Document:

exv10w24

Exhibit 10.24

EDUCATION MANAGEMENT CORPORATION

OMNIBUS LONG-TERM INCENTIVE PLAN

     EDUCATION MANAGEMENT CORPORATION, a Pennsylvania corporation (the “Company”), sets forth
herein the terms of its Omnibus Long-Term Incentive Plan (the “Plan”), as follows:

1. PURPOSE

     The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability
to attract and retain highly qualified officers, non-employee members of the Board, key employees,
consultants and advisors, and to motivate such officers, non-employee members of the Board, key
employees, consultants and advisors to serve the Company and its Affiliates and to expend maximum
effort to improve the business results and earnings of the Company, by providing to such persons an
opportunity to acquire or increase a direct proprietary interest in the operations and future
success of the Company. To this end, the Plan provides for the grant of stock options, stock
appreciation rights, restricted stock, restricted stock units, unrestricted stock, other
stock-based awards and cash awards. Any of these awards may, but need not, be made as performance
incentives to reward attainment of performance goals in accordance with the terms hereof. Stock
options granted under the Plan may be non-qualified stock options or incentive stock options, as
provided herein.

2. DEFINITIONS

     For purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:

     2.1. “Affiliate” means any company or other trade or business that “controls,” is
“controlled by” or is “under common control” with the Company within the meaning of Rule
405 of Regulation C under the Securities Act, including, without limitation, any
Subsidiary.

     2.2. “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, other Stock-based Award or cash award under the Plan.

     2.3. “Award Agreement” means a written agreement between the Company and a Grantee,
or notice from the Company or an Affiliate to a Grantee that evidences and sets out the
terms and conditions of an Award.

     2.4. “Board” means the Board of Directors of the Company.

     2.5. “Business Combination” shall have the meaning set forth in Section 15.2.

     2.6. “Cause” shall be defined as that term is defined in a Grantee’s offer letter or
other applicable employment agreement; or, if there is no such definition, “Cause” means,
as determined by the Company and unless otherwise provided in an applicable

 

 

Award Agreement with the Company or an Affiliate: (i) engaging in any act, or failing
to act, or misconduct that is injurious to the Company or its Affiliates; (ii) gross
negligence or willful misconduct in connection with the performance of duties;
(iii) conviction of (or entering a plea of guilty or nolo contendere to) a criminal
offense (other than minor traffic offenses); (iv) fraud, embezzlement or misappropriation
of funds or property of the Company or an Affiliate; (v) material breach of any term of
any employment, consulting or other services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider and the Company or an
Affiliate; (vi) the entry of an order duly issued by any regulatory agency (including
federal, state and local regulatory agencies and self-regulatory bodies) having
jurisdiction over the Company or an Affiliate requiring the removal from any office held
by the Service Provider with the Company or prohibiting a Service Provider from
participating in the business or affairs of the Company or any Affiliate; or (vii) the
revocation or threatened revocation of any of the Company’s or any Affiliate’s government
licenses, permits or approvals, which is primarily due to the Service Provider’s action or
inaction and such revocation or threatened revocation would be alleviated or mitigated in
any material respect by the termination of the Service Provider’s Services.

     2.7. “Change in Control” shall have the meaning set forth in Section 15.2.

     2.8. “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter
amended.

     2.9. “Committee” means the Compensation Committee of the Board, or such other
committee as determined by the Board. The Compensation Committee of the Board may, in its
discretion, designate a subcommittee of its members to serve as the Committee (to the
extent the Board has not designated another person, committee or entity as the Committee).
Following the Company’s initial public offering, (i) the Board will cause the Committee
to satisfy the applicable requirements of any stock exchange on which the Common Stock may
then be listed;(ii) for purposes of Awards to Covered Employees intended to constitute
Performance Awards, to the extent required by Code Section 162(m), “Committee” means all
of the members of the Compensation Committee who are “outside directors” within the
meaning of Section 162(m) of the Code; and (iii) for purposes of Awards to Grantees who
are subject to Section 16 of the Exchange Act, “Committee” means all of the members of the
Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3
adopted under the Exchange Act.

     2.10. “Company” means Education Management Corporation, a Pennsylvania corporation,
or any successor corporation.

     2.11. “Common Stock” or “Stock” means a share of common stock of the Company, par
value $0.01 per share.

- 2 -

 

     2.12. “Covered Employee” means a Grantee who is a “covered employee” within the
meaning of Section 162(m)(3) of the Code as qualified by Section 12.4 herein.

     2.13. “Disability” means as determined by the Company and unless otherwise provided
in an applicable Award Agreement with the Company or an Affiliate, the Grantee is unable
to perform each of the essential duties of such Grantee’s position by reason of a
medically determinable physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous period of not less than 12
months; provided, however, that, with respect to rules regarding
expiration of an Incentive Stock Option following termination of the Grantee’s Service,
“Disability” means “permanent and total disability” as set forth in Section 22(e)(3) of
the Code.

     2.14. “Effective Date” means                     , 2009.

     2.15. “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or
as hereafter amended.

     2.16. “Fair Market Value” of a share of Common Stock as of a particular date shall
mean (1) if the Common Stock is listed on a national securities exchange, the closing or
last price of the Common Stock on the composite tape or other comparable reporting system
for the applicable date, or if the applicable date is not a trading day, the trading day
immediately preceding the applicable date, or (2) if the shares of Common Stock are not
then listed on a national securities exchange or national market system, or the value of
such shares is not otherwise determinable, such value as determined by the Board in good
faith in its sole discretion (but in any event not less than fair market value within the
meaning of Section 409A); notwithstanding the foregoing, the Fair Market Value of a share
of Common Stock for purposes of determining Awards with a Grant Date as of the Company’s
initial public offering shall be the price per share of Common Stock set in the final
prospectus for such initial public offering.

     2.17. “Family Member” means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or
sister-in-law, including adoptive relationships, of the applicable individual, any person
sharing the applicable individual’s household (other than a tenant or employee), a trust
in which any one or more of these persons have more than fifty percent of the beneficial
interest, a foundation in which any one or more of these persons (or the applicable
individual) control the management of assets, and any other entity in which one or more of
these persons (or the applicable individual) own more than fifty percent of the voting
interests.

     2.18. “Grant Date” means, as determined by the Board, the latest to occur of (i) the
date as of which the Board approves an Award, (ii) the date on which the recipient of an
Award first becomes eligible to receive an Award under Section 6
hereof, or (iii) such other date as may be specified by the Board in the Award
Agreement.

- 3 -

 

     2.19. “Grantee” means a person who receives or holds an Award under the Plan.

     2.20. “Incentive Stock Option” means an “incentive stock option” within the meaning
of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax
statute, as amended from time to time.

     2.21. “Incumbent Board” shall have the meaning set forth in Section 15.2.

     2.22.
“Initial Public Offering” shall mean the initial public offering of shares of
Common Stock pursuant to a registration statement (other than a Form S-8 or successor
forms) filed with, and declared effective by, the SEC.

     2.23. “Non-qualified Stock Option” means an Option that is not an Incentive Stock
Option.

     2.24. “Option” means an option to purchase one or more shares of Stock pursuant to
the Plan.

     2.25. “Option Price” means the exercise price for each share of Stock subject to an
Option.

     2.26. “Outside Director” means a member of the Board who is not an officer or
employee of the Company or an Affiliate, determined in accordance with the requirements of
Section 162(m) of the Code.

     2.27. “Outstanding Company Common Stock” shall have the meaning set forth in Section
15.2.

     2.28. “Outstanding Company Voting Securities” shall have the meaning set forth in
Section 15.2.

     2.29. “Performance Award” means an Award made subject to the attainment of
performance goals (as described in Section 12) over a performance period of from one (1)
to five (5) years.

     2.30. “Person” shall have the meaning set forth in Section 15.2.

     2.31. “Plan” means this Education Management Corporation Omnibus Long-Term Incentive
Plan.

