Document:

EX-10.3

 

Exhibit 10.3

As Adopted

by the Board of Directors of

Pzena Investment Management, Inc.

on October 24, 2007

PZENA INVESTMENT MANAGEMENT, LLC

Amended and Restated 2006 Equity Incentive Plan

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	1.
	 	Purpose	 	 	1	 
	2.
	 	Definitions	 	 	1	 
	3.
	 	Term of the Plan	 	 	4	 
	4.
	 	Administration	 	 	4	 
	5.
	 	Authorization of Grants	 	 	5	 
	6.
	 	Specific Terms of Awards	 	 	6	 
	7.
	 	Adjustment Provisions	 	 	11	 
	8.
	 	Settlement of Awards	 	 	12	 
	9.
	 	No Special Employment or Other Rights	 	 	14	 
	10.
	 	Nonexclusivity of the Plan	 	 	14	 
	11.
	 	Termination and Amendment of the Plan and Awards	 	 	14	 
	12.
	 	Notices and Other Communications	 	 	14	 
	13.
	 	Governing Law	 	 	15	 

 

 

PZENA INVESTMENT MANAGEMENT, LLC

2006 Equity Incentive Plan

1. Purpose

     Pzena Investment Management, LLC hereby adopts this Pzena Investment Management, LLC Amended
and Restated 2006 Equity Incentive Plan effective as of October 30, 2007. This Plan is intended to
encourage ownership of Class B Units of the Company by persons providing services to the Company
and/or its subsidiaries, including members of the Company and employees and consultants of the
Company and/or its subsidiaries, and to provide additional incentives for them to promote the
success of the Company’s business.

2. Definitions

     As used in this Plan, the following terms shall have the following meanings:

     2.1. Accelerate, Accelerated, and Acceleration, when used with respect
to an Option or Unit-Based Award, means that as of the time of reference the Option or Unit-Based
Award will vest and, if applicable, will become exercisable with respect to some or all of the
Class B Units or cash equivalent for which such Option or Unit-Based Award was not then otherwise
exercisable by its terms, and, when used with respect to Restricted Units, means that the Risk of
Forfeiture otherwise applicable to the Class B Units shall expire with respect to some or all of
the Class B Units then otherwise subject to the Risk of Forfeiture.

     2.2. Award means any grant or sale pursuant to the Plan of Options, Restricted Units,
Unit Grants or other Unit-Based Awards or LTIP Units.

     2.3. Award Agreement means an agreement between the Company and the recipient of an
Award, setting forth the terms and conditions of the Award.

     2.4.
Cause means “Cause”, as described in the Operating
Agreement, provided that references to an “Employee
Member” shall be replaced by references to a “Participant.”

     2.5. Class A Stock means Class A common stock, par value $0.01 per share, of Pzena
Investment Management, Inc.

     2.6. Class B Unit means a “Class B Unit” in the Company, as defined in the Operating
Agreement.

     2.7. Client means “Client”, as described in the Operating Agreement, provided that
references to an “Employee Member” shall be replaced by references to a “Participant.”

     2.8. Code means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto, and any regulations issued from time to time thereunder. To the
extent that reference is made to any particular section of the Code, such reference shall be, where
the context so admits, to any corresponding provisions of any succeeding law.

 

 

     2.9. Committee means any committee of the board of directors of Pzena Investment
Management, Inc., in its capacity as the Managing Member of the Company, that is delegated
responsibility by such board of directors for the administration of the Plan, as provided in
Section 4 of the Plan; provided, that such committee shall be comprised solely of directors of
Pzena Investment Management, Inc. who are (a) “non-employee directors” under Rule 16b-3 of the
Exchange Act, (b) “outside directors” under Code Section 162(m) and (c) “independent directors”
pursuant to New York Stock Exchange requirements. For any period during which no such committee is
in existence, “Committee” shall mean the Managing Member and all authority and responsibility
assigned to the Committee under the Plan shall be exercised, if at all, by the Managing Member.

     2.10. Company means Pzena Investment Management, LLC, a limited liability company
organized under the laws of the State of Delaware.

     2.11 Confidential Information means “Confidential Information”, as defined in the
Operating Agreement.

     2.12. Exchange Act means the Securities Exchange Act of 1934, as amended from time to
time, and as now or hereafter construed, interpreted and applied by regulations, rulings and cases.

     2.13. Fair Market Value of a Class B Unit on any given date means: (i) if the Class A
Stock is listed for trading on the New York Stock Exchange, the closing sale price per share of
Class A Stock on the New York Stock Exchange on that date (or, if no closing sale price is
reported, the last reported sale price), (ii) if the Class A Stock is not listed for trading on the
New York Stock Exchange, the closing sale price (or, if no closing sale price is reported, the last
reported sale price) as reported on that date in composite transactions for the principal national
securities exchange registered pursuant to Section 6(g) of the Exchange Act on which the Class A
Stock is listed, (iii) if the Class A Stock is not so listed on a national securities exchange, the
last quoted bid price for the Class A Stock on that date in the over-the-counter market as reported
by Pink Sheets LLC or a similar organization, or (iv) if the Class A Stock is not so quoted by Pink
Sheets LLC or a similar organization such value as the Committee, in its sole discretion, shall
determine in good faith.

     2.14. Good Reason means the occurrence of any of the following events without either
(i) the Participant’s prior written consent; or (ii) full cure within 30 days after the Participant
gives written notice to the Company describing the event in reasonable detail and requesting cure:
any material diminution in the Participant’s title, responsibilities or authority with the Company;
or any relocation of the Participant’s place of employment to a location that is more than 50 miles
from both the Company’s principal office and the Participant’s then current principal residence.

     2.15. Grant Date means the date as of which an Option is granted, as determined under
Section 6.1(a).

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     2.16. Investment Advisory Services means any services that involve (i) the management
of an investment account or fund (or portions thereof or a group of investment accounts or funds),
(ii) the giving of advice with respect to the investment and/or reinvestment of assets or funds (or
any group of assets or funds), or (iii) otherwise acting as an “investment adviser” within the
meaning of the Investment Advisers Act of 1940, as amended (whether or not required to be
registered under such act), and performing activities related or incidental thereto, provided that
“Investment Advisory Services” shall exclude any service in respect of which no compensation or
economic benefit is provided directly or indirectly to any person in respect of such service.

     2.17. IPO means the initial public offering of Class A Stock, as contemplated in the
registration statement on Form S-1 of Pzena Investment Management, Inc. (No. 333-143660).

     2.18. LTIP Unit means a certain class or classes of membership interests in the
Company which, upon the occurrence of certain events, may convert into Class B Units.

     2.19. Managing Member has the meaning set forth in the Operating Agreement

     2.20. Obligations means the Participant not engaging in any of the following activies:
(i) directly or indirectly, whether as an officer, director, owner, partner, investor, member,
adviser, representative, consultant, agent, employee, co-venturer or otherwise, providing
Investment Advisory Services, except in the performance of his duties with the Company, or
engaging, or assisting others to engage, in whole or in part, in any business in competition with
the business of the Company, (ii) directly or indirectly (other than in the course of performing
his duties to the Company) (a) soliciting the hiring of or hiring any employee of the Company or
any person who, within the prior six months, had been an employee of the Company, assisting in, or
encouraging such hiring by any person or encouraging any such employee to terminate or alter his
relationship with the Company; (b) in competition with the Company, soliciting, seeking, inducing,
pursuing in any way, or accepting a business relationship of any kind with, any person who is a
Client of the Company, including by way of indirect or sub-advisory arrangements (such obligation
to include the duty of the Participant to decline any such offered business activity even if
unsolicited); (c) otherwise soliciting, encouraging or inducing any Client to terminate or reduce
its business or relationship with the Company; or (d) otherwise take any action or have any
communication with any person the purpose of which is, or the reasonably likely effect of which
could be, to cause any such Client to terminate, alter, reduce, modify or restrict in any way its
relationship or business with the Company; or (iii) except as required by law or on the written
request or with the written consent of the Company, disclosing any Confidential Information,
directly or indirectly, or using Confidential Information in any way.

