Agreement setting forth the amount of the Award together with such other terms and conditions applicable to the Award (and not inconsistent with the Plan) as determined by the Committee. An Award to a Participant may be
made singly or in combination with any form of Award. Two types of Awards may be made in tandem with each other such that the exercise of one type of Award with respect to a number of Shares reduces the number of Shares subject to the related Award by at least an equal amount.
|
b.
|
Vesting and Term
. Each Agreement shall set forth the period until the applicable Award is scheduled to expire (which shall not be more than ten years from the Grant Date), and any applicable performance period. The Committee may provide in an Agreement for such vesting conditions and timing as it may determine.
|
c.
|
Transferability
. Except as provided in this Section 6(c), (i) during the lifetime of a Participant, only the Participant or the Participant’s guardian or legal representative may exercise an Option or SAR, or receive payment with respect to any other Award; and (ii) no Award may be sold, assigned, transferred, exchanged or encumbered, voluntarily or involuntarily, other than by will or the laws of descent and distribution. Any attempted transfer in violation of this Section 6(c) shall be of no effect. The Committee may, however, provide in an Agreement or otherwise that an Award (other than an Incentive Stock Option) may be transferred pursuant to a domestic relations order or may be transferable by gift to any “family member” (as defined in General Instruction A(5) to Form S-8 under the Securities Act of 1933) of the Participant. Any Award held by a transferee shall continue to be subject to the same terms and conditions that were applicable to that Award immediately before the transfer thereof. For purposes of any provision of the Plan relating to notice to a Participant or to acceleration or termination of an Award upon the death or termination of employment of a Participant, the references to “Participant” shall mean the original grantee of an Award and not any transferee.
|
d.
|
Designation of Beneficiary
. To the extent permitted by the Committee, a Participant may designate a beneficiary or beneficiaries to exercise any Award or receive a payment under any Award payable on or after the Participant’s death. Any such designation shall be on a form approved by the Committee and shall be effective upon its receipt by the Company.
|
e.
|
Termination of Service
. Unless otherwise provided in an Agreement, and subject to Section 12 of this Plan, if a Participant’s Service with the Company and all of its Affiliates terminates, the following provisions shall apply (in all cases subject to the scheduled expiration of an Option or Stock Appreciation Right Award, as applicable):
|
(1)
|
Upon termination of Service for Cause, or conduct during a post-termination exercise period that would constitute Cause, all of the Participant’s unexercised Option and SAR Awards and all unvested portions of any of the Participant’s other outstanding Awards shall be immediately forfeited without consideration.
|
(2)
|
Upon termination of Service due to death or Disability, (i) all of the Participant’s outstanding Option and SAR Awards shall immediately vest and become exercisable in full and may be exercised for a period of one year after the date of such termination; (ii) each of the Participant’s outstanding Full Value Awards whose continued vesting is otherwise subject only to continued Service by the Participant shall immediately vest in full; and (iii) each of the Participant’s outstanding Full Value Awards whose continued vesting is otherwise subject to the satisfaction of performance-based vesting conditions shall immediately vest to the degree the Awards would have vested at the end of the applicable performance period had the specified target level of performance been achieved.
|
(3)
|
Upon termination of Service due to Retirement, all of the Participant’s outstanding Awards will continue to vest and become exercisable in accordance with their applicable vesting and exercisability schedules, including satisfaction of any applicable performance-based vesting conditions, and Option and SAR Awards will remain exercisable until the scheduled expiration dates of such Awards. Notwithstanding the foregoing, if the Participant is a Non-Employee Director, all outstanding Awards shall immediately vest in full upon a termination of service due to Retirement.
|
(4)
|
Upon termination of Service for any reason other than Cause, death, Disability or Retirement, the currently vested and exercisable portions of Options and SAR Awards may be exercised for a period of three months after the date of such termination. However, if a Participant dies during the three-month post-termination exercise period specified in the previous sentence, then any outstanding Option and SAR Awards shall immediately vest and become exercisable in full and may be exercised for a period of one year after the date of such termination.