     2.32. “Principal Stockholders” means GS Capital Partners V Fund, L.P., a Delaware
limited partnership, GS Capital Partners V Offshore Fund, L.P., a Cayman Islands exempted
limited partnership, GS Capital Partners V GmbH & Co. KG, a limited partnership formed
under the laws of the Federal Republic of Germany, GS

- 4 -

 

Capital Partners V Institutional, L.P., a Delaware limited partnership, Providence
Equity Partners V L.P., a Delaware limited partnership, Providence Equity Partners V-A
L.P., a Delaware limited partnership, Providence Equity Partners IV L.P., a Delaware
limited partnership, Providence Equity Operating Partners IV L.P., a Delaware limited
partnership and Leeds Equity Partners IV, L.P., a Delaware limited partnership.

     2.33. “Purchase Price” means the purchase price for each share of Stock pursuant to a
grant of Restricted Stock.

     2.34. “Reporting Person” means a person who is required to file reports under
Section 16(a) of the Exchange Act.

     2.35. “Restricted Stock” means shares of Stock awarded to a Grantee pursuant to
Section 10 hereof.

     2.36. “Restricted Stock Unit” means a bookkeeping entry representing the equivalent
of shares of Stock, awarded to a Grantee pursuant to Section 10 hereof.

     2.37. “SAR Exercise Price” means the per share exercise price of a SAR granted to a
Grantee under Section 9 hereof.

     2.38. “SEC” means the United States Securities and Exchange Commission.

     2.39. “Section 409A” shall mean Section 409A of the Code and all formal guidance and
regulations promulgated thereunder.

     2.40. “Securities Act” means the Securities Act of 1933, as now in effect or as
hereafter amended.

     2.41. “Separation from Service” means a termination of Service by a Service Provider,
as determined by the Board, which determination shall be final, binding and conclusive;
provided if any Award governed by Section 409A is to be distributed on a Separation from
Service, then the definition of Separation from Service for such purposes shall comply
with the definition provided in Section 409A.

     2.42. “Service” means service as a Service Provider to the Company or an Affiliate.
Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position
or duties shall not result in interrupted or terminated Service, so long as such Grantee
continues to be a Service Provider to the Company or an Affiliate.

     2.43. “Service Provider” means an employee, officer, non-employee member of the
Board, consultant or advisor of the Company or an Affiliate.

     2.44. “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under
Section 9 hereof.

     2.45. “Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.

- 5 -

 

     2.46. “Substitute Award” means any Award granted in assumption of or in substitution
for an award of a company or business acquired by the Company or a Subsidiary or with
which the Company or an Affiliate combines, shares issued or issuable.

     2.47. “Ten Percent Stockholder” means an individual who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding stock of the
Company, its parent or any of its Subsidiaries. In determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be applied.

     2.48. “Termination Date” means the date that is ten (10) years after the Effective
Date, unless the Plan is earlier terminated by the Board under Section 5.2 hereof.

     2.49. “Transaction” shall have the meaning set forth in Section 15.1.

     2.50. “Transition Period” means the period beginning with the consummation of an
Initial Public Offering and ending as of the earlier of (i) the date of the first annual
meeting of shareholders of the Company at which directors are to be elected that occurs
after the close of the third calendar year following the calendar year in which the
Initial Public Offering occurs and (ii) the expiration of the “reliance period” under
Treasury Regulation Section 1.162-27(f)(2).

3. ADMINISTRATION OF THE PLAN

     3.1. General.

     The Board shall have such powers and authorities related to the administration of the Plan as
are consistent with the Company’s certificate of incorporation and bylaws and applicable law. The
Board shall have the power and authority to delegate its responsibilities hereunder to the
Committee, which shall have full authority to act in accordance with its charter, and with respect
to the authority of the Board to act hereunder, all references to the Board shall be deemed to
include a reference to the Committee, to the extent such power or responsibilities have been
delegated. Except as specifically provided in Section 14 or as otherwise may be required by
applicable law, regulatory requirement or the certificate of incorporation or the bylaws of the
Company, the Board shall have full power and authority to take all actions and to make all
determinations required or provided for under the Plan, any Award or any Award Agreement, and shall
have full power and authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan. Following the Company’s initial public
offering, the Committee shall administer the Plan; provided that, the Board shall retain the right
to exercise the authority of the Committee to the extent consistent with applicable law and the
applicable requirements of any securities exchange on which the Common Stock may then be listed.
The interpretation and construction by the Board of any provision of the Plan, any Award or any
Award Agreement shall be final, binding and conclusive. Without limitation, the Board shall have
full and final authority, subject to the other terms and conditions of the Plan, to:

- 6 -

 

     (i) designate Grantees;

     (ii) determine the type or types of Awards to be made to a Grantee;

     (iii) determine the number of shares of Stock to be subject to an Award;

     (iv) establish the terms and conditions of each Award (including, but not limited to, the
Option Price of any Option, the nature and duration of any restriction or condition (or provision
for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the
shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options);

     (v) prescribe the form of each Award Agreement; and

     (vi) amend, modify, or supplement the terms of any outstanding Award including the authority,
in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or
individuals who are employed outside the United States to recognize differences in local law, tax
policy, or custom.

     To the extent permitted by applicable law, the Board may delegate its authority as identified
herein to any individual or committee of individuals (who need not be directors), including without
limitation the authority to make Awards to Grantees who are not subject to Section 16 of the
Exchange Act or who are not Covered Employees. To the extent that the Board delegates its
authority to make Awards as provided by this Section 3.1, all references in the Plan to the Board’s
authority to make Awards and determinations with respect thereto shall be deemed to include the
Board’s delegate. Any such delegate shall serve at the pleasure of, and may be removed at any time
by the Board.

     3.2. Restrictions; No Repricing.

     Notwithstanding the foregoing, no amendment or modification may be made to an outstanding
Option or SAR that causes the Option or SAR to become subject to Section 409A, without the
Grantee’s written prior approval. Notwithstanding any provision herein to the contrary, the
repricing of Options or SARs is prohibited without prior approval of the Company’s stockholders.
For this purpose, a “repricing” means any of the following (or any other action that has the same
effect as any of the following): (A) changing the terms of an Option or SAR to lower its Option
Price or SAR Exercise Price; (B) any other action that is treated as a “repricing” under generally
accepted accounting principles; and (C) repurchasing for cash or canceling an Option or SAR at a
time when its Option Price or SAR Exercise Price is greater than the Fair Market Value of the
underlying shares in exchange for another Award, unless the cancellation and exchange occurs in
connection with a change in capitalization or similar change under Section 15. Such cancellation
and exchange would be considered a “repricing” regardless of whether it is treated as a “repricing”
under generally accepted accounting principles and regardless of whether it is voluntary on the
part of the Grantee.

     3.3. Award Agreements.

     The grant of any Award may be contingent upon the Grantee executing the appropriate Award
Agreement. The Company may retain the right in an Award Agreement to cause a

- 7 -

 

forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in
violation or breach of or in conflict with any employment agreement, non-competition agreement, any
agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof
or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise
in competition with the Company or any Affiliate thereof, to the extent specified in such Award
Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is
terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.

     If any of the Company’s financial statements are required to be restated, the Company may
recover all or a portion of any Award made to any Grantee with respect to any fiscal year of the
Company the financial results of which are negatively affected by such restatement. The amount to
be recovered shall be the amount, as determined by the Committee, by which the affected Award
exceeds the amount that would have been payable had the financial statements been initially filed
as restated. In no event shall the amount to be recovered by the Company be less than the amount
required to be repaid or recovered as a matter of law.

     3.4. Deferral Arrangement.

     The Board may permit or require the deferral of any Award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish and in accordance with
Section 409A, which may include provisions for the payment or crediting of interest or dividend
equivalents, including converting such credits into deferred Stock units.

     3.5. No Liability.

     No member of the Board or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan, any Award or Award Agreement.

     3.6. Book Entry.

     Notwithstanding any other provision of this Plan to the contrary, the Company may elect to
satisfy any requirement under this Plan for the delivery of stock certificates through the use of
book-entry.