     2.21. Operating Agreement means the Company’s Amended and Restated Operating
Agreement, dated as of October 30, 2007, as in effect from time to time.

     2.22. Option means an option to purchase Class B Units of the Company.

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     2.23. Optionee means a Participant to whom an Option shall have been granted under the
Plan.

     2.24. Participant means any holder of an outstanding Award under the Plan.

     2.25. Plan means this Pzena Investment Management, LLC 2006 Amended and Restated
Equity Incentive Plan, as amended from time to time, and including any attachments or addenda
hereto.

     2.26. Restricted Units means Class B Units issued or sold to a Participant subject to
a Risk of Forfeiture.

     2.27. Restriction Period means the period of time, established by the Committee in
connection with an Award of Restricted Units, during which such Restricted Units are subject to a
Risk of Forfeiture described in the applicable Award Agreement.

     2.28. Risk of Forfeiture  means a limitation on the right of the Participant to retain
Restricted Units, including a right in the Company to reacquire the Restricted Units at less than
their then Fair Market Value, arising because of the occurrence or non-occurrence of specified
events or conditions.

     2.29. Securities Act means the Securities Act of 1933, as amended from time to time.

     2.30. Unit Grant means a grant of Class B Units not subject to restrictions or other
forfeiture conditions.

     2.31. Unit-Based Award means an Award granted pursuant to Section 6.4 of the Plan.

3. Term of the Plan

     Unless the Plan shall have been earlier terminated by the Company, Awards may be granted under
this Plan at any time in the period commencing on the date of approval of the Plan by the Company
and ending immediately prior to the tenth anniversary of such date. Awards granted pursuant to the
Plan within that period shall not expire solely by reason of the termination of the Plan.

4. Administration

     The Plan shall be administered by the Committee; provided, however, that at any time and on
any one or more occasions the Managing Member may itself exercise any of the powers and
responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of
all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities
hereunder; and provided further, however, that the Committee may delegate to one or more “executive
officers” (as defined under applicable rules promulgated under the Exchange Act) the authority to
grant Awards hereunder to employees who are not executive officers, and to consultants, in
accordance with such

4

 

guidelines as the Committee shall set forth at any time or from time to time. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or
to select the manner of making all determinations with respect to each Award to be granted by the
Company under the Plan including the member, employee or consultant to receive the Award and the
form of Award. In making such determinations, the Committee may take into account the nature of
the services rendered by such members, employees and consultants, their present and potential
contributions to the success of the Company, and such other factors as the Committee in its
discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall also
have complete authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the respective Award
Agreements (which need not be identical), and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee’s determinations made in good faith on
matters referred to in the Plan shall be final, binding and conclusive on all persons having or
claiming any interest under the Plan or an Award made pursuant hereto.

5. Authorization of Grants

     5.1. Eligibility. The Committee may grant from time to time and at any time prior to
the termination of the Plan one or more Awards, either alone or in combination with any other
Awards, to any service provider to the Company or any of its subsidiaries, including members of the
Company and employees and consultants of the Company and/or its subsidiaries.

     5.2. General Terms of Awards. Each grant of an Award shall be subject to all
applicable terms and conditions of the Plan (including but not limited to any specific terms and
conditions applicable to that type of Award set out in Section 6), and such other terms and
conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe.
Restricted Units and Units Grants under the Plan shall at all times be subject to the terms of the
Operating Agreement.

     5.3. Non-Transferability of Awards. Awards shall not be transferable, and no Awards
or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution, and all of a
Participant’s rights in any Award may be exercised during the life of the Participant only by the
Participant or the Participant’s legal representative. Notwithstanding the foregoing, Unit Grants
and, following lapse of the Restriction Period, Restricted Units may be transferred in accordance
with the provisions of the Operating Agreement.

     5.4. Conditions to Receipt of Awards.

          (a) No prospective Participant shall have any rights with respect to an Award unless and until
such Participant has executed an agreement evidencing the Award, delivered a fully executed copy
thereof to the Company, and otherwise complied with the applicable terms and conditions of such
Award.

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          (b) Notwithstanding anything herein to the contrary, no Award of Options, Restricted Units,
Unit Grants, other Unit- Based Awards, LTIP Units and no issuance of Class B Units upon exercise of
an Option or the settlement of any Unit-Based Award, may be made to a person who has committed any
act which could serve as a basis for (i) denial, suspension or revocation of the registration of
any investment adviser, including the Company, under Section 203(e) of the Investment Advisers Act
of 1940, as amended, or Rule 206(4)-4(b) thereunder, or for disqualification of any investment
adviser, including the Company, as an investment adviser to a registered investment company
pursuant to Sections 9(a) or 9(b) of the Investment Company Act of 1940, as amended, (ii)
precluding the Company from acting as a fiduciary by operation of Section 411 of the Employee
Retirement Income Security Act of 1974, as amended, or (iii) the Company failing to qualify as a
“qualified professional asset manager” within the meaning of Department of Labor Prohibited
Transaction Exemption 84-14.

          (c) Each Award of Restricted Units, Unit Grants, other Unit-based Awards or LTIP Units and
each issuance of Class B Units to the recipient of an Award of Options upon exercise of the Options
or upon settlement of a Unit-Based Award, shall be conditioned upon the recipient’s execution of
the Operating Agreement or an agreement of accession thereto.

     5.5. Units Subject to Plan. The maximum number of Class B Units reserved for the
grant or settlement of Awards under the Plan shall be 10,113,996 Class B Units, subject to
adjustment as provided herein. If any Class B Units subject to an Award are forfeited, canceled,
exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of
Class B Units to the Participant, the Class B Units with respect to such Award shall, to the extent
of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be
available for Awards under the Plan. Notwithstanding the foregoing, Class B Units that are
exchanged by a Participant or withheld by the Company as full or partial payment in connection with
any Award under the Plan, as well as any Class B Units exchanged by a Participant or withheld by
the Company to satisfy the tax withholding obligations related to any Award under the Plan, shall
not be available for subsequent Awards under the Plan.

6. Specific Terms of Awards

     6.1. Options.

          (a) Date of Grant. The granting of an Option shall take place at the time specified
in the Award Agreement.

          (b) Exercise Price. The price at which a Class B Unit may be acquired under each
Option shall be no less than 100% of the Fair Market Value of such Class B Unit on the Grant Date.

          (c) Option Period. The exercise period with respect to each Option shall be
determined in the sole discretion of the Committee and specified in each Award

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Agreement; provided, however, that no Option may be exercised on or after the tenth
anniversary of the Grant Date.

          (d) Exercisability. An Option may be immediately exercisable or become exercisable in such
installments, cumulative or non-cumulative, as the Committee may determine and as set forth in each
Award Agreement. In the case of an Option not otherwise immediately exercisable in full, the
Committee may Accelerate such Option in whole or in part at any time.

