Document:

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EXHIBIT 4.1

PLATO Learning, Inc. 2006 Stock Incentive Plan

 

 

PLATO LEARNING, INC. 2006 STOCK INCENTIVE PLAN

Article 1. Establishment, Objectives and Duration

     1.1 Establishment of the Plan. PLATO Learning, Inc., a Delaware corporation, hereby
establishes this PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”) as set forth herein.
Capitalized terms used but not otherwise defined herein will have the meanings given to them in
Article 2. The Plan permits the grant of Nonstatutory Stock Options, Incentive Stock Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, and other
Stock Awards. In addition, the Plan provides the opportunity for the deferral of the payment of
salary, bonuses and other forms of incentive compensation in accordance with Code Section 409A.

     The Board of Directors of the Company approved the Plan on December 8, 2005. The Plan shall
become effective upon its ratification by an affirmative vote at the annual meeting of stockholders
of the Company to be held on March 2, 2006, and will remain in effect as provided in Section 1.3
hereof.

     1.2 Purpose of the Plan. The purpose of the Plan is to promote the success and enhance the
value of the Company by linking the personal interests of Participants to those of Company
shareholders, and by providing Participants with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability to motivate, attract
and retain the services of Participants upon whose judgment, interest, and special effort the
successful conduct of its business is largely dependent.

     1.3 Duration of the Plan. The Plan will commence on the Effective Date, as described in
Article 2, and will remain in effect, subject to the right of the Committee to amend or terminate
the Plan at any time pursuant to Article 15, until all Shares subject to it pursuant to Article 4
have been issued or transferred according to the Plan’s provisions. In no event may an Award be
granted under the Plan on or after the tenth annual anniversary of the Effective Date.

Article 2. Definitions

     Whenever used in the Plan, the following terms have the meanings set forth below, and when the
meaning is intended, the initial letter of the word is capitalized:

     “Affiliates” means (a) for purposes of Incentive Stock Options, any corporation that is a
Parent or Subsidiary of the Company, and (b) for all other purposes hereunder, an entity that is
(directly or indirectly) controlled by, or controls, the Company.

     “Award” means, individually or collectively, a grant under this Plan to a Participant of
Nonstatutory Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Shares or other Stock Awards.

     “Award Agreement” means an agreement entered into by the Company and a Participant setting
forth the terms and provisions applicable to an Award or Awards granted to

 

 

the Participant or the terms and provisions applicable to an election to defer compensation
under Section 8.2.

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

     “Cause” shall have the meaning set forth in any employment, consulting, or other written
agreement between the Participant and the Company or an Affiliate. If there is no employment,
consulting, or other written agreement between the Participant and the Company or an Affiliate, or
if such agreement does not define “Cause,” then “Cause” shall have the meaning specified by the
Committee in connection with the grant of any Award; provided, that if the Committee does not so
specify, “Cause” shall mean the Participant’s:

	 	(a)	 	willful neglect of or continued failure to substantially perform his or her
duties with or obligations for the Company or an Affiliate in any material respect
(other than any such failure resulting from his or her incapacity due to physical or
mental illness);
	 
	 	(b)	 	commission of a willful or grossly negligent act or the willful or grossly
negligent omission to act that causes or is reasonably likely to cause material harm to
the Company or an Affiliate; or
	 
	 	(c)	 	commission or conviction of, or plea of nolo contendere to, any felony or any
crime materially injurious to the Company or an Affiliate.

An act or omission is “willful” for this purpose if it was knowingly done, or knowingly omitted, by
the Participant in bad faith and without reasonable belief that the act or omission was in the best
interest of the Company or an Affiliate. Determination of Cause shall be made by the Committee in
its sole discretion, and may be applied retroactively if, after the Participant terminates Service,
it is discovered that Cause occurred during Participant’s Service.

     “Change in Control” means the occurrence of any one or more of the following:

	 	(a)	 	Any person or persons acting as a group acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person or
persons) ownership of securities of the Company representing fifty percent (50%) or
more of the voting power of the Company’s then outstanding stock; provided, however,
that a Change in Control shall not be deemed to occur by virtue of any of the following
acquisitions: (i) by the Company or any Affiliate, (ii) by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any Affiliate, or (iii) by
any underwriter temporarily holding securities pursuant to an offering of such
securities;
	 
	 	(b)	 	Any person or persons acting as a group acquires beneficial ownership of stock
that, together with stock held by such person or group, constitutes more than fifty
(50%) of the total fair market value or voting power of the Company’s then outstanding
stock. The acquisition of Company stock by the Company in