4. STOCK SUBJECT TO THE PLAN

     Subject to adjustment as provided in Section 15 hereof, the maximum number of shares of Stock
available for issuance under the Plan shall be                     , plus a number of shares equal to the
number of shares subject to stock options granted under the Company’s 2006 Stock Plan that are
canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number
of shares underlying such stock options or otherwise terminated without delivery of shares to the
grantees, plus a number of shares equal to the number of shares reserved but not previously granted
under the Company’s 2006 Stock Option Plan.      % of such shares of Stock available for issuance
under the Plan shall be available for issuance pursuant to Incentive Stock

- 8 -

 

Options. Stock issued or to be issued under the Plan shall be authorized but unissued shares;
or, to the extent permitted by applicable law, issued shares that have been reacquired by the
Company. Following the end of the Transition Period and subject to adjustments in accordance with
Section 15, the maximum number of each type of Award (other than cash-based Performance Awards)
intended to constitute “performance-based compensation” under Code Section 162(m) granted to any
Grantee in any thirty-six (36) month period shall not exceed the following: Options:                     ;
SARs:                     ; Restricted Stock:                     ; Restricted Stock Units:                     ; and other
Stock-based Performance Awards:                     .

     The Board may adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments
in accordance with Section 15. If the Option Price of any Option granted under the Plan, or if
pursuant to Section 17.3 the withholding obligation of any Grantee with respect to an Option or
other Award, is satisfied by tendering shares of Stock to the Company (by either actual delivery or
by attestation) or by withholding shares of Stock, the number of shares of Stock issued net of the
shares of Stock tendered or withheld shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the Plan. To the extent that an
Award under the Plan or a stock option granted under the Company’s 2006 Stock Option Plan is
canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number
underlying the Award or stock option, or otherwise terminated without delivery of shares to the
Grantee, the shares retained by or returned to the Company will be available under the Plan; and
shares that are withheld from such an Award or stock option granted under the Company’s 2006 Stock
Option Plan, or separately surrendered by the Grantee in payment of any exercise price or taxes
relating to such an Award or stock option shall be deemed to constitute shares not delivered to the
Grantee and will be available under the Plan. In addition, in the case of any Substitute Award,
such Substitute Award shall not be counted against the number of shares reserved under the Plan.

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

     5.1. Term.

     The Plan shall be effective as of the Effective Date and shall terminate automatically as of
the first meeting of stockholders at which directors are to be elected that occurs after the close
of the third calendar year following the calendar year in which the initial public offering occurs
unless the Plan is approved by the stockholders of the Company prior to such meeting but subsequent
to the Effective Date. The Plan shall terminate automatically on the ten (10) year anniversary of
the Effective Date and may be terminated on any earlier date as provided in Section 5.2.

- 9 -

 

     5.2. Amendment and Termination of the Plan.

     The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any Awards which have not been made. An amendment shall be contingent on approval of the Company’s
stockholders to the extent stated by the Board, required by applicable law or required by
applicable stock exchange listing requirements. Notwithstanding the foregoing, any amendment to
Section 3.2 shall be contingent upon the approval of the Company’s stockholders. No Awards shall
be made after the Termination Date. The applicable terms of the Plan, and any terms and conditions
applicable to Awards granted prior to the Termination Date shall survive the termination of the
Plan and continue to apply to such Awards. No amendment, suspension, or termination of the Plan
shall, without the consent of the Grantee, materially impair rights or obligations under any Award
theretofore awarded.

6. AWARD ELIGIBILITY AND LIMITATIONS

     6.1. Service Providers.

     Subject to this Section 6, Awards may be made to any Service Provider, including any Service
Provider who is an officer, Non-employee member of the Board, consultant or advisor of the Company
or of any Affiliate, as the Board shall determine and designate from time to time in its
discretion.

     6.2. Successive Awards.

     An eligible person may receive more than one Award, subject to such restrictions as are
provided herein.

     6.3. Stand-Alone, Additional, Tandem, and Substitute Awards.

     Awards may, in the discretion of the Board, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award granted under another
plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an
Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate.
Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award
is granted in substitution or exchange for another Award, the Board shall have the right to require
the surrender of such other Award in consideration for the grant of the new Award. The Board shall
have the right, in its discretion, to make Awards in substitution or exchange for any other award
under another plan of the Company, any Affiliate, or any business entity to be acquired by the
Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including
in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the
value of Stock subject to the Award is equivalent in value to the cash compensation (for example,
Restricted Stock Units or Restricted Stock).

7. AWARD AGREEMENT

     Each Award shall be evidenced by an Award Agreement, in such form or forms as the Board shall
from time to time determine. Without limiting the foregoing, an Award Agreement may be provided in
the form of a notice which provides that acceptance of the Award constitutes

- 10 -

 

acceptance of all terms of the Plan and the notice. Award Agreements granted from time to
time or at the same time need not contain similar provisions but shall be consistent with the terms
of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such
Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the
absence of such specification such options shall be deemed Non-qualified Stock Options.

8. TERMS AND CONDITIONS OF OPTIONS

     8.1. Option Price.

     The Option Price of each Option shall be fixed by the Board and stated in the related Award
Agreement. The Option Price of each Option (except those that constitute Substitute Awards) shall
be at least the Fair Market Value on the Grant Date of a share of Stock; provided,
however, that in the event that a Grantee is a Ten Percent Stockholder as of the Grant
Date, the Option Price of an Option granted to such Grantee that is intended to be an Incentive
Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the
Grant Date. In no case shall the Option Price of any Option be less than the par value of a share
of Stock.

     8.2. Vesting.

     Subject to Section 8.3 hereof, each Option shall become exercisable at such times and under
such conditions (including, without limitation, performance requirements) as shall be determined by
the Board and stated in the Award Agreement.

     8.3. Term.

     Each Option shall terminate, and all rights to purchase shares of Stock thereunder shall
cease, upon the expiration of ten (10) years from the Grant Date, or under such circumstances and
on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated
in the related Award Agreement; provided, however, that in the event that the
Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an
Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five (5)
years from its Grant Date.

     8.4. Limitations on Exercise of Option.

     Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, (i) prior to the date the Plan is approved by the stockholders of the Company as
provided herein or (ii) after the occurrence of an event which results in termination of the
Option.

- 11 -

 

     8.5. Method of Exercise.

     An Option that is exercisable may be exercised by the Grantee’s delivery to the Company of
written notice of exercise on any business day, at the Company’s principal office, on the form
specified by the Company. Such notice shall specify the number of shares of Stock with respect to
which the Option is being exercised and shall be accompanied by payment in full of the Option Price
of the shares for which the Option is being exercised plus the amount (if any) of federal and/or
other taxes which the Company may, in its judgment, be required to withhold with respect to an
Award. The minimum number of shares of Stock with respect to which an Option may be exercised, in
whole or in part, at any time shall be the lesser of (i) the number set forth in the related Award
Agreement and (ii) the maximum number of shares available for purchase under the Option at the time
of exercise.

     8.6. Rights of Holders of Options.

     Unless otherwise stated in the related Award Agreement, an individual holding or exercising an
Option shall have none of the rights of a stockholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock or to direct the
voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid
and issued to him. Except as provided in Section 15 hereof or the related Award Agreement, no
adjustment shall be made for dividends, distributions or other rights for which the record date is
prior to the date of such issuance.

     8.7. Delivery of Stock Certificates.

     Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.

     8.8. Limitations on Incentive Stock Options.

     An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates)
does not exceed $100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.

9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

     9.1. Right to Payment.

     A SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of
(i) the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR Exercise
Price, as determined by the Board. The Award Agreement for an SAR shall specify the SAR Exercise
Price, which shall be fixed at the Fair Market Value of a share of Stock on the Grant

- 12 -

 

Date. SARs may be granted alone or in conjunction with all or part of an Option or at any
subsequent time during the term of such Option or in conjunction with all or part of any other
Award. A SAR granted in tandem with an outstanding Option following the Grant Date of such Option
shall have a grant price that is equal to the Option Price; provided, however, that
the SAR’s grant price may not be less than the Fair Market Value of a share of Stock on the Grant
Date of the SAR.