          (e) Termination of Association with the Company — Generally. Unless the Committee
shall provide otherwise for any Award with respect to any Option and except as provided in Section
6.1(f), if the Optionee’s employment or other association with the Company ends for any reason, any
outstanding Option of the Optionee shall cease to be exercisable in any respect and shall terminate
not later than 90 days following that event and, for the period it remains exercisable following
that event, shall be exercisable only to the extent exercisable at the date of that event (and to
the extent not then exercisable, shall terminate as of the date of such event), after giving effect
to the last sentence of this Section 6(e). Military or sick leave or other bona fide leave shall
not be deemed a termination of employment or other association, provided that it does not exceed
the longer of ninety (90) days or the period during which the absent Optionee’s reemployment
rights, if any, are guaranteed by statute or by contract. Notwithstanding anything contained
herein to the contrary, unless the Committee shall otherwise provide, an Optionee shall immediately
become fully vested in all Options if (i) such Optionee dies while employed by or providing
services to the Company, (ii) such Optionee’s employment with or provision of services to the
Company is terminated by the Company without Cause or (iii) such Optionee voluntarily terminates
the provision of services to or employment with the Company with Good Reason; provided, that any
termination of an Optionee’s employment (x) by reason of the Company’s waiver of any termination
notice period given by an Optionee or (y) by the Company after such Optionee has given notice of
voluntary termination will, in either case, be deemed a voluntary termination as of the date of the
Optionee’s actual termination of employment.

          (f) Termination of Association with the Company Following Ten Years of Continuous
Service. Notwithstanding anything contained herein to the contrary and unless the Committee
shall provide otherwise for any Award with respect to any Option, in the event the Optionee
voluntarily terminates employment or other association with the Company and has, as of the time of
such termination, been employed by or providing services to the Company for a continuous period of
no less than ten years, then (i) such Optionee will, subject to the Optionee’s continued compliance
with the Obligations, continue to vest in any outstanding Options held by the Optionee in
accordance with the vesting schedule set forth in the Award Agreement and (ii) any outstanding
Option of the Optionee will remain outstanding until the earlier to occur of (x) the expiration
date of such Option and (y) the date the Optionee violates any of the Obligations.

          (g) Method of Exercise. An Option may be exercised by the Optionee giving written
notice, in the manner provided in Section 12, specifying the number of

7

 

Class B Units with respect to which the Option is then being exercised. Where the exercise of
an Option is to be accompanied by payment, the Committee may determine the required or permitted
forms of payment, subject to the following: (a) all payments will be by cash or check acceptable to
the Committee, or (b) if so permitted by the Committee, (i) through the delivery of Class B Units
that have a Fair Market Value equal to the exercise price, except where payment by delivery of
Class B Units would adversely affect the Company’s results of operations under U.S. generally
accepted accounting principles or where payment by delivery of Class B Units outstanding for less
than six months would require application of securities laws relating to profit realized on such
Class B Units, (ii) by other means acceptable to the Committee, or (iii) by means of withholding of
Class B Units, with an aggregate Fair Market Value equal to (A) the aggregate exercise price and
(B) unless the Company is precluded or restricted from doing so under debt covenants, minimum
statutory withholding taxes with respect to such exercise, or (iv) by any combination of the
foregoing permissible forms of payment. The delivery of Class B Units in payment of the exercise
price under clause (g)(i) above may be accomplished either by actual delivery or by constructive
delivery through attestation of ownership, subject to such rules as the Committee may prescribe.

          (h) No Certificates. Class B Units are not represented by certificates. The
“issuance” of Class B Units pursuant to the exercise of an Option granted under the Plan shall not
require the creation or delivery of a certificate or other evidence of ownership, other than that
provided by the applicable Award Agreement, but instead only the Company’s recognition of the
Optionee on its books and records as the beneficial holder of such Class B Units.

          (i) Rights Pending Exercise. No person holding an Option shall be deemed for any
purpose to be a member of the Company with respect to any of the Class B Units issuable pursuant to
his or her Option, except to the extent that the Option shall have been exercised with respect
thereto.

     6.2.
Restricted Units.

          (a) Purchase Price. Class B Units or Restricted Units shall be issued under the Plan
for such consideration, in cash, other property or services, or any combination thereof, as is
determined by the Committee.

          (b) No Certificates. Class B Units are not represented by certificates. The
“issuance” of Class B Units or Restricted Units under the Plan shall not require the creation or
delivery of a certificate or other evidence of ownership, other than that provided by the
applicable Award Agreement, but instead only the Company’s recognition of the Participant on its
books and records as the beneficial holder of such Class B Units or Restricted Units.

          (c) Restrictions and Restriction Period. During the Restriction Period applicable to
Restricted Units, such Restricted Units shall be subject to limitations on transferability and a
Risk of Forfeiture arising on the basis of such conditions related to the performance of services,
Company performance or otherwise as the Committee may

8

 

determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may
be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such
basis as it deems appropriate.

          (d) Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except as
otherwise provided in the Plan or the applicable Award Agreement, at all times prior to lapse of
any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted Units, the
Participant shall have all of the rights of a holder of Class B Units of the Company, including the
right to receive any distributions with respect to, the Restricted Units.

          (e) Termination of Association with the Company — Generally. Unless the Committee
shall provide otherwise for any Award of Restricted Units and except as provided in Section 6.2(f),
upon termination of a Participant’s employment or other association with the Company and its
subsidiaries for any reason during the Restriction Period, all Restricted Units still subject to
Risk of Forfeiture shall be forfeited or otherwise subject to return to or repurchase by the
Company on the terms specified in the Award Agreement; provided, however, that military or sick
leave or other bona fide leave shall not be deemed a termination of employment or other association
if it does not exceed the longer of ninety (90) days or the period during which the absent
Participant’s reemployment rights, if any, are guaranteed by statute or by contract.
Notwithstanding anything contained herein to the contrary, unless the Committee provides otherwise,
the Restriction Period applicable to Restricted Units shall immediately lapse if (i) such
Participant dies while employed by or providing services to the Company, (ii) such Participant’s
employment with or provision of services to the Company is terminated by the Company without Cause
or (iii) such Participant voluntarily terminates the provision of services to or employment with
the Company with Good Reason; provided, that any termination of a Participant’s employment (x) by
reason of the Company’s waiver of any termination notice period given by a Participant or (y) by
the Company after such Participant has given notice of voluntary termination will, in either case,
be deemed a voluntary termination as of the date of the Participant’s actual termination of
employment.

          (f) Termination of Association with the Company Following Ten Years of Continuous
Service. Notwithstanding anything contained herein to the contrary and unless the Committee
shall provide otherwise for any Award of Restricted Units with respect to any Option, in the event
a Participant voluntarily terminates employment or other association with the Company and has, as
of the time of such termination, been employed by or providing services to the Company for a
continuous period of no less than ten years, then (i) such Participant will, subject to the
Participant’s continued compliance with the Obligations, continue to vest in any outstanding
Restricted Units subject to a Risk of Forfeiture in accordance with the vesting schedule set forth
in the Award Agreement and (ii) any outstanding Restricted Units held by the Participant will
remain outstanding until the earlier to occur of (x) the expiration date of such Restricted Units
and (y) the date the Participant violates any of the Obligations.

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     6.3. Unit Grants. Class B Unit Grants shall be awarded solely in recognition of
significant contributions to the success of the Company, in lieu of compensation otherwise already
due and in such other limited circumstances as the Committee deems appropriate. Unit Grants shall
be made without forfeiture conditions of any kind.

     6.4. Unit-Based Awards. The Committee, in its sole discretion, may grant Awards of
phantom Class B Units and other Awards that are valued in whole or in part by reference to, or are
otherwise based on the Fair Market Value of a Class B Unit. Such Unit-Based Awards shall be in
such form, and dependent on such conditions, as the Committee shall determine, including, without
limitation, the right to receive one or more Class B Units (or the equivalent cash value of such
Class B Units) upon the completion of a specified period of service, the occurrence of an event
and/or the attainment of performance objectives. Unit-Based Awards may be granted alone or in
addition to any other Awards granted under the Plan. Subject to the provisions of the Plan, the
Committee shall determine: (a) the number of Class B Units to be awarded under (or otherwise
related to) such Unit-Based Awards; (b) whether such Unit-Based Awards shall be settled in cash,
Class B Units or a combination of cash and Class B Units; and (c) all other terms and conditions of
such Unit-Based Awards (including, without limitation, the vesting provisions thereof).