|
(5)
|
Upon any termination of Service, all unvested and unexercisable portions of any outstanding Awards (after giving effect to any accelerated vesting specified under Subsections 6(e)(2), (3) and (4)) shall be immediately forfeited without consideration, except to the extent provided in Subsection 6(e)(3).
|
f.
|
Rights as Stockholder
. No Participant shall have any rights as a stockholder with respect to any securities covered by an Award unless and until the date the Participant becomes the holder of record of the Shares, if any, to which the Award relates.
|
g.
|
Performance-Based Awards
. Any Award may be granted as a performance-based Award if the Committee establishes one or more measures of corporate, business unit or individual performance which must be attained, and the performance period over which the specified performance is to be attained, as a condition to the vesting, exercisability, lapse of restrictions and/or settlement of such Award. In connection with any such Award, the Committee shall determine the extent to which performance measures have been attained and other applicable terms and conditions have been satisfied, and the degree to which vesting, exercisability, lapse of restrictions and/or settlement of such Award has been earned. Any performance-based Award that is intended by the Committee to qualify as Performance-Based Compensation shall additionally be subject to the requirements of Section 17 of this Plan. Except as provided in Section 17 with respect to Performance-Based Compensation, the Committee shall also have the authority to provide, in an Agreement or otherwise, for the modification of a performance period and/or an adjustment or waiver of the achievement of performance measures upon the occurrence of certain events, which may include a Change of Control, a recapitalization, a change in the accounting practices of the Company, or the Participant’s death or Disability.
|
h.
|
Dividends and Dividend Equivalents
. No dividends, dividend equivalents or distributions will be paid with respect to Shares subject to an Option or SAR Award. Any dividends or distributions paid with respect to Shares that are subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the Shares to which such dividends or distributions relate, except for regular cash dividends on Shares subject to the unvested portion of a Restricted Stock Award that is subject only to Service-based vesting conditions. In its discretion, the Committee may provide in an Award Agreement for a Stock Unit Award or an Other Stock-Based Award that the Participant will be entitled to receive dividend equivalents on the units or other Share equivalents subject to the Award based on dividends actually declared on outstanding Shares. The terms of any dividend equivalents will be as set forth in the applicable Agreement, including the time and form of payment and whether such dividend equivalents will be credited with interest or deemed to be reinvested in additional units or Share equivalents. Dividend equivalents paid with respect to units or Share equivalents that are subject to the unvested portion of a Stock Unit Award or an Other Stock-Based Award will be subject to the same restrictions as the units or Share equivalents to which such dividend equivalents relate. The Committee may, in its discretion, provide in an Agreement for restrictions on dividends and dividend equivalents in addition to those specified in this Section 6(h).
|
i.
|
Deferrals of Full Value Awards
. The Committee may, in its discretion, permit or require the deferral by a Participant of the issuance of Shares or payment of cash in settlement of any Full Value Award, subject to such terms, conditions, rules and procedures as it may establish or prescribe for such purpose and with the intention of complying with the applicable requirements of Code Section 409A. The terms, conditions, rules and procedures for any such deferral shall be set forth in writing in the relevant Agreement or in such other agreement, plan or document as the Committee may determine, or some combination of such documents. The terms, conditions, rules and procedures for any such deferral shall address, to the extent relevant, matters such as: (i) the permissible time(s) and form(s) of payment of deferred amounts; (ii) the terms of any deferral elections by a Participant or of any deferral required by the Company; and (iii) the crediting of interest or dividend equivalents on deferred amounts.
|
7.
|
Stock Option Awards
.
|
a.
|
Type and Exercise Price
. The Agreement pursuant to which an Option is granted shall specify whether the Option is an Incentive Stock Option or a Non-Statutory Stock Option. The exercise price at which each Share subject to an Option may be purchased shall be determined by the Committee and set forth in the Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A and, in the case of Incentive Stock Options, Code Section 424).
|
b.