     9.2. Other Terms.

     The Board shall determine at the Grant Date or thereafter, the time or times at which and the
circumstances under which an SAR may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time or times at which
SARs shall cease to be or become exercisable following Separation from Service or upon other
conditions, the method of exercise, whether or not a SAR shall be in tandem or in combination with
any other Award, and any other terms and conditions of any SAR.

     9.3. Term of SARs.

     The term of a SAR granted under the Plan shall be determined by the Board, in its sole
discretion; provided, however, that such term shall not exceed ten (10) years.

     9.4. Payment of SAR Amount.

     Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in
cash or Stock, as determined by the Board) in an amount determined by multiplying:

     (i) the difference between the Fair Market Value of a share of Stock on the date of
exercise over the SAR Exercise Price; by

     (ii) the number of shares of Stock with respect to which the SAR is exercised.

10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

     10.1. Restrictions.

     At the time of grant, the Board may, in its sole discretion, establish a period of time (a
“restricted period”) and any additional restrictions including the satisfaction of corporate or
individual performance objectives applicable to an Award of Restricted Stock or Restricted Stock
Units in accordance with Section 12.1 and 12.2. Each Award of Restricted Stock or Restricted Stock
Units may be subject to a different restricted period and additional restrictions. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of
any other applicable restrictions.

- 13 -

 

     10.2. Restricted Stock Certificates.

     The Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been
granted, stock certificates or other evidence of ownership representing the total number of shares
of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date.
The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold
such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee;
provided, however, that such certificates shall bear a legend or legends that
comply with the applicable securities laws and regulations and makes appropriate reference to the
restrictions imposed under the Plan and the Award Agreement.

     10.3. Rights of Holders of Restricted Stock.

     Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have rights as stockholders of the Company.

     10.4. Rights of Holders of Restricted Stock Units.

10.4.1. Settlement of Restricted Stock Units.

     Restricted Stock Units may be settled in cash or Stock, as determined by the Board and set
forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock
Units shall be settled (i) within the time period specified in Section 17.9.1 for short term
deferrals or (ii) otherwise within the requirements of Section 409A, in which case the Award
Agreement shall specify upon which events such Restricted Stock Units shall be settled.

10.4.2. Voting and Dividend Rights.

     Unless otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units
shall not have rights as stockholders of the Company.

10.4.3. Creditor’s Rights.

     A holder of Restricted Stock Units shall have no rights other than those of a general creditor
of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the
Company, subject to the terms and conditions of the applicable Award Agreement.

     10.5. Purchase of Restricted Stock.

     The Grantee shall be required, to the extent required by applicable law, to purchase the
Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if
any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase
Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a
form described in Section 11 or, in the discretion of the Board, in consideration for past Services
rendered.

- 14 -

 

     10.6. Delivery of Stock.

     Upon the expiration or termination of any restricted period and the satisfaction of any other
conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or
Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award
Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

11. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

     11.1. General Rule.

     Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to
the Company, except as provided in this Section 11.

     11.2. Surrender of Stock.

     To the extent the Award Agreement so provides, payment of the Option Price for shares
purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be
made all or in part through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price or Purchase Price for
Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or
surrender. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to
make payment in the form of already owned shares of Stock may be authorized only at the time of
grant.

     11.3. Cashless Exercise.

     With respect to an Option only (and not with respect to Restricted Stock), to the extent
permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may
be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction
to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver
all or part of the sales proceeds to the Company in payment of the Option Price and any withholding
taxes described in Section 17.3.

     11.4. Other Forms of Payment.

     To the extent the Award Agreement so provides, payment of the Option Price or the Purchase
Price for Restricted Stock may be made in any other form that is consistent with applicable laws,
regulations and rules, including, but not limited to, the Company’s withholding of shares of Stock
otherwise due to the exercising Grantee.

	12.	 	TERMS AND CONDITIONS OF PERFORMANCE AWARDS

- 15 -

 

     12.1. Performance Conditions.

          The right of a Grantee to exercise or receive a grant or settlement of any Award, and the
timing thereof, may be subject to such performance conditions as may be specified by the Committee.
The Committee may use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may exercise its discretion to reduce
the amounts payable under any Award subject to performance conditions, except as limited under
Section 12.2 hereof in the case of a Performance Award intended to qualify under Code
Section 162(m).

     12.2. Performance Awards Granted to Designated Covered Employees.

          If and to the extent that the Committee determines that a Performance Award to be granted to a
Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as
“performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 12.2.

     12.2.1. Performance Goals Generally.

     The performance goals for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 12.2. Following the end of the Transition
Period, performance goals shall be objective and shall otherwise meet the requirements of Code
Section 162(m) and regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” The Committee may determine that such Performance Awards shall be
granted, exercised and/or settled upon achievement of any one performance goal or that two or more
of the performance goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may, in the discretion of the Committee, be established
on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or
business segments, as applicable. Performance goals may be absolute or relative (to the
performance of one or more comparable companies or indices). Measurement of performance goals may
exclude (in the discretion of the Committee) the impact of charges for restructuring, discontinued
operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects
of tax or accounting changes (each as defined by generally accepted accounting principles and as
identified in the Company’s financial statements or other SEC filings). Performance goals may
differ for Performance Awards granted to any one Grantee or to different Grantees.

     12.2.2. Business Criteria.

     One or more of the following business criteria for the Company, on a consolidated basis,
and/or specified subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used exclusively by the Committee in
establishing performance goals for such Performance Awards: net sales; revenue; revenue growth or
product revenue growth; operating income (before or after taxes); pre-or after-tax

- 16 -

 

income (before or after allocation of corporate overhead and bonuses; net earnings; earnings
per share; net income (before or after taxes); return on equity; total shareholder return; return
on assets or net assets; appreciation in and/or maintenance of, share price; market share; gross
profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings
before interest, taxes depreciation and amortization); economic value-added models or equivalent
metrics; comparisons with various stock market indices; reduction in costs; cash flow or cash flow
per share (before or after dividends); return on capital (including return on total capital or
return on invested capital; cash flow return on investment; improvement in or attainment of expense
levels or working capital levels; operating margins; gross margins or cash margin; year-end cash;
debt reductions; shareholder equity; regulatory performance; academic performances; student loan
performance; implementation, completion or attainment of measurable objectives with respect to
research, development, products or projects and recruiting and maintaining personnel and, prior to
the end of the Transition Period, any other business criteria established by the Committee.

12.2.3. Timing for Establishing Performance Goals.

     Performance goals shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such other date as may be required
or permitted for “performance-based compensation” under Code Section 162(m).

12.2.4. Settlement of Performance Awards; Other Terms.

     Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in
the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a
settlement otherwise to be made in connection with such Performance Awards. Following the end of
the Transition Period, the maximum amount of each cash-based Performance Award intended to
constitute “performance-based compensation” under Code Section 162(m) granted to any Grantee in any
twelve (12) month period shall not exceed One Million Dollars ($1,000,000).

     12.3. Written Determinations.

     All determinations by the Committee as to the establishment of performance goals, the amount
of any Performance Award pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards, shall be made in writing in the case of any
Award intended to qualify under Code Section 162(m), to the extent required by Code Section 162(m).
To the extent permitted by Code Section 162(m), the Committee may delegate any responsibility
relating to such Performance Awards.

     12.4. Status of Section 12.2 Awards under Code Section 162(m).

     It is the intent of the Company that Performance Awards under Section 12.2 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees within the meaning of
Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute
“qualified performance-based compensation” within the meaning of Code Section 162(m) and
regulations thereunder. Accordingly, the terms of Section 12.2, including the definitions of
Covered Employee and other terms used therein, shall be interpreted in a manner consistent with
Code Section 162(m) and regulations thereunder. The foregoing

- 17 -

 

notwithstanding, because the Committee cannot determine with certainty whether a given Grantee
will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the Committee, at the time
of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal
year. If any provision of the Plan or any agreement relating to such Performance Awards does not
comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder,
such provision shall be construed or deemed amended to the extent necessary to conform to such
requirements.