     6.5. LTIP Units. LTIP Units may be granted as free-standing awards or in tandem with
other Awards under the Plan, and may be valued by reference to the Class B Units, and will be
subject to such other conditions and restrictions as the Committee, in its sole and absolute
discretion, may determine, including, but not limited to, continued employment or service,
computation of financial metrics and/or achievement of pre-established performance goals and
objectives. LTIP Units, whether vested or unvested, may entitle the participant to receive,
currently or on a deferred or contingent basis, distributions or distribution equivalent payments
with respect to the number of Class B Units corresponding to the LTIP Unit or other distributions
from the Company and the Committee may provide in the applicable Award Agreement that such amounts
(if any) shall be deemed to have been reinvested in additional Class B Units or LTIP Units. The
LTIP Units granted under the Plan will be subject to such terms and conditions as may be determined
by the Administrator in its sole and absolute discretion, including, but not limited to the
conversion ratio, if any, pursuant to which LTIP Units may be exchanged for Class B Units in
accordance with the terms of the Operating Agreement. LTIP Units may be structured as “profits
interests,” “capital interests” or other types of interests for federal income tax purposes.

     6.6. Awards to Participants Outside the United States. The Committee may modify the
terms of any Award under the Plan granted to a Participant who is, at the time of grant or during
the term of the Award, resident or primarily employed outside of the United States in any manner
deemed by the Committee to be necessary or appropriate in order that the Award shall conform to
laws, regulations, and customs of the country in which the Participant is then resident or
primarily employed, or so that the value and other benefits of the Award to the Participant, as
affected by foreign tax laws and other restrictions applicable as a result of the Participant’s
residence or employment abroad, shall be comparable to the value of such an Award to a Participant
who is resident or

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primarily employed in the United States. The Committee may establish supplements to, or
amendments, restatements, or alternative versions of the Plan for the purpose of granting and
administrating any such modified Award.

7. Adjustment Provisions

     7.1. Adjustment for Company Actions. Subject to Section 7.2, if subsequent to the
adoption of the Plan by the Company the outstanding Class B Units are increased, decreased, or
exchanged for a different number or kind of units or other securities, or if additional units or
new or different units or other securities are distributed with respect to Class B Units, through
merger, consolidation, sale of all or substantially all the property of the Company,
reorganization, recapitalization, reclassification, dividend, unit split, reverse unit split, or
other similar distribution with respect to such Class B Units, the Committee shall make an
adjustment, to the extent appropriate and proportionate, in (i) the numbers and kinds of Class B
Units or other securities subject to the then outstanding Awards, and (ii) the exercise price for
each Class B Unit or other securities subject to then outstanding Options (without change in the
aggregate purchase price as to which such Options remain exercisable).

     7.2. Reorganizations. Upon a sale, merger, reorganization, separation or liquidation of the
Company or a sale of all or substantially all of the Company’s assets, except to the extent
modified by an applicable Award Agreement, the Committee shall have the discretion, exercisable
either in advance of such a transaction or at the time thereof, to provide for one or more of the
following: (i) the continuation of outstanding Awards after the transaction without change (ii) the
cash-out of outstanding Options as of the time of the transaction as part of the transaction for an
amount equal to the difference between the price that would have been paid for the Class B Units
subject to such outstanding Options if such Options were exercised upon the closing of such
transaction and the exercise price of such outstanding Options; provided that if the exercise price
of the Options exceeds the price that would have been paid for the Class B Units subject to the
outstanding Options if such Options were exercised upon the closing of the transaction, then such
Options may be cancelled without making a payment to the Optionees, (iii) the expiration of the
exercise period for outstanding Options upon the closing of the transaction, (iv) the cancellation
of outstanding Restricted Units and/or Unit-Based Awards and payment to the Participants holding
such Restricted Units and/or Unit-Based Awards equal to the value of the underlying Class B Units
as of the closing date of the transaction, in such form and at such time as the Committee shall
determine, (v) a requirement that the buyer in the transaction assume outstanding Options and/or
Restricted Units and/or Unit-Based Awards, (vi) a requirement that the buyer in the transaction
substitute outstanding Options with comparable options to purchase the equity interests of the
buyer or its parent and/or substitute outstanding Restricted Units and/or Unit-Based Awards with
comparable restricted stock or units of the buyer or its parent, and (vii) the Acceleration of
outstanding Options, Restricted Units and Unit-Based Awards. Each outstanding Option, Restricted
Unit and Unit-Based Award that is assumed in connection with such a transaction, or is otherwise to
continue in effect subsequent to the transaction, will be appropriately adjusted, immediately after
the

11

 

transaction, as to the number and class of securities and, with respect to an Option, the
price at which it may be exercised, in accordance with Section 7.1.

     7.3. Dissolution or Liquidation. Upon dissolution or liquidation of the Company,
other than as part of a transaction referred to in Section 7.2, each outstanding Option shall
terminate, but the Optionee (if at the time in the employ of or otherwise associated with the
Company) shall have the right, immediately prior to the dissolution or liquidation, to exercise the
Option to the extent exercisable on the date of dissolution or liquidation.

     7.4. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. In the event of any Company action not specifically covered by the preceding Sections,
including but not limited to an extraordinary cash distribution on Units, a Company separation,
spin-off, split off or other reorganization or liquidation, the Committee shall make such
adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem
equitable and appropriate in the circumstances.

     7.5. Related Matters. Any adjustment in Awards made pursuant to this Section 7 shall
be determined and made, if at all, by the Committee and shall include any correlative modification
of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of
Forfeiture and applicable repurchase prices for Restricted Units and Unit-Based Awards, which the
Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their
respective Awards are not substantially diminished nor enlarged as a result of the adjustment and
Company action other than as expressly contemplated in this Section 7. No fraction of a Class B
Unit shall be issued or purchasable or deliverable upon exercise, but in the event any adjustment
hereunder of the number of Class B Units covered by an Award shall cause such number to include a
fraction of a Class B Unit, such number of Class B Units shall be adjusted to the nearest smaller
whole number of Class B Units.

8. Settlement of Awards

     8.1. Violation of Law. Notwithstanding any other provision of the Plan or the
relevant Award Agreement, if, at any time, in the reasonable opinion of the Company, the issuance
of Class B Units or LTIP Units covered by an Award may constitute a violation of law, then the
Company may delay such issuance and the delivery of such Class B Units or LTIP Units, as
applicable, until approval shall have been obtained from such governmental agencies as may be
required under any applicable law, rule, or regulation, and the Company shall take all reasonable
efforts to obtain such approval.

     8.2. Restrictions on Rights in Units. Any Class B Unit or LTIP Unit to be issued
pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer
thereof which may be now or hereafter imposed by the Certificate of Formation of the Company, as
amended from time to time, and the Operating Agreement, as amended from time to time.

12

 

     8.3. Investment Representations. The Company shall be under no obligation to issue
any Class B Units or LTIP Units covered by any Award unless the intended recipient has made such
written representations to the Company (upon which the Company believes it may reasonably rely) as
the Company may deem necessary or appropriate for purposes of confirming that the issuance of such
Class B Units or LTIP Units, as applicable, will be exempt from the registration requirements of
the Securities Act and any applicable state securities laws and otherwise in compliance with all
applicable laws, rules and regulations, including but not limited to that the Participant is
acquiring the Class B Units or LTIP Units, as applicable, for his or her own account for the
purpose of investment and not with a view to, or for sale in connection with, the distribution of
any such Class B Units or LTIP Units.