|
Payment of Exercise Price
. The purchase price of the Shares with respect to which an Option is exercised shall be payable in full at the time of exercise, which may include, to the extent permitted by the Committee, payment under a broker-assisted sale and remittance program acceptable to the Committee. The purchase price may be paid in cash or in such other manner as the Committee may permit, including by withholding Shares otherwise issuable to the Participant upon exercise of the Option or by delivery to the Company of Shares (by actual delivery or attestation) already owned by the Participant (in each case, such Shares having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the Shares being purchased).
|
c.
|
Exercisability and Expiration
. Each Option shall become exercisable in whole or in part on the terms provided in the Agreement. No Option shall be exercisable at any time after its scheduled expiration. When an Option is no longer exercisable, it shall be deemed to have terminated.
|
d.
|
Incentive Stock Options
.
|
(1)
|
An Option will constitute an Incentive Stock Option only if the Participant receiving the Option is an Employee, and only to the extent that (i) it is so designated in the applicable Agreement and (ii) the aggregate Fair Market Value (determined as of the Option’s Grant Date) of the Shares with respect to which Incentive Stock Options held by the Participant first become exercisable in any calendar year (under the Plan and all other plans of the Company and its Affiliates) does not exceed $100,000. To the extent an Option granted to a Participant exceeds this limit, the Option shall be treated as a Non-Statutory Stock Option. The maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the maximum number of Shares that may be the subject of Awards and issued under the Plan as provided in the first sentence of Section 4(a).
|
(2)
|
No Participant may receive an Incentive Stock Option under the Plan if, immediately after the grant of such Award, the Participant would own (after application of the rules contained in Code Section 424(d)) Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or an Affiliate, unless (i) the exercise price for that Incentive Stock Option is at least 110% of the Fair Market Value of the Shares subject to that Incentive Stock Option on the Grant Date and (ii) that Option will expire no later than five years after its Grant Date.
|
(3)
|
For purposes of continued Service by a Participant who has been granted an Incentive Stock Option, no approved leave of absence may exceed three months unless reemployment upon expiration of such leave is provided by statute or contract. If reemployment is not so provided, then on the date six months following the first day of such leave, any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Statutory Stock Option.
|
(4)
|
If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Code Section 422, such Option shall thereafter be treated as a Non-Statutory Stock Option.
|
(5)
|
The Agreement covering an Incentive Stock Option shall contain such other terms and provisions that the Committee determines necessary to qualify the Option as an Incentive Stock Option.
|
8.
|
Stock Appreciation Rights
.
|
a.
|
Nature of Award
. An Award of Stock Appreciation Rights shall be subject to such terms and conditions as are determined by the Committee, and shall provide a Participant the right to receive upon exercise of the SAR Award all or a portion of the excess of (i) the Fair Market Value as of the date of exercise of the SAR Award of the number of Shares as to which the SAR Award is being exercised, over (ii) the aggregate exercise price for such number of Shares. The per Share exercise price for any SAR Award shall be determined by the Committee and set forth in the applicable Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A).
|
b.
|
Exercise of Award
. Each SAR Award may be exercisable in whole or in part at the times, on the terms and in the manner provided in the Agreement. No SAR Award shall be exercisable at any time after its scheduled expiration. When a SAR Award is no longer exercisable, it shall be deemed to have terminated. Upon exercise of a SAR Award, payment to the Participant shall be made at such time or times as shall be provided in the Agreement in the form of cash, Shares or a combination of cash and Shares as determined by the Committee. The Agreement may provide for a limitation upon the amount or percentage of the total appreciation on which payment (whether in cash and/or Shares) may be made in the event of the exercise of a SAR Award.
|
9.
|
Restricted Stock Awards
.
|
a.
|
Vesting and Consideration
. Shares subject to a Restricted Stock Award shall be subject to vesting and the lapse of applicable restrictions based on such conditions or factors and occurring over such period of time as the Committee may determine in its discretion. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the grant of a Restricted Stock Award, and may correspondingly provide for Company reacquisition or repurchase rights if such additional consideration has been required and some or all of a Restricted Stock Award does not vest.
|
b.