13. OTHER STOCK-BASED AWARDS

     13.1. Grant of Other Stock-based Awards.

     Other Stock-based Awards, consisting of Stock units, or other Awards, valued in whole or in
part by reference to, or otherwise based on, Common Stock, may be granted either alone or in
addition to or in conjunction with other Awards under the Plan. Other Stock-based Awards may be
granted in lieu of other cash or other compensation to which a Service Provider is entitled from
the Company or may be used in the settlement of amounts payable in shares of Common Stock under any
other compensation plan or arrangement of the Company, including without limitation, the Company’s
Incentive Compensation Plan. Subject to the provisions of the Plan, the Committee shall have the
sole and complete authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards,
and all other conditions of such Awards. Unless the Committee determines otherwise, any such Award
shall be confirmed by an Award Agreement, which shall contain such provisions as the Committee
determines to be necessary or appropriate to carry out the intent of this Plan with respect to such
Award.

     13.2. Terms of Other Stock-based Awards.

     Any Common Stock subject to Awards made under this Section 13 may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or,
if later, the date on which any applicable restriction, performance or deferral period lapses.

14. REQUIREMENTS OF LAW

     14.1. General.

     The Company shall not be required to sell or issue any shares of Stock under any Award if the
sale or issuance of such shares would constitute a violation by the Grantee, any other individual
exercising an Option, or the Company of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing, registration or
qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award unless such listing,
registration, qualification, consent or approval shall have been effected or

- 18 -

 

obtained free of any conditions not acceptable to the Company, and any delay caused thereby
shall in no way affect the date of termination of the Award. Specifically, in connection with the
Securities Act, upon the exercise of any Option or the delivery of any shares of Stock underlying
an Award, unless a registration statement under such Act is in effect with respect to the shares of
Stock covered by such Award, the Company shall not be required to sell or issue such shares unless
the Board has received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to
the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction
that expressly imposes the requirement that an Option shall not be exercisable until the shares of
Stock covered by such Option are registered or are exempt from registration, the exercise of such
Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of such an exemption.

     14.2. Rule 16b-3.

     During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act, it is the intent of the Company that Awards and the exercise of Options granted
to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent that any provision of the Plan or action by the Board or Committee does
not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan.
In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to
modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of
any features of, the revised exemption or its replacement.

15. EFFECT OF CHANGES IN CAPITALIZATION

     15.1. Changes in Capitalization.

15.1.1. Changes in Stock.

     If (i) the number of outstanding shares of Stock is increased or decreased or the shares of
Stock are changed into or exchanged for a different number or kind of shares or other securities of
the Company on account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date or (ii) there occurs any spin-off, split-up,
extraordinary cash dividend or other distribution of assets by the Company, the number and kinds of
shares for which grants of Options and other Stock-based Awards may be made under the Plan
(including the per-Grantee maximums set forth in Section 4) shall be equitably adjusted by the
Company; provided that any such adjustment shall comply with Section 409A. In addition, in the
event of any such increase or decrease in the number of outstanding shares or

- 19 -

 

other transaction described in clause (ii) above, the number and kind of shares for which
Awards are outstanding and the Option Price per share of outstanding options and SAR Exercise Price
per share of outstanding SARs shall be equitably adjusted; provided that any such adjustment shall
comply with Section 409A.

     15.1.2. Effect of Certain Transactions.

     Except as otherwise provided in an Award Agreement, in the event of (a) the liquidation or
dissolution of the Company or (b) a reorganization, merger, exchange or consolidation of the
Company or involving the shares of Common Stock (a “Transaction”), the Plan and the Awards issued
hereunder shall continue in effect in accordance with their respective terms, except that following
a Transaction either (i) each outstanding Award shall be treated as provided for in the agreement
entered into in connection with the Transaction or (ii) if not so provided in such agreement, each
Grantee shall be entitled to receive in respect of each share of Common Stock subject to any
outstanding Awards, upon exercise or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property or other consideration that each holder of a share of
Common Stock was entitled to receive in the Transaction in respect of a share of Common stock;
provided, however, that, unless otherwise determined by the Committee, such stock, securities,
cash, property or other consideration shall remain subject to all of the conditions, restrictions
and performance criteria which were applicable to the Awards prior to such Transaction. Without
limiting the generality of the foregoing, the treatment of outstanding Options and SARs pursuant to
this Section 15.1.2 in connection with a Transaction in which the consideration paid or distributed
to the Company’s stockholders is not entirely shares of common stock of the acquiring or resulting
corporation may include the cancellation of outstanding Options and SARs upon consummation of the
Transaction as long as, at the election of the Committee, (x) the holders of affected Options and
SARs have been given a period of at least fifteen days prior to the date of the consummation of the
Transaction to exercise the Options or SARs (whether or not they were otherwise exercisable) or (y)
the holders of the affected Options and SARs are paid (in cash or cash equivalents) in respect of
each share of Stock covered by the Option or SAR being canceled an amount equal to the excess, if
any, of the per share price paid or distributed to stockholders in the transaction (the value of
any non-cash consideration to be determined by the Committee in its sole discretion) over the
Option Price or SAR Exercise Price, as applicable. For avoidance of doubt, (1) the cancellation of
Options and SARs pursuant to clause (y) of the preceding sentence may be effected notwithstanding
anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount
determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Option or
SAR may be cancelled without any payment therefore. The treatment of any Award as provided in this
Section 15.1.2 shall be conclusively presumed to be appropriate for purposes of Section 15.1.1.

     15.2. Definition of Change in Control.

     “Change in Control” means:

	 	(1)	 	Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) becomes the
beneficial owner (within the meaning of Rule 13d 3 promulgated under
the Exchange Act) of 30% or more of either (A) the then-outstanding
shares of common stock of the Company (the

- 20 -

 

	 	 	 	“Outstanding Company Common
Stock”) or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”);
provided, however, that, for purposes of this Section 15.2, the
following acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Company, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition pursuant to a transaction
that complies with Sections 15.2(3)(A), (B) and (C) or (v) any
acquisition by any of the Principal Stockholders other than in
connection with a going private transaction within the meaning of Rule
13e-3 of the Exchange Act.

	 	(2)	 	Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual was a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
	 
	 	(3)	 	Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or any of
its subsidiaries, a sale or other disposition of all or substantially
all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries
(each, a “Business Combination”), in each case unless, following such
Business Combination, (A) all or substantially all of the individuals
and entities that were the beneficial owners of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-

- 21 -

 

	 	 	 	outstanding shares
of common stock (or, for a non-corporate entity, equivalent
securities) and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of
directors (or, for a non-corporate entity, equivalent governing body),
as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a
result of such transaction, owns the Company or all or substantially
all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then-outstanding shares of common stock
of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of
such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the
members of the board of directors (or, for a non-corporate entity,
equivalent governing body) of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board
providing for such Business Combination; or

	 	(4)	 	Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.

     Notwithstanding the foregoing, if it is determined that an Award hereunder is subject to the
requirements of Section 409A, the Company will not be deemed to have undergone a Change in Control
unless the Company is deemed to have undergone a “change in control event” pursuant to the
definition of such term in Section 409A.

     15.3. Effect of Change in Control

     The Board shall determine the effect of a Change in Control upon Awards, and such effect may
be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Board may
provide in the Award Agreements at the time of grant, or any time thereafter with the consent of
the Grantee, the actions that will be taken upon the occurrence of a Change in Control, including,
but not limited to, accelerated vesting, termination or assumption. The Board may also provide in
the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee,
for different provisions to apply to an Award in place of those described in Sections 15.1 and
15.2.