     8.4. Registration. If the Company shall deem it necessary or desirable to register under the
Securities Act or other applicable statutes any Class B Units or LTIP Units issued or to be issued
pursuant to Awards granted under the Plan, or to qualify any such Class B Units or LTIP Units, as
applicable for exemption from the Securities Act or other applicable statutes, then the Company
shall take such action at its own expense. The Company may require from each recipient of an Award
such information in writing for use in any registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for that purpose and may require
reasonable indemnity to the Company and its Managing Member, officers and directors from that
holder against all losses, claims, damage and liabilities arising from use of the information so
furnished and caused by any untrue statement of any material fact therein or caused by the omission
to state a material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made. In addition, the
Company may require of any such person that he or she agree that, without the prior written consent
of the Company or the managing underwriter in any public offering of Class B Units or LTIP Units,
as applicable, he or she will not sell, make any short sale of, loan, grant any option for the
purchase of, pledge or otherwise encumber, or otherwise dispose of, any Class B Units or LTIP
Units, as applicable, during the 180 day period commencing on the effective date of the
registration statement relating to the underwritten public offering of securities.

     8.5. Tax Withholding. Whenever Class B Units or LTIP Units are issued or to be issued
pursuant to Awards granted under the Plan, the Company shall have the right to require the
recipient to remit to the Company in cash an amount sufficient to satisfy federal, state, local or
other withholding tax requirements if, when, and to the extent required by law (whether so required
to secure for the Company an otherwise available tax deduction or otherwise) coincident with the
recipient’s exercise of such Option or receipt of Class B Units or LTIP Units, as applicable. The
obligations of the Company under the Plan shall be conditional on satisfaction of all such
withholding obligations and the Company shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the recipient of an Award.

13

 

9. No Special Employment or Other Rights

     Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an
Award any right with respect to the continuation of his or her employment or other association with
the Company or any of its subsidiaries, or interfere in any way with the right of the Company or
any of its subsidiaries, subject to the terms of any separate employment or consulting agreement,
any provision of law, the Company’s Certificate of Formation or the Operating Agreement to the
contrary, at any time to terminate such employment or consulting agreement or to increase or
decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or
other association with the Company or any of its subsidiaries.

10. Nonexclusivity of the Plan

     The adoption of the Plan by the Company shall not be construed as creating any limitations on
the power of the Company to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of options and restricted units other than under the
Plan, and such arrangements may be either applicable generally or only in specific cases.

11. Termination and Amendment of the Plan and Awards

     The Company may at any time terminate the Plan or make such modifications of the Plan as it
shall deem advisable. Unless the Company otherwise expressly provides, or may deem necessary or
appropriate to comply with applicable law, including without limitation the provisions of Section
409A of the Code, no termination or amendment of the Plan may adversely affect the rights of the
recipient of an Award previously granted hereunder without the consent of the recipient of such
Award.

     The Committee may amend the terms of any Award theretofore granted, prospectively or
retroactively, provided that the Award as amended is consistent with the terms of the Plan, and
further provided that, other than as the Committee may deem necessary or appropriate to comply with
applicable law, including without limitation the provisions of Section 409A of the Code, no
amendment or modification of an outstanding Award may adversely affect the rights of the recipient
of such Award without his or her consent.

12. Notices and Other Communications

     Any notice, demand, request or other communication hereunder to any party shall be deemed to
be sufficient if contained in a written instrument delivered in person or duly sent by first class
registered, certified or overnight mail, postage prepaid, or by facsimile with a confirmation copy
by regular, certified or overnight mail, addressed or sent by facsimile, as the case may be, (i) if
to the recipient of an Award, at his or her residence address last filed with the Company and (ii)
if to the Company, at its principal place of business, addressed to the attention of the Managing
Member, or to such other address or facsimile number, as the case may be, as the addressee may have
designated by notice to

14

 

the addressor. All such notices, requests, demands and other communications shall be deemed
to have been received: (i) in the case of personal delivery, on the date of such delivery, (ii) in
the case of mailing, when received by the addressee, and (iii) in the case of facsimile
transmission, when confirmed by facsimile machine report.

13. Governing Law

     The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted
and enforced in accordance with the laws of the State of New York without regard to the conflict of
laws principles thereof.

15EX-10.4

 

Exhibit 10.4

As Adopted

by the Board of Directors of

Pzena Investment Management, Inc.

on October 24, 2007

PZENA INVESTMENT MANAGEMENT, LLC

AMENDED AND RESTATED BONUS PLAN

Effective as of October 30, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	1.   Purpose
	 	 	1	 
	2.   Nature of Plan
	 	 	1	 
	3.   Definitions
	 	 	1	 
	4.   Bonus Awards
	 	 	4	 
	5.   Mandatory Deferral of Restricted Amounts
	 	 	5	 
	6.   Accounts
	 	 	8	 
	7.   Administration
	 	 	9	 
	8.   Amendment and Termination
	 	 	10	 
	9.   Unfunded Status of Accounts
	 	 	10	 
	10. Effective Date
	 	 	10	 
	11. Miscellaneous
	 	 	10	 

i

 

PZENA INVESTMENT MANAGEMENT, LLC

AMENDED AND RESTATED BONUS PLAN

Effective as of October 30, 2007

1. Purpose

     Pzena Investment Management, LLC adopted the Pzena Investment Management, LLC Bonus Plan
effective as of January 1, 2007, for bonus amounts earned in Fiscal Years beginning on or after
January 1, 2007. Pzena Investment Management, LLC hereby adopts this Pzena Investment
Management< LLC Amended and Restated Bonus Plan effective as of October 30, 2007. The purpose
of the Plan is to enable the Company to attract, retain, motivate and reward highly qualified
individuals to provide services to the Company by (1) providing for grants of bonus compensation to
eligible employees and members of the Company; (2) providing that a portion of the bonus awards
made to certain highly compensated individuals shall be deferred on a mandatory basis under the
Plan and shall vest and become payable over a four-year period; and (3) permitting members of Pzena
Investment Management, LLC to elect to receive a portion of their bonus compensation that is
mandatorily deferred in the form of Restricted Share Units of the Company.

2. Nature of Plan

     The Plan is intended to be an unfunded bonus program of the Company in accordance with
Department of Labor Regulations Section 2510.3-2(c). Any deferral of bonus compensation under this
Plan is intended to be for a limited period of time only and for the purposes of encouraging a
Participant’s continued Service with the Company, and the Plan is not intended to provide
retirement income to Participants or to defer income by Participants to termination of covered
employment and beyond. The Plan is intended to satisfy the requirements of Section 409A of the
Code. The Plan shall be interpreted, operated and administered in a manner consistent with these
intentions.

3. Definitions

     3.1. Account shall mean a bookkeeping account established and maintained by the
Company for a Participant in accordance with Section 6 to which is credited all or a portion of the
Participant’s Bonus Award for a Fiscal Year and to which are credited income, gains and losses in
accordance with Section 6.3.

     3.2. Allocation Date shall have the meaning set forth in Section 4.2.

     3.3. Bonus Award shall mean an award of bonus or incentive compensation made by the
Company to an Eligible Individual with respect to a Fiscal Year in accordance with Section 4.

     3.4. Cause shall have the meaning set forth in the Operating Agreement, provided that
references to an “Employee Member” shall be replaced by references to a “Participant.”

 

 

     3.5. Client shall have the meaning set forth in the Operating Agreement, provided that
references to an “Employee Member” shall be replaced by references to a “Participant.”

     3.6. Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

     3.7. Committee means any committee of the board of directors of Pzena Investment
Management, Inc., in its capacity as the Managing Member of the Company, that is delegated
responsibility by such board of directors for the administration of the Plan, as provided in
Section 7 of the Plan; provided, that such committee shall be comprised solely of directors of
Pzena Investment Management, Inc. who are (a) “non-employee directors” under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases, (b) “outside directors” under Code
Section 162(m) and (c) “independent directors” pursuant to New York Stock Exchange requirements.
For any period during which no such committee is in existence, “Committee” shall mean the Managing
Member and all authority and responsibility assigned to the Committee under the Plan shall be
exercised, if at all, by the Managing Member.