|
Shares Subject to Restricted Stock Awards
. Unvested Shares subject to a Restricted Stock Award shall be evidenced by a book-entry in the name of the Participant with the Company’s transfer agent or by one or more Stock certificates issued in the name of the Participant. Any such Stock certificate shall be deposited with the Company or its designee, together with an assignment separate from the certificate, in blank, signed by the Participant, and bear an appropriate legend referring to the restricted nature of the Restricted Stock evidenced thereby. Any book-entry shall be subject to comparable restrictions and corresponding stop transfer instructions. Upon the vesting of Shares of Restricted Stock, and the Company’s determination that any necessary conditions precedent to the release of vested Shares (such as satisfaction of tax withholding obligations and compliance with applicable legal requirements) have been satisfied, such vested Shares shall be made available to the Participant in such manner as may be prescribed or permitted by the Committee. Such vested Shares may, however, continue to be subject to certain restrictions as provided in Section 18. Except as otherwise provided in the Plan or an applicable Agreement, a Participant with a Restricted Stock Award shall have all the rights of a shareholder, including the right to vote the Shares of Restricted Stock.
|
10.
|
Stock Unit Awards
.
|
a.
|
Vesting and Consideration
. A Stock Unit Award shall be subject to vesting and the lapse of applicable restrictions based on such conditions or factors and occurring over such period of time as the Committee may determine in its discretion. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the settlement of a Stock Unit Award.
|
b.
|
Payment of Award
. Following the vesting of a Stock Unit Award, and the Company’s determination that any necessary conditions precedent to the settlement of the Award (such as satisfaction of tax withholding obligations and compliance with applicable legal requirements) have been satisfied, settlement of the Award and payment to the Participant shall be made at such time or times in the form of cash, Shares (which may themselves be considered Restricted Stock under the Plan subject to restrictions on transfer and forfeiture conditions) or a combination of cash and Shares as determined by the Committee. Amounts received in settlement may, however, continue to be subject to certain restrictions as provided in Section 18. If the Stock Unit Award is not by its terms exempt from the requirements of Code Section 409A, then the applicable Agreement shall contain terms and conditions intended to avoid adverse tax consequences specified in Code Section 409A.
|
11.
|
Other Stock-Based Awards
.
The Committee may from time to time grant Stock and other Awards that are valued by reference to and/or payable in whole or in part in Shares under the Plan. The Committee, in its sole discretion, shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan.
|
12.
|
Changes in Capitalization, Corporate Transactions, Change in Control
.
|
a.
|
Adjustments for Changes in Capitalization
. In the event of any equity restructuring (within the meaning of FASB ASC Topic 718 -
Stock Compensation
) that causes the per share value of Shares to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary dividend, the Committee shall make such adjustments as it deems equitable and appropriate to (i) the aggregate number and kind of Shares or other securities issued or reserved for issuance under the Plan, (ii) the number and kind of Shares or other securities subject to outstanding Awards, (iii) the exercise price of outstanding Options and SARs, and (iv) any maximum limitations prescribed by the Plan with respect to certain types of Awards or the grants to individuals of certain types of Awards. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of Participants. In either case, any such adjustment shall be conclusive and binding for all purposes of the Plan. No adjustment shall be made pursuant to this Section 12(a) in connection with the conversion of any convertible securities of the Company, or in a manner that would cause Incentive Stock Options to violate Section 422(b) of the Code or cause an Award to be subject to adverse tax consequences under Section 409A of the Code.
|
b.
|
Corporate Transactions
. Unless otherwise provided in an applicable Agreement, the following provisions shall apply to outstanding Awards in the event of a Change in Control that involves a Corporate Transaction.
|
(1)
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Continuation, Assumption or Replacement of Awards. In the event of a Corporate Transaction, the surviving or successor entity (or its Parent) may continue, assume or replace Awards outstanding as of the date of the Corporate Transaction (with such adjustments as may be required or permitted by Sections 12(a) and 6(g)), and such Awards or replacements therefor shall remain outstanding and be governed by their respective terms, subject to Section 12(b)(4) below. A surviving or successor entity may elect to continue, assume or replace only some Awards or portions of Awards. For purposes of this Section 12(b)(1), an Award shall be considered assumed or replaced if, in connection with the Corporate Transaction and in a manner consistent with Code Sections 409A and 424, either (i) the contractual obligations represented by the Award are expressly assumed by the surviving or successor entity (or its Parent) with appropriate adjustments to the number and type of securities subject to the Award and the exercise price thereof that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction, or (ii) the Participant has received a comparable equity-based award that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction and contains terms and conditions that are substantially similar to those of the Award.