     15.4. Reorganization Which Does Not Constitute a Change in Control.

     If the Company undergoes any reorganization, merger, or consolidation of the Company with one
or more other entities which does not constitute a Change in Control, any Option or SAR theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Stock subject to such Option or SAR would have been entitled immediately
following such reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price
or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise
Price of the shares remaining subject to the Option or SAR immediately prior to such
reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement,
any restrictions applicable to such Award shall apply as well to any replacement shares received by
the Grantee as a result of the reorganization, merger or consolidation.

     15.5. Adjustments.

     Adjustments under this Section 15 related to shares of Stock or securities of the Company
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. No fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share.

- 22 -

 

16. NO LIMITATIONS ON COMPANY

     The making of Awards pursuant to the Plan shall not affect or limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.

17. TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN

     17.1. Disclaimer of Rights.

     No provision in the Plan or in any Award Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the
applicable Award Agreement, no Award granted under the Plan shall be affected by any change of
duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to
transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any Grantee or beneficiary under the terms of the Plan.

     17.2. Nonexclusivity of the Plan.

     Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals), including, without limitation, the granting of stock options
as the Board in its discretion determines desirable.

     17.3. Withholding Taxes.

     The Company or an Affiliate, as the case may be, shall have the right to deduct from payments
of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by
law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to
an Award, (ii) upon the issuance of any shares of Stock upon the exercise of an Option or SAR, or
(iii) otherwise due in connection with an Award. At the time of such vesting, lapse, or exercise,
the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the
Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding
obligation. Subject to the prior approval of the Company or the Affiliate, which

- 23 -

 

may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion,
the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company
or the Affiliate to withhold the minimum required number of shares of Stock otherwise issuable to
the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the
Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so
delivered or withheld shall have an aggregate Fair Market Value equal to such withholding
obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Company or the Affiliate as of the date that the amount of
tax to be withheld is to be determined. A Grantee who has made an election pursuant to this
Section 17.3 may satisfy his or her withholding obligation only with shares of Stock that are not
subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

     17.4. Captions.

     The use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or any Award Agreement.

     17.5. Other Provisions.

     Each Award Agreement may contain such other terms and conditions not inconsistent with the
Plan as may be determined by the Board, in its sole discretion.

     17.6. Number and Gender.

     With respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.

     17.7. Severability.

     If any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

     17.8. Governing Law.

     The Plan shall be governed by and construed in accordance with the laws of the State of New
York without giving effect to the principles of conflicts of law, provided that the provisions set
forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988,
as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.

- 24 -

 

     17.9. Section 409A.

17.9.1. Short-Term Deferrals.

     For each Award intended to comply with the short-term deferral exception provided for under
Section 409A, the related Award Agreement shall provide that such Award shall be paid out by the
later of (i) the 15th day of the third month following the Grantee’s first taxable year
in which the Award is no longer subject to a substantial risk of forfeiture or (ii) the
15th day of the third month following the end of the Company’s first taxable year in
which the Award is no longer subject to a substantial risk of forfeiture.

17.9.2. Adjustments.

     To the extent that the Board determines that a Grantee would be subject to the additional 20%
tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of
any provision of any Award, to the extent permitted by Section 409A, such provision shall be deemed
amended to the minimum extent necessary to avoid application of such additional tax. The Board
shall determine the nature and scope of such amendment.

     17.10. Stockholder Approval; Effective Date of Plan.

     The Plan shall be effective as of the Effective Date. Any Option that is designated as an
Incentive Stock Option shall be a Nonqualified Stock Option if the Plan is not approved by the
shareholders of the Company within twelve (12) months after the Effective Date of the Plan.
Following the end of the Transition Period, no award that is intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code shall be effective
unless and until the Plan is approved by the stockholders of the Company.

     17.11. Separation from Service.

     The Board shall determine the effect of a Separation from Service upon Awards, and such effect
shall be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Board
may provide in the Award Agreements at the time of grant, or any time thereafter with the consent
of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service,
including, but not limited to, accelerated vesting or termination, depending upon the circumstances
surrounding the Separation from Service.

     17.12. Transferability of Awards.

17.12.1. Transfers in General.

     Except as provided in Section 17.12.2, no Award shall be assignable or transferable by the
Grantee to whom it is granted, other than by will or the laws of descent and distribution, and,
during the lifetime of the Grantee, only the Grantee personally (or the Grantee’s personal
representative) may exercise rights under the Plan.

- 25 -

 

17.12.2. Family Transfers.

     If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this
Section 17.12.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) a transfer to
an entity in which more than fifty percent of the voting interests are owned by Family Members (or
the Grantee) in exchange for an interest in that entity. Following a transfer under this
Section 17.12.2, any such Award shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are
prohibited except to Family Members of the original Grantee in accordance with this Section 17.12.2
or by will or the laws of descent and distribution.

     17.13. Dividends and Dividend Equivalent Rights.

     If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled
to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the
Common Stock or other securities covered by an Award. The terms and conditions of a dividend
equivalent right may be set forth in the Award Agreement. Dividend equivalents credited to a
Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or
other securities of the Company at a price per unit equal to the Fair Market Value of a share of
Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion
of the Committee.

	 	 	 	 	 	 	 	 	 
	 	 	EDUCATION MANAGEMENT CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

- 26 -exv10w26

Exhibit 10.26

FORM OF INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (“Agreement”) is made as of                     , 200    by and
between Education Management Corporation, a Pennsylvania corporation (the “Company”), and
                                         (“Indemnitee”).

RECITALS

     WHEREAS, the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company;

     WHEREAS, in order to induce Indemnitee to continue to provide services to the Company and/or
to one or more of its direct or indirect subsidiaries, the Company wishes to provide for the
indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by
applicable law;

     WHEREAS, the Company’s Amended and Restated Articles of Incorporation (the “Articles”)
and its Amended and Restated Bylaws (the “Bylaws”) require indemnification of the officers
and directors of the Company, and Indemnitee may also be entitled to indemnification pursuant to
the Pennsylvania Business Corporation Law of 1988, as amended (the “PBCL”);

     WHEREAS, the Articles, the Bylaws, and Chapter 17, Subchapter D, of the PBCL expressly provide
that the indemnification provisions set forth therein are not exclusive of any other rights to
which any person may be entitled under any agreement, and thereby contemplate that contracts may be
entered into between the Company and members of the board of directors, officers and other persons
with respect to indemnification;

     WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate
itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified; and

     WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided
in the Articles, the Bylaws, and any other agreements applicable to the Indemnitee, and any
resolutions adopted pursuant to any of the foregoing, and shall not be deemed a substitute
therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

     [WHEREAS, Indemnitee has certain rights to indemnification and/or insurance provided by the
Sponsor Indemnitors (as defined below) which Indemnitee and the Sponsor Indemnitors intend to be
secondary to the primary obligation of the Company to indemnify Indemnitee as provided herein, with
the Company’s acknowledgement and agreement to the foregoing being a material condition to
Indemnitee’s willingness to serve on the Board of Directors (the “Board”).]*

 

			
	*	 	Bracketed provisions to be included in indemnification agreements
between the Company and the Sponsor Indemnitors’ designees.

 

 

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the
Company and Indemnitee do hereby covenant and agree as follows:

     Section 1. Services to the Company. Indemnitee agrees to serve as a director of the
Company. Indemnitee may at any time and for any reason resign from such position (subject to any
other contractual obligation or any obligation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to continue Indemnitee in such position.
This Agreement shall not be deemed an employment contract between the Company (or any of its
subsidiaries or any Enterprise) and Indemnitee. The foregoing notwithstanding, this Agreement
shall continue in force after Indemnitee has ceased to serve as a director of the Company.

     Section 2. Definitions

     As used in this Agreement:

          (a) “Corporate Status” describes the status of a person who is or was a director,
officer, employee or agent of the Company or of any other corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.

          (b) “Enterprise” shall mean the Company and any other corporation, limited liability
company, partnership, joint venture, trust, employee benefit plan or other enterprise of which
Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent
or fiduciary.