     3.8. Company shall mean Pzena Investment Management, LLC, a Delaware limited liability
company, and its subsidiaries.

     3.9. Compensation shall mean the total remuneration paid by the Company to an Eligible
Individual for services provided to the Company in respect of a Fiscal Year, including, without
limitation, base salary, guaranteed minimum base payments, Bonus Awards, commissions, sick pay and
short-term disability pay (to the extent paid from payroll), and amounts contributed by or on
behalf of the Eligible Individual to any retirement plan or simplified employee plan of the
Company. Notwithstanding the foregoing, an Eligible Individual’s Compensation shall exclude
short-term disability pay not paid from payroll, long-term disability pay, severance pay, welfare
and fringe benefits (whether or not includible in the Eligible Individual’s gross income), expense
allowances and reimbursements (whether or not includible in the Eligible Individual’s gross
income), awards or income under the Equity Incentive Plan (other than Restricted Share Units issued
under the Equity Incentive Plan pursuant to the terms of this Plan), and, with respect to an
Eligible Individual who is a member of the Company, the Eligible Individual’s distributive share,
as a member, of the net income of the Company after payment of all compensation and other expenses
of the Company. Notwithstanding the foregoing, an Eligible Individual’s Compensation shall not
include any amount paid or payable from an Account to such Eligible Individual during a Fiscal
Year.

     3.10. Confidential Information shall have the meaning set forth in the Operating
Agreement.

     3.11. Distribution Equivalent shall mean a right, granted pursuant to the Equity
Incentive Plan, to be paid an amount determined with respect to the distributions declared and paid
with respect to outstanding Restricted Share Units.

     3.12. Eligible Individual shall have the meaning set forth in Section 4.1.

2

 

     3.13. Equity Incentive Plan shall mean the Pzena Investment Management, LLC 2006
Equity Incentive Plan, as it may be amended and in effect from time to time.

     3.14. FICA Amount shall have the meaning set forth in Section 11.3(b).

     3.15. Fiscal Year shall mean the fiscal year of Pzena Investment Management, LLC,
which is the calendar year.

     3.16. Good Reason shall mean the occurrence of any of the following events without
either (i) the Participant’s prior written consent; or (ii) full cure within 30 days after the
Participant gives written notice to the Company describing the event in reasonable detail and
requesting cure:

          (a) any material diminution in the Participant’s title, responsibilities or authority with
the Company; or

          (b) any relocation of the Participant’s place of employment to a location that is more
than 50 miles from both the Company’s principal office and the Participant’s then current
principal residence.

     3.17. Investment Options shall have the meaning set forth in Section 6.2.

     3.18. Investment Advisory Services shall mean any services that involve (1) the
management of an investment account or fund (or portions thereof or a group of investment accounts
or funds), (2) the giving of advice with respect to the investment and/or reinvestment of assets or
funds (or any group of assets or funds), or (3) otherwise acting as an “investment adviser” within
the meaning of the Investment Advisers Act of 1940, as amended (whether or not required to be
registered under such act), and performing activities related or incidental thereto, provided that
“Investment Advisory Services” shall exclude any service in respect of which no compensation or
economic benefit is provided directly or indirectly to any Person in respect of such service.

     3.19. Managing Member shall have the meaning set forth in the Operating Agreement.

     3.20. Market Value shall have the same meaning as Fair Market Value set forth in the
Equity Incentive Plan.

     3.21. Operating Agreement shall mean the Company’s Amended and Restated Operating
Agreement, Further Amended and Restated as of October 30, 2007, as in effect from time to time.

     3.22. Participant shall mean a current or former employee or member of the Company for
whom an Account is maintained pursuant to this Plan or who holds any Restricted Share Units
pursuant to the Plan.

     3.23. Person shall mean any individual, partnership (whether general or limited),
joint venture, corporation, limited liability company, trust, incorporated organization, or
governmental or regulatory authority or other entity.

3

 

     3.24. Plan shall mean this Pzena Investment Management, LLC Amended and Restated Bonus
Plan, as it may be amended and in effect from time to time.

     3.25. Restricted Amount shall have the meaning set forth in Section 5.2.

     3.26. Restricted Share Units shall mean a right granted to a Participant under Section
6.4 of the Equity Incentive Plan to receive Units or cash at the end of a specified period.

     3.27. Restriction Period shall have the meaning set forth in the Equity Incentive
Plan.

     3.28. Separation from Service shall mean a Participant’s “separation from service,” as
defined in Section 409A of the Code and applicable guidance thereunder, from the Company.

     3.29. Service means employment with the Company, or the provision of services to the
Company as a member.

     3.30. Unit shall mean a “Class B Unit” in Pzena Investment Management, LLC, as defined
in the Operating Agreement.

     3.31. Valuation Date shall have the meaning set forth in Section 6.3.

     3.32. Vesting Date shall mean each date upon which a portion of a Participant’s
Account vests and/or upon which the Restriction Period ends with respect to all or a portion of a
Participant’s Restricted Share Units, in accordance with Section 5.6(a).

4. Bonus Awards

     4.1. Grant of Bonus Awards. No later than the last day of a Fiscal Year, the
Committee shall designate, from among the employees and members of the Company who provide personal
services to the Company, those individuals eligible for a Bonus Award for such Fiscal Year (each,
an “Eligible Individual”) and shall determine and specify for each Eligible Individual the amount
of the Bonus Award that shall be awarded to such Eligible Individual for such Fiscal Year. In
designating the Eligible Individuals for a Fiscal Year and in determining the amount of the Bonus
Awards to be granted, the Committee shall take into account any subjective or objective factors
that it may in its sole discretion deem relevant, including, without limitation, the performance of
the Company, the Eligible Individual or the business unit within the Company to which the Eligible
Individual provides services. The Committee may designate as an Eligible Individual an employee or
member of the Company who terminates his association with the Company during a Fiscal Year.

     4.2. Time of Payment. Unless deferred under Section 5, a Bonus Award shall be paid to
the Participant in one lump sum in cash in the calendar year following the Fiscal Year in which it
was earned, but no later than the March 15th of such calendar year (the “Allocation Date”).

4

 

5. Mandatory Deferral of Restricted Amounts

     5.1. Application of Section to Eligible Individuals. The provisions of this Section 5
shall apply to each Eligible Individual who is allocated a Bonus Award for a Fiscal Year and whose
Compensation for such Fiscal Year (including such Bonus Award) exceeds $600,000.

     5.2. Restricted Amount. An Eligible Individual’s “Restricted Amount” is that portion
of the Eligible Individual’s Bonus Award (but no more than 100% of such Bonus Award) for such
Fiscal Year which is equal to:

          (a) twenty-five percent (25%) of the amount of the Eligible Individual’s Compensation for
the Fiscal Year that exceeds $600,000; plus

          (b) an additional fifteen percent (15%) of the amount of the Eligible Individual’s
Compensation for the Fiscal Year that exceeds $1,200,000.

     5.3. Member Participants. Each Eligible Individual who is a member of Pzena
Investment Management, LLC and who is or may be entitled to receive a Bonus Award for a Fiscal Year
may elect, in accordance with procedures prescribed by the Committee, to have any Restricted Amount
of such Bonus Award credited to an Account in his name in accordance with Section 6.1, to receive
the Restricted Amount in the form of Restricted Share Units in accordance with Section 5.5, or in a
combination of the two. In the absence of an election, the entire Restricted Amount shall be
credited to an Account in the name of the Eligible Individual in accordance with Section 6.1.

     5.4. Other Participants. Each Eligible Individual who is an employee or member of the
Company, who is not a member of Pzena Investment Management, LLC and who is entitled to receive a
Restricted Amount in any Fiscal Year shall have the entire Restricted Amount credited to an Account
in his name in accordance with Section 6.1.