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(2)
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Accelerated Vesting. If and to the extent that outstanding Awards under the Plan are not continued, assumed or replaced in connection with a Corporate Transaction, then (i) all outstanding Options and SARs shall become fully exercisable for such period of time prior to the effective time of the Corporate Transaction as is deemed fair and equitable by the Committee, and shall terminate at the effective time of the Corporate Transaction, and (ii) all outstanding Full Value Awards shall fully vest immediately prior to the effective time of the Corporate Transaction. The Committee shall provide written notice of the period of accelerated exercisability of Options and SARs to all affected Participants. The exercise of any Option or SAR whose exercisability is accelerated as provided in this Section 12(b)(2) shall be conditioned upon the consummation of the Corporate Transaction and shall be effective only immediately before such consummation.
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(3)
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Payment for Awards. If and to the extent that outstanding Awards under the Plan are not continued, assumed or replaced in connection with a Corporate Transaction, then the Committee may provide that some or all of such outstanding Awards shall be canceled at or immediately prior to the effective time of the Corporate Transaction in exchange for payments to the holders as provided in this Section 12(b)(3). The Committee will not be required to treat all Awards similarly for purposes of this Section 12(b)(3). The payment for any Award canceled shall be in an amount equal to the difference, if any, between (i) the fair market value (as determined in good faith by the Committee) of the consideration that would otherwise be received in the Corporate Transaction for the number of Shares subject to the Award, and (ii) the aggregate exercise price (if any) for the Shares subject to such Award. If the amount determined pursuant to clause (i) of the preceding sentence is less than or equal to the amount determined pursuant to clause (ii) of the preceding sentence with respect to any Award, such Award may be canceled pursuant to this Section 12(b)(3) without payment of any kind to the affected Participant. Payment of any amount under this Section 12(b)(3) shall be made in such form, on such terms and subject to such conditions as the Committee determines in its discretion, which may or may not be
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(4)
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Termination After a Corporate Transaction. If and to the extent that Awards are continued, assumed or replaced under the circumstances described in Section 12(b)(1), and if within one year after the Corporate Transaction a Participant experiences an involuntary termination of Service for reasons other than Cause or voluntarily terminates his or her Service for Good Reason, then (i) outstanding Options and SARs issued to the Participant that are not yet fully exercisable shall immediately become exercisable in full and shall remain exercisable for one year following the Participant’s termination of employment, and (ii) any Full Value Awards that are not yet fully vested shall immediately vest in full.
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c.
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Change in Control
. In connection with a Change in Control that does not involve a Corporate Transaction, the Committee may provide (in the applicable Agreement or otherwise) for one or more of the following: (i) that any Award shall become fully vested and exercisable upon the occurrence of the Change in Control or upon the involuntary termination of the Participant” Service without Cause within one year of the Change in Control or upon the Participant’s voluntary termination of Service for Good Reason within one year of the Change in Control, (ii) that any Option or SAR shall remain exercisable during all or some specified portion of its remaining term, or (iii) that Awards shall be canceled, which may be in exchange for payments in a manner similar to that provided in Section 12(b)(3). The Committee will not be required to treat all Awards similarly in such circumstances.
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13.
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Plan Participation and Service Provider Status
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Status as a Service Provider shall not be construed as a commitment that any Award will be made under the Plan to that Service Provider or to eligible Service Providers generally. Nothing in the Plan or in any Agreement or related documents shall confer upon any Service Provider or Participant any right to continued Service with the Company or any Affiliate, nor shall it interfere with or limit in any way any right of the Company or any Affiliate to terminate the person’s Service at any time with or without Cause or change such person’s compensation, other benefits, job responsibilities or title.
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14.