          (c) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, any federal, state, local or
foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of
the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or
defend, investigating, being or preparing to be a witness in, or otherwise participating in, a
Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal
resulting from any Proceeding, including without limitation the premium, security for, and other
costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii)
Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of
Indemnitee’s rights under this Agreement, by litigation or otherwise. The parties agree that for
the purposes of any advancement of Expenses for which Indemnitee has made written demand to the
Company in accordance with this Agreement, all Expenses included in such demand that are certified
by affidavit of Indemnitee’s counsel as being reasonable shall be presumed conclusively to be
reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the
amount of judgments or fines against Indemnitee.

-2-

 

          (d) “Proceeding” shall include any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing
or any other actual, threatened or completed proceeding, whether brought in the right of the
Company or otherwise and whether of a civil, criminal, administrative legislative, or investigative
(formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be
involved as a party, potential party, non-party witness or otherwise by reason of the fact that
Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or
of any action on his part while acting as director or officer of the Company, or by reason of the
fact that he is or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or other enterprise, in each case whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification, reimbursement, or
advancement of expenses can be provided under this Agreement. If the Indemnitee believes in good
faith that a given situation may lead to or culminate in the institution of a Proceeding, such
situation shall be considered a Proceeding under this paragraph.

          Section 3. Indemnification. The Company shall indemnify Indemnitee in accordance with
the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a
participant in any Proceeding, whether or not by or in the right of the Company or otherwise.
Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by
applicable law against all Expenses, judgments, losses, penalties, fines and amounts paid in
settlement actually and reasonably incurred or suffered by Indemnitee or on his behalf in
connection with such Proceeding or any claim, issue or matter therein. Indemnitee shall not enter
into any settlement in connection with a Proceeding without ten (10) days prior notice to the
Company. The Company shall not be liable to indemnify the Indemnitee under this Agreement for any
amounts paid in settlement of any Proceeding effected without its written consent, which consent
shall not be unreasonably withheld.

          For purposes of Section 3, the meaning of the phrase “to the fullest extent permitted by
applicable law” shall include, but not be limited to:

               i. to the fullest extent permitted by the provision of the PBCL that authorizes or
contemplates additional or supplementary indemnification by agreement, or the corresponding
provision of any amendment to or replacement of the PBCL or such provision thereof; and

               ii. to the fullest extent authorized or permitted by any amendments to or replacements of the
PBCL adopted after the date of this Agreement that increase the extent to which a corporation may
indemnify its directors.

     Section 4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.
To the extent that Indemnitee is a party to and is successful, on the merits or otherwise, in any
Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in
connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful,
on the merits or otherwise, as to one or more but less than all

-3-

 

claims, issues or matters in such Proceeding, the Company shall, at a minimum, indemnify
Indemnitee against (a) all Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter and (b) any claim, issue or
matter related to any such successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter. The foregoing provisions of this Section 4 are in addition to, and not in
limitation of, any other rights of the Indemnitee under this Agreement, including, without
limitation, under Section 3 and/or Section 8, granting the Indemnitee the right to be indemnified
against, and/or receive an advancement of Expenses in respect of, any Proceeding in which the
Indemnitee is unsuccessful, in whole or in part.

     Section 5. Indemnification For Expenses of a Witness. To the extent that Indemnitee
is, by reason of his Corporate Status, a witness or otherwise asked to participate in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection therewith. Nothing in this
Section 5 is intended to limit Indemnitee’s rights provided for in Section 3.

     Section 6. Partial Indemnification. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of Expenses, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.

     Section 7. Exclusions. Notwithstanding any provision in this Agreement to the
contrary, the Company shall not be obligated under this Agreement to make any indemnity:

          (a) in connection with a proceeding (or any claim, issue or matter therein or any part
thereof) initiated by the Indemnitee, except (i) with respect to actions or proceedings brought to
establish or enforce a right to receive Expenses or indemnification under this Agreement or any
other agreement or insurance policy or under the Articles or the Bylaws now or hereafter in effect
relating to indemnification, (ii) if the Board has approved the initiation or bringing of such
claim, (iii) any compulsory counterclaim, compulsory cross-claim, or required joinder made by
Indemnitee in a proceeding not initiated by Indemnitee; or (iv) as otherwise required under
Pennsylvania law; or

          (b) with respect to any act that is established, by a final, unappealable adjudication adverse
to the Indemnitee, as having been material to the cause of action so adjudicated and as having
constituted either willful misconduct or recklessness; or

          (c) for liability imposed in a proceeding by or for the benefit of the Company to recover any
profit pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and
regulations thereunder or similar provisions of any applicable state law; provided, however, that
the exclusion in this Section 7(c) shall not apply to Expenses incurred by Indemnitee in such a
proceeding; or

-4-

 

          (d) [subject to Section 12(c),]* for which payment has actually been made to or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except with respect to any
excess beyond the amount paid under any insurance policy or other indemnity provision.

     Section 8. Advances of Expenses. Notwithstanding any provision of this Agreement to
the contrary, the Company shall advance, to the extent not prohibited by applicable law, all
Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding, and such
advancement shall be made within twenty (20) days after the receipt by the Company of a statement
or statements requesting such advances (which shall include invoices received by Indemnitee in
connection with such Expenses but, in the case of invoices in connection with legal services, any
references to legal work performed or to expenditures made that would cause Indemnitee to waive any
privilege accorded by applicable law shall not be included with the invoice) from time to time,
whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and
interest free. Advances shall be made without regard to Indemnitee’s ability to repay expenses and
without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions
of this Agreement. Advances shall include any and all Expenses incurred pursuing an action to
enforce this right of advancement, including Expenses incurred preparing and forwarding statements
to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the
execution and delivery to the Company of this Agreement, which shall constitute an undertaking
providing that the Indemnitee undertakes to the fullest extent required by applicable law to repay
the amounts advanced (without interest) if and to the extent that it is ultimately determined by a
court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not
entitled to be indemnified by the Company. No other form of undertaking shall be required other
than the execution of this Agreement. This Section 8 shall not apply to any request for
advancement relating to any claim for which indemnity is excluded pursuant to Section 7. The right
to advances under this paragraph shall in all events continue until final disposition of any
Proceeding.

     Section 9. Procedure for Notification and Defense of Claim.

          (a) To obtain indemnification or advancement of Expenses under this Agreement, Indemnitee
shall submit to the Company a written request therefor, coupled with appropriate documentation to
support the request. The omission by Indemnitee to notify the Company hereunder will not relieve
the Company from any liability which it may have to Indemnitee hereunder, under the Articles, the
Bylaws, any resolution of the Board providing for indemnification or otherwise, and any delay in so
notifying the Company shall not constitute a waiver by Indemnitee of any rights under this
Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that Indemnitee has requested indemnification.

 

			
	*	 	Bracketed provisions to be included in indemnification agreements
between the Company and the Sponsor Indemnitors’ designees.

-5-

 

          (b) The Company will be entitled to participate in any Proceeding at its own expense.

     Section 10. Procedure Upon Application for Indemnification. Upon written request by
Indemnitee for indemnification pursuant to Section 9(a), payment shall be made within thirty (30)
days of the Company’s receipt of such request. Indemnification shall be made by the Company
without any requirement that any determination be made or any action be taken by the Board, the
shareholders, or legal counsel.

     Section 11. Remedies of Indemnitee.

          (a) Subject to Section 11(d), in the event that (i) payment of indemnification pursuant to
Section 3, 4, 5, or 6 of this Agreement is not made within thirty (30) days after receipt by the
Company of a written request therefor, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, or (iii) in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the
benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be
entitled to an adjudication by a court of his entitlement to such indemnification and/or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. Indemnitee shall commence such proceeding seeking an
adjudication or award in arbitration within 180 days following the date on which Indemnitee first
has the right to commence such proceeding pursuant to this Section 11(a); provided, however, that
the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce
his rights under Section 4 of this Agreement. The Company shall not oppose Indemnitee’s right to
seek any such adjudication or award in arbitration. In any judicial proceeding or arbitration
commenced pursuant to this Section 11, the Company shall have the burden of proving Indemnitee is
not entitled to indemnification or advancement of Expenses, as the case may be.