     5.5. Restricted Share Units.

          (a) If an Eligible Individual who is a member of Pzena Investment Management, LLC elects
to receive all or a portion of his Restricted Amount in the form of Restricted Share Units, the
Restricted Share Units shall be issued under and in accordance with the terms of the Equity
Incentive Plan and Section 5.6 below and subject to any restrictions thereof. In addition, the
Committee may, no later than the last date on which an Eligible Individual may make an election
to receive all or a portion of his Restricted Amount in Restricted Share Units, reject such
election in its sole discretion, in which event the portion of such Restricted Amount that is
rejected shall be credited to an Account in the name of the Eligible Individual in accordance
with Section 6.1.

          (b) An Eligible Individual who is a member of Pzena Investment Management, LLC shall
receive, effective as of the last day of the Fiscal Year to which a Restricted Amount relates,
the number of Restricted Share Units whose Market Value, determined as of the last business day
of the Fiscal Year to which the Restricted Amount relates, equals the portion of the Restricted
Amount to be provided in the form of Restricted Share Units pursuant to Sections 5.3 and
5.5(a); provided, however, that fractional Restricted

5

 

Share Units shall not be issued and any excess amount shall be credited to an Account in
the name of the Eligible Individual in accordance with Section 6.1. Such Restricted Share
Units shall be subject to a Restriction Period that reflects the vesting provisions set forth
in Section 5.6.

          (c) In addition, in the sole discretion of the Committee, a Participant may be entitled to
be credited with Distribution Equivalents with respect to Restricted Share Units, calculated as
follows: on each date that a cash distribution is paid by the Company while the Restricted
Share Units are outstanding, a Participant’s Account shall be credited with an amount of cash
equal to the aggregate dollar amount of the cash distribution that would have been paid on the
Restricted Share Units had the Restricted Share Units been issued as Units. The Account
credited under this Section shall be subject to the same terms and conditions applicable to the
Restricted Share Units originally awarded hereunder, including, without limitation, provisions
related to vesting and payment. Notwithstanding the foregoing, in lieu of the Account credit
described herein, a Participant may, in the sole discretion of the Committee and to the extent
the Committee credits such Participant with Distribution Equivalents, be credited with an
additional number of Restricted Share Units equal to the number of whole Units (valued at Fair
Market Value (as defined in the Equity Incentive Plan) on such date) that could be purchased on
such date with the aggregate dollar amount of the cash distribution that would have been paid
on the Restricted Share Units had the Restricted Share Units been issued as Units. The
additional Restricted Share Units credited under this Section shall be subject to the same
terms and conditions applicable to the Restricted Share Units originally awarded hereunder,
including, without limitation, for purposes of vesting and crediting of additional Distribution
Equivalents.

     5.6. Vesting.

          (a) A Participant shall become vested in his Account, and the Restriction Period
applicable to his Restricted Share Units shall lapse, in accordance with the following
schedule, provided that the Participant continues in Service with the Company or satisfies the
provisions of paragraph (c) through to the applicable Vesting Date:

	 	 	 	 	 
	Vesting Date	 	 	 	 
	(Time Elapsed Since Last Day	 	 	 	 
	of Fiscal Year For 

Which Bonus Earned)

	 	 	Percentage

Vesting on Vesting Date	 
	 
	 	 	 	 
	1 year
	 	 	25%	 
	2 years
	 	 	50%	 
	3 years
	 	 	75%	 
	4 years
	 	 	100%	 

          (b) A Participant shall also become fully vested in his Account and the Restriction Period
applicable to his Restricted Share Units shall lapse if he dies while in

6

 

Service with the Company, his Service is terminated by the Company without Cause or he
voluntarily terminates his Service with Good Reason.

          (c) A Participant who voluntarily terminates his Service with the Company and who has, as
of the time of such termination, provided Services to the Company for a continuous period of no
less than ten years, shall continue to vest in his Account and in any Restricted Share Units
for which the Restriction Period has not lapsed in accordance with the vesting schedule set
forth in paragraph (a) above provided that he does not, on or before an applicable Vesting
Date:

          (1) directly or indirectly, whether as an officer, director, owner, partner, investor,
member, adviser, representative, consultant, agent, employee, co-venturer or otherwise,
provide Investment Advisory Services, except in the performance of his duties with the
Company, or engage, or assist others to engage, in whole or in part, in any business in
competition with the business of the Company;

          (2) directly or indirectly (other than in the course of performing his duties to the
Company) (i) solicit the hiring of or hire any employee of the Company or any Person who,
within the prior six months, had been an employee of the Company, assist in, or encourage
such hiring by any Person or encourage any such employee to terminate or alter his
relationship with the Company; (ii) in competition with the Company, solicit, seek, induce,
pursue in any way, or accept a business relationship of any kind with, any Person who is a
Client of the Company, including by way of indirect or sub-advisory arrangements (such
obligation to include the duty of the Participant to decline any such offered business
activity even if unsolicited); (iii) otherwise solicit, encourage or induce any Client to
terminate or reduce its business or relationship with the Company; or (iv) otherwise take
any action or have any communication with any Person the purpose of which is, or the
reasonably likely effect of which could be, to cause any such Client to terminate, alter,
reduce, modify or restrict in any way its relationship or business with the Company; or

          (3) except as required by law or on the written request or with the written consent of
the Company, disclose any Confidential Information, directly or indirectly, or use it in any
way.

          (d) Except as provided in paragraphs (b) and (c), a Participant who terminates his Service
with the Company for any reason shall forfeit the unvested portions of his Accounts and any
Restricted Share Units for which the Restriction Period has not lapsed. Notwithstanding the
foregoing, any termination of a Participant’s employment (1) by reason of the Company’s waiver
of any termination notice period given by a Participant or (2) by the Company after such
Participant has given notice of voluntary termination will, in either case, be deemed a
voluntary termination as of the date of the Participant’s actual termination of employment.

7

 

6. Accounts

     6.1. Establishment of Accounts. The Company shall establish and maintain an account
(an “Account”) for each Eligible Individual who is entitled to receive a Restricted Amount in any
Fiscal Year, provided that an Account shall only be established for an Eligible Individual who is a
member of Pzena Investment Management, LLC if he does not receive all of his Restricted Amount for
the Fiscal Year in the form of Restricted Share Units. A separate Account shall be established for
each such Participant for each Fiscal Year. A Participant’s Account shall be credited with an
initial amount equal to the Restricted Amount for such Fiscal Year (or, in the case of a
Participant who is a member of Pzena Investment Management, LLC, that part of the Restricted Amount
that is not received in the form of Restricted Share Units) effective as of the applicable
Allocation Date.

     6.2. Investment of Accounts. The Committee may from time to time designate investment
options in which a Participant’s Accounts may be notionally invested (the “Investment Options”),
which may include, without limitation, funds or groups of funds to which the Company acts as
investment adviser or sub-adviser and designated stock or bond indices. Upon or prior to the
establishment of an Account and in accordance with procedures established by the Committee, a
Participant shall specify how such Account is to be notionally invested among the Investment
Options. At such intervals and in accordance with such procedures as the Committee may prescribe,
a Participant may reallocate the notional investment of his Accounts among the available Investment
Options. Nothing in this Plan, however, will require the Company to invest any amounts in such
Investment Options or otherwise.

     6.3. Allocation of Income and Losses. As of the last day of each month or such other
dates as the Committee shall determine (each, a “Valuation Date”), income, gains and losses shall
be credited or debited, as appropriate, to a Participant’s Account as if the Account balance had
been invested in the Investment Options in which it is notionally invested.