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Tax Withholding
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The Company or any Affiliate, as applicable, shall have the right to (i) withhold from any cash payment under the Plan or any other compensation owed to a Participant an amount sufficient to cover any required withholding taxes related to the grant, vesting, exercise or settlement of an Award, and (ii) require a Participant or other person receiving Shares under the Plan to pay a cash amount sufficient to cover any required withholding taxes before actual receipt of those Shares. In lieu of all or any part of a cash payment from a person receiving Shares under the Plan, the Committee may permit the individual to cover all or any part of the required withholdings (up to the Participant’s minimum required tax withholding rate) through a reduction in the number of Shares delivered or a delivery (either actually or by attestation) to the Company of Shares held by the Participant or other person, in each case valued in the same manner as used in computing the withholding taxes under applicable laws.
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15.
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Effective Date, Duration, Amendment and Termination of the Plan
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a.
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Effective Date
. The Plan shall become effective on the date it is approved by the Company’s shareholders, which shall be considered the date of its adoption for purposes of Treasury Regulation §1.422-2(b)(2)(i). No Awards shall be made under the Plan prior to its effective date. If the Company’s shareholders fail to approve the Plan by June 30, 2014, the Plan will be of no further force or effect.
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b.
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Duration of the Plan
. The Plan shall remain in effect until all Shares subject to it are distributed, all Awards have expired or terminated, the Plan is terminated pursuant to Section 15(c), or the tenth anniversary of the effective date of the Plan, whichever occurs first (the “Termination Date”). Awards made before the Termination Date shall continue to be outstanding in accordance with their terms and the terms of the Plan unless otherwise provided in the applicable Agreements.
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c.
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Amendment and Termination of the Plan
. The Board may at any time terminate, suspend or amend the Plan. The Company shall submit any amendment of the Plan to its shareholders for approval only to the extent required by applicable laws or regulations or the rules of any securities exchange on which the Shares may then be listed. No termination, suspension, or amendment of the Plan may materially impair the rights of any Participant under a previously granted Award without the Participant's consent, unless such action is necessary to comply with applicable law or stock exchange rules.
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d.
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Amendment of Awards
. Subject to Section 15(e), the Committee may unilaterally amend the terms of any Agreement previously granted, except that no such amendment may materially impair the rights of any Participant under the applicable Award without the Participant's consent, unless such amendment is necessary to comply with applicable law or stock exchange rules or any compensation recovery policy as provided in Section 18(i)(2).
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e.
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No Option or SAR Repricing
. Except as provided in Section 12(a), no Option or Stock Appreciation Right Award granted under the Plan may be (i) amended to decrease the exercise price thereof, (ii) cancelled in conjunction with the grant of any new Option or Stock Appreciation Right Award with a lower exercise price, (iii) cancelled in exchange for cash, other property or the grant of any Full Value Award at a time when the per share exercise price of the Option or Stock Appreciation Right Award is greater than the current Fair Market Value of a Share, or (iv) otherwise subject to any action that would be treated under accounting rules as a “repricing” of such Option or Stock Appreciation Right Award, unless such action is first approved by the Company’s shareholders.
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16.
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Substitute Awards
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The Committee may also grant Awards under the Plan in substitution for, or in connection with the assumption of, existing awards granted or issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or an Affiliate is a party. The terms and conditions of the Substitute Awards may vary from the terms and conditions set forth in the Plan to the extent that the Board at the time of the grant may deem appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted.
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17.
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Performance-Based Compensation
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a.
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Designation of Awards
. If the Committee determines at the time a Full Value Award is granted to a Participant that such Participant is, or is likely to be, a “covered employee” for purposes of Code Section 162(m) as of the end of the tax year in which the Company would ordinarily claim a tax deduction in connection with such Award, then the Committee may provide that this Section 17 will be applicable to such Award, which shall be considered Performance-Based Compensation.
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b.