          (b) The Company shall be precluded from asserting in any judicial proceeding or arbitration
commenced pursuant to this Section 11 that the procedures and presumptions of this Agreement are
not valid, binding and enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of
the Company that, to the fullest extent permitted by applicable law, the Indemnitee not be required
to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of
Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to the Indemnitee
hereunder. To the fullest extent permitted by applicable law, the Company shall indemnify
Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within thirty (30)
days after receipt by the Company of a written request therefor) advance such Expenses to
Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee
for indemnification or advance of Expenses from the Company under this Agreement or under any
directors’ and officers’ liability insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of
Expenses or insurance recovery, as the case may be, in the suit for which indemnification or
advances is being sought.

-6-

 

          (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall
not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to
believe that his conduct was unlawful. The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for
purposes of determining the right to indemnification under this Agreement.

          (d) Notwithstanding anything in this Agreement to the contrary, other than Section 8, no
determination as to entitlement of Indemnitee to indemnification under this Agreement shall be
required to be made prior to the final disposition of the Proceeding.

          (e) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted
in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise,
including financial statements, or on information supplied to Indemnitee by the officers of the
Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or
the Board or counsel selected by any committee of the Board or on information or records given or
reports made to the Enterprise by an independent certified public accountant or by an appraiser,
investment banker or other expert selected with reasonable care by the Company or the Board or any
committee of the Board. The provisions of this Section 11(e) shall not be deemed to be exclusive
or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met
the applicable standard of conduct set forth in this Agreement.

     Section 12. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

          (a) The rights of indemnification and to receive advancement of Expenses as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Articles, the Bylaws, any agreement, a vote of shareholders or a
resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of
any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in
respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in Pennsylvania law, whether by
statute or judicial decision, permits greater indemnification or advancement of Expenses than would
be afforded currently under the Articles, the Bylaws and this Agreement, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of any other right or
remedy, and every other right and remedy shall be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.

-7-

 

          (b) To the extent that the Company maintains an insurance policy or policies providing
liability insurance for directors, officers, employees, or agents of the Company or of any other
Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage available for any such director, officer, employee or
agent under such policy or policies. If, at the time of the receipt of a notice of a claim
pursuant to the terms hereof, the Company has director and officer liability insurance in effect,
the Company shall give prompt notice of such claim or of the commencement of a proceeding, as the
case may be, to the insurers in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

          [(c) The Company hereby acknowledges that Indemnitee may have certain rights to
indemnification, advancement of expenses and/or insurance provided by
______ and/or certain of
its affiliates (collectively, the “Sponsor Indemnitors”). The Company hereby agrees (i)
that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any
obligation of the Sponsor Indemnitors to advance expenses or to provide indemnification for the
same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required
to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full
amount of all Expenses, judgments, losses, penalties, fines and amounts paid in settlement to the
extent legally permitted and as required by the terms of this Agreement, the Articles and the
Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights
Indemnitee may have against the Sponsor Indemnitors, and, (iii) that it irrevocably waives,
relinquishes and releases the Sponsor Indemnitors from any and all claims against the Sponsor
Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.
The Company further agrees that no advancement or payment by the Sponsor Indemnitors on behalf of
Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the
Company shall affect the foregoing and the Sponsor Indemnitors shall have a right of contribution
and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery
of Indemnitee against the Company. The Company and Indemnitee agree that the Sponsor Indemnitors
are express third party beneficiaries of the terms of this Section 12(c).]*

          (d) [Except as provided in Section 12(c),]* In the event of any payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee [(other than against the Sponsor Indemnitors)]*, who shall execute all papers required
and take all action necessary to secure such rights, including execution of such documents as are
necessary to enable the Company to bring suit to enforce such rights.

          (e) [Except as provided in Section 12(c),]* The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which
advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or otherwise.

 

			
	*	 	Bracketed language to be included in indemnification agreements
between the Company and the Sponsor Indemnitors’ designees.

-8-

 

          (f) [Except as provided in Section 12(c),]* The Company’s obligation to indemnify or advance
Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director,
officer, employee or agent of any other corporation, limited liability company, partnership, joint
venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee
has actually received as indemnification or advancement of Expenses from such other corporation,
limited liability company, partnership, joint venture, trust, employee benefit plan or other
enterprise.

          (g) The Company may create a fund of any nature, which may, but need not be, irrevocable or
under the control of a trustee, or otherwise secure or insure in any manner, its obligations to
indemnify and advance Expenses to the Indemnitee, whether arising under or pursuant to this
Agreement or any other agreement or otherwise. In such case, the Indemnitee shall be an intended
beneficiary of any such fund or arrangement.

     Section 13. Duration of Agreement. This Agreement shall continue until and terminate
upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as
a director of the Company or (b) one (1) year after the final termination of any Proceeding then
pending on such ten (10) year anniversary in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee
pursuant to Section 11 of this Agreement relating thereto. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a
substantial part, of the business and/or assets of the Company, by written agreement in form and
substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to perform if no such
succession had taken place.

     Section 14. Severability. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including without limitation,
each portion of any Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by
applicable law; (b) such provision or provisions shall be deemed reformed to the extent necessary
to conform to applicable law and to give the maximum effect to the intent of the parties hereto;
and (c) to the fullest extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.

     Section 15. Enforcement.

          (a) The Company expressly confirms and agrees that it has entered into this Agreement and
assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director
of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as a director of the Company.

-9-

 

          (b) This Agreement constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings, oral, written and
implied, between the parties hereto with respect to the subject matter hereof; provided,
however, that this Agreement is a supplement to and in furtherance of the Articles, the
Bylaws, the PBCL, any resolution of the Board providing for indemnification and applicable law, and
shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee
thereunder.

     Section 16. Modification and Waiver. No supplement, modification or amendment, or
waiver of any provision, of this Agreement shall be binding unless executed in writing by the
parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a
continuing waiver.

     Section 17. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in
writing upon being served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company
shall not relieve the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.

     Section 18. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by
hand and receipted for by the party to whom said notice or other communication shall have been
directed, (b) mailed by certified or registered mail with postage prepaid, on the third business
day after the date on which it is so mailed, (c) mailed by reputable overnight courier and
receipted for by the party to whom said notice or other communication shall have been directed or
(d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has
been received:

          (a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or
such other address as Indemnitee shall provide to the Company.

          (b) If to the Company to:

			
	
 

			
	Attn:	 	
 

			
	Facsimile: (     )	 	
 

or to any other address as may have been furnished to Indemnitee by the Company.

     Section 19. Contribution. To the fullest extent permitted by applicable law, if the
indemnification provided for in this Agreement is unavailable to Indemnitee for any reason
whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount
incurred by Indemnitee, whether for judgments, losses, fines, penalties, excise taxes, amounts paid
or to be paid in settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in

-10-

 

light of all of the circumstances of such Proceeding in order to reflect (i) the relative
benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s)
giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors,
officers, employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).

     Section 20. Applicable Law and Consent to Jurisdiction. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in accordance with,
the laws of the Commonwealth of Pennsylvania, without regard to its conflict of laws rules. Except
with respect to any arbitration commenced by Indemnitee pursuant to Section 11(a) of this
Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any
action or proceeding arising out of or in connection with this Agreement shall be brought only in
the state or federal courts located in Allegheny County, Pennsylvania (the “Pennsylvania
Court”), and not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction of the
Pennsylvania Court for purposes of any action or proceeding arising out of or in connection with
this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding
in the Pennsylvania Court, and (iv) waive, and agree not to plead or to make, any claim that any
such action or proceeding brought in the Pennsylvania Court has been brought in an improper or
inconvenient forum.

     Section 21. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original but all of which
together shall constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be produced to evidence the existence of this
Agreement.

     Section 22. Miscellaneous. The headings of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof.

[signature page follows]

-11-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year
first above written.

	 	 	 	 	 
	 	COMPANY:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	 	INDEMNITEE:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 

-12-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}]]