     6.4. Payments from Accounts and Settlement of Restricted Share Units.

          (a) Within 30 days following each Vesting Date, that portion of the Participant’s Account
(including the portion of such Account attributable to a Distribution Equivalent) that vested
on that Vesting Date shall be paid to the Participant in a single lump sum in cash. Such
payments shall be apportioned pari passu among the Investment Options of the Account. Within
30 days following each Vesting Date, that portion of the Participant’s Restricted Share Units
that vested on that Vesting Date shall be paid to the Participant in the form of Units;
provided, however, that fractional Units shall not be issued and any excess amount shall be
paid to the Participant in a single lump sum in cash.

          (b) Notwithstanding anything herein to the contrary, if a Participant dies while in
Service with the Company or while continuing to vest in his Account after his termination of
Service in accordance with Section 5.6(c), if a Participant’s Service is terminated by the
Company without Cause, or if a Participant voluntarily terminates his Service with Good Reason,
all unpaid amounts in his Accounts shall be paid to the Participant, or to the Participant’s
estate, as applicable, in a lump sum in cash within 60 days of the Participant’s date of death
or Separation from Service, as applicable.

8

 

7. Administration

     7.1. Power and Authority of the Committee. The Plan shall be administered by the
Committee, which shall have the full discretionary power and authority to:

          (a) select Eligible Individuals from the Company’s employees and members;

          (b) determine the amount of any Bonus Award;

          (c) prescribe, amend and rescind rules and procedures relating to the Plan;

          (d) determine all questions arising in connection with the administration, interpretation
and application of the Plan;

          (e) correct defects, supply information, or reconcile inconsistencies in any manner and to
whatever extent is deemed necessary or advisable to carry out the purposes of this Plan;

          (f) select the Investment Options available under the Plan;

          (g) determine the amount of income, gains and losses to be credited to Accounts;

          (h) compute and certify the amount and the kind of benefits to which any Participant may
be entitled;

          (i) adjudicate, in good faith, all claims by Participants or any other persons for
benefits under the Plan;

          (j) authorize and direct payments to Participants from their Accounts;

          (k) maintain all necessary records for the administration of the Plan;

          (l) assist any Participant regarding his rights, benefits, or elections available under
the Plan;

          (m) employ such legal counsel, auditors and consultants as it deems desirable for the
administration of the Plan and rely upon any opinion or computation received therefrom;

          (n) designate persons other than members of the Committee to carry out its
responsibilities; and

          (o) make all other determinations and take all other actions as may be necessary,
appropriate or advisable for the administration of the Plan.

     7.2. Determinations of Committee Final and Binding. All determinations and
interpretations by the Committee in carrying out and administering the Plan shall be made in the

9

 

Committee’s sole discretion and shall be final, conclusive and binding for all purposes and
upon all persons.

     7.3. Indemnification of Committee. The Company agrees to indemnify and hold harmless
each individual person who serves as a member of the Committee to the fullest extent permitted by
law for all acts done in good faith and without gross negligence including defense of all
litigation, including legal fees. The Company may purchase insurance to further protect each
member of the Committee.

8. Amendment and Termination

     Pzena Investment Management, LLC may amend, suspend or terminate this Plan at any time in
writing, and each such amendment, suspension or termination shall be binding upon its subsidiaries,
all Participants and all other persons. Notwithstanding the foregoing, no amendment or termination
of this Plan shall adversely affect any then existing deferred amounts in any Account or any rights
with respect to such amounts under this Plan; provided, however, that, upon termination of the
Plan, the Company may accelerate the time of payment of all or any part of the Accounts in
accordance with the requirements of Section 409A of the Code and the guidance thereunder.

9. Unfunded Status of Accounts

     The Accounts established under this Plan shall be unfunded. The right of any Participant to
receive future payments from any Account shall be an unsecured claim against the general assets of
the Company, and no Participant or any other person shall have any interest in any specific asset
or assets of the Company by reason of any Account hereunder, nor any rights to receive distribution
of any of the Accounts except as and to the extent expressly provided hereunder. With respect to
the payment of amounts held under the Accounts, the Participants have the status of unsecured
general creditors of the Company. The Company shall not be required to purchase, hold or dispose
of any investments pursuant to this Plan; however, if in order to cover its obligations hereunder
the Company elects to purchase any investments, the same shall continue for all purposes to be a
part of the general assets and property of the Company, subject to the claims of its general
creditors and shall not be deemed to create a trust, and no person other than the Company shall by
virtue of the provisions of this Plan have any interest in such assets other than an interest as a
general creditor.

10. Effective Date

     This Plan shall be effective January 1, 2007 and shall apply to Bonus Awards earned in Fiscal
Years beginning on and after January 1, 2007.

11. Miscellaneous

     11.1. Assignability. No right or interest of a Participant under this Plan to any
amounts in a Participant’s Account or to any Bonus Award shall be subject to alienation,
assignment, transfer, pledge or encumbrance of any kind; provided, however, that nothing in this
Section 11.1 shall prevent transfer by will or by the applicable laws of descent and distribution.
No loans will be issued by the Plan against a Participant’s Account.

10

 

     11.2. No Guarantee of Employment. The Plan shall not be construed to give any
Participant the right to be retained in the employment of the Company or to interfere with the
right of the Company to terminate the employment of any person at any time.

     11.3. Taxation of Accounts and Compliance with Section 409A of the Code.

          (a) This Plan is established with the intention that no portion of a Participant’s
Accounts will be treated as income to the Participant under the Code until the Participant
actually receives the deferred amounts. To the extent applicable:

          (1) at all times, this Plan shall be operated in accordance with the requirements of
Section 409A of the Code;

          (2) any action that may be taken (and, to the extent possible, any action actually
taken) by the Company or a Participant shall not be taken (or shall be void and without
effect) if such action is not in accordance with the requirements of Section 409A of the
Code;

          (3) any provision in this Plan that is determined to violate the requirements of
Section 409A of the Code shall be void and without effect; and

          (4) any provision that is required by Section 409A of the Code to appear in this Plan
in order to comply with the requirements of Section 409A of the Code that is not expressly
set forth shall be deemed to be set forth herein, and this Plan shall be administered in all
respects as if such provision were expressly set forth.

          (b) Notwithstanding anything in the Plan to the contrary, upon a determination under the
Plan as to the imposition of Federal Insurance Contributions Act tax (the “FICA Amount”) under
Sections 3101, 3121(a) or 3121(v)(2) of the Code with respect to all or any portion of an
Account in the name of any Participant, the Committee may in its discretion pay to the
participant an amount not in excess of the FICA Amount and the income tax withholding pursuant
to Section 3401 of the Code and applicable state, local or foreign tax laws as a result of the
payment of the FICA Amount.

          (c) Notwithstanding anything in the Plan to the contrary, upon a determination under the
Plan that any deferral arrangement with respect to any Account in the name of a Participant
fails to meet the requirements of Section 409A of the Code and applicable guidance thereunder,
the Committee may in its discretion pay to the Participant an amount not in excess of that
portion of the Participant’s Account that is required to be included in the income of the
Participant as a result of such failure.

     11.4. Withholding. Any payment or other distribution of benefits under the Plan may
be reduced by any amount (including employment taxes) required to be withheld by the Company under
any applicable law, rule, regulation, order or other requirement of any governmental authority. In
addition, the Company has full authority to withhold any taxes (including employment taxes)
applicable to amounts deferred hereunder from other compensation owing to any Participant that is
not being deferred hereunder. If a Participant becomes entitled to a distribution under the Plan,
and if at such time such Participant has

11

 

outstanding any debt, obligation or other liability representing an amount owing to the
Company, then the Company may offset such amount against the amount of benefits otherwise
distributable to the Participant under this Plan to the extent permitted by applicable law.

     11.5. Governing Law. The Plan shall be construed, administered and enforced in
accordance with the laws of the State of New York.

     11.6. Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and the neuter genders, the singular shall include the plural, and the
plural shall include the singular.

     11.7. Headings. The headings of Sections are included solely for convenience of
reference and are not intended in any way to modify or otherwise to affect the text of the Plan.

12

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