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Compliance with Code Section 162(m)
. If an Award is subject to this Section 17, then the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement over the applicable performance period of one or more performance goals based on one or more of the performance measures specified in Section 17(d). The Committee will select the applicable performance measure(s) and specify the performance goal(s) based on those performance measures for any performance period, specify in terms of an objective formula or standard the method for calculating the amount payable to a Participant if the performance goal(s) are satisfied, and certify the degree to which applicable performance goals have been satisfied and any amount that vests and is payable in connection with an Award subject to this Section 17, all within the time periods prescribed by and consistent with the other requirements of Code Section 162(m). In specifying the performance goals applicable to any performance period, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance measures on which the performance goals are based, which may include adjustments that would cause such measures to be considered “non-GAAP financial measures” within the meaning of Rule 101 under Regulation G promulgated by the Securities and Exchange Commission, such as excluding the impact of specified unusual or nonrecurring events such as acquisitions, divestitures, restructuring activities, asset write-downs, litigation judgments or settlements or changes in tax laws or accounting principles. The Committee may also adjust performance measures for a performance period to the extent permitted by Code Section 162(m) in connection with an event described in Section 12(a) to prevent the dilution or enlargement of a Participant’s rights with respect to Performance-Based Compensation. The Committee may adjust downward, but not upward, any amount determined to be otherwise payable in connection with such an Award. The Committee may also provide, in an Agreement or otherwise, that the achievement of specified performance goals in connection with an Award subject to this Section 17 may be waived upon the death or Disability of the Participant or under any other circumstance with respect to which the existence of such possible waiver will not cause the Award to fail to qualify as “performance-based compensation” under Code Section 162(m).
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c.
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Limitations
. With respect to Awards of Performance-Based Compensation, (i) the maximum number of Shares that may be the subject of Full Value Awards that are denominated in Shares or Share equivalents and that are granted to any Participant during any calendar year shall not exceed 400,000 Shares (subject to adjustment as provided in Section 12(a)); and (ii) the maximum amount payable with respect to any Full Value Awards that are denominated other than in Shares or Share equivalents and that are granted to any one Participant during any calendar year shall not exceed $2,500,000.
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d.
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Performance Measures
. For purposes of any Full Value Award considered Performance-Based Compensation subject to this Section 17, the performance measures to be utilized shall be limited to one or a combination of two or more of the following performance measures: (i) net revenue; (ii) specified levels of the Company's stock price; (iii) market share; (iv) sales; (v) earnings per share; (vi) return on equity; (vii) costs; (viii) operating income; (ix) net income before interest, taxes, depreciation and/or amortization; (x) net income before or after extraordinary items; (xi) return on operating assets or levels of cost savings; (xii) earnings before taxes; (xiii) net earnings; (xiv) asset turnover; (xv) total shareholder return; (xvi) pre-tax, pre-interest expense return on invested capital; (xvii) return on invested capital; (xviii) return on incremental invested capital (xix) free cash flow; (xx) cash flow from operations; (xxi) customer satisfaction; or (xxii) learner success metrics. Any performance goal based on one or more of the foregoing performance measures may be expressed in absolute amounts, on a per share basis (basic or diluted), relative to one or more other performance measures, as a growth rate or change from preceding periods, or as a comparison to the performance of specified companies, indices or other external measures, and may relate to one or any combination of Company, Affiliate, division, business unit or individual performance.
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18.
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Other Provisions
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a.
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Unfunded Plan
. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Neither the Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan nor shall anything contained in the Plan or any action taken pursuant to its provisions create or be construed to create a fiduciary relationship between the Company and/or its Affiliates, and a Participant. To the extent any person has or acquires a right to receive a payment in connection with an Award under the Plan, this right shall be no greater than the right of an unsecured general creditor of the Company.
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b.
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Limits of Liability
. Except as may be required by law, neither the Company nor any member of the Board or of the Committee, nor any other person participating (including participation pursuant to a delegation of authority under Section 3(c) of the Plan) in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the Plan.
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c.
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Compliance with Applicable Legal Requirements
. No Shares distributable pursuant to the Plan shall be issued and delivered unless the issuance of the Shares complies with all applicable legal requirements, including compliance with the provisions of applicable state and federal securities laws, and the requirements of any securities exchanges on which the Company’s Shares may, at the time, be listed. During any period in which the offering and issuance of Shares under the Plan is not registered under federal or state securities laws, Participants shall acknowledge that they are acquiring Shares under the Plan for investment purposes and not for resale, and that Shares may not be transferred except pursuant to an effective registration statement under, or an exemption from the registration requirements of, such securities laws. Any stock certificate or book-entry evidencing Shares issued under the Plan that are subject to securities law restrictions shall bear or be accompanied by an appropriate restrictive legend or stop transfer instruction.
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d.
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Other Benefit and Compensation Programs
. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of the termination, indemnity or severance pay laws of any state or country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or an Affiliate unless expressly so provided by such other plan, contract or arrangement, or unless the Committee expressly determines that an Award or portion of an Award should be included to accurately reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation.
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e.
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Governing Law
. To the extent that federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Minnesota without regard to its conflicts-of-law principles and shall be construed accordingly.
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f.
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Severability
. If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
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g.
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Code Section 409A
. It is intended that (i) all Awards of Options, SARs and Restricted Stock under the Plan will not provide for the deferral of compensation within the meaning of Code Section 409A and thereby be exempt from Code Section 409A, and (ii) all other Awards under the Plan will either not provide for the deferral of compensation within the meaning of Code Section 409A, or will comply with the requirements of Code Section 409A, and Awards shall be structured and the Plan administered and interpreted in accordance with this intent. The Plan and any Agreement may be unilaterally amended by the Company in any manner deemed necessary or advisable by the Committee or Board in order to maintain such exemption from or compliance with Code Section 409A, and any such amendment shall conclusively be presumed to be necessary to comply with applicable law. Notwithstanding anything to the contrary in the Plan or any Agreement, with respect to any Award that constitutes a deferral of compensation subject to Code Section 409A:
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(1)
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If any amount is payable under such Award upon a termination of Service, a termination of Service will be deemed to have occurred only at such time as the Participant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A;
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(2)
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If any amount shall be payable with respect to any such Award as a result of a Participant’s “separation from service” at such time as the Participant is a “specified employee” within the meaning of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first business day after the earlier of (i) the date that is six months after the Participant’s separation from service or (ii) the Participant’s death. Unless the Committee has adopted a specified employee identification policy as contemplated by Code Section 409A, specified employees will be identified in accordance with the default provisions specified under Code Section 409A.
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h.
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Rule 16b-3
. It is intended that the Plan and all Awards granted pursuant to it shall be administered by the Committee so as to permit the Plan and Awards to comply with Exchange Act Rule 16b-3. If any provision of the Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 18(h), that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applied to Participants subject to Section 16 of the Exchange Act to the extent permitted by law and in the manner deemed advisable by the Committee.
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i.
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Forfeiture and Compensation Recovery
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(1)
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An Agreement may provide that if a Participant has received or been entitled to a payment of cash, delivery of Shares, or a combination thereof pursuant to an Award within six months before the Participant's termination of employment with the Company and its Affiliates, the Committee, in its sole discretion, may require the Participant to return or forfeit the cash and/or Shares received with respect to the Award (or its economic value as of (i) the date of the exercise of Options or Stock Appreciation Rights, (ii) the date of, and immediately following, the vesting of Restricted Stock or the receipt of Shares without restrictions, or (iii) the date on which the right of the Participant to payment with respect to Stock Units or Other Stock-Based Awards vests, as the case may be) in the event of certain occurrences specified in the Agreement. The Committee's right to require such return or forfeiture must be exercised within ninety days after discovery of such an occurrence but in no event later than fifteen months after the Participant's termination of employment with the Company and its Affiliates. The occurrences may, but need not, include competition with the Company or any Affiliate, unauthorized disclosure of material proprietary information of the Company or any Affiliate, a violation of applicable business ethics policies of the Company or Affiliate or any other occurrence specified in the Agreement within the period or periods of time specified in the Agreement.
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(2)
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Awards and any compensation associated therewith may be made subject to forfeiture, recovery by the Company or other action pursuant to any compensation recovery policy adopted by the Board or the Committee at any time, including in response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law. Any Agreement may be unilaterally amended by the Committee to comply with any such compensation recovery policy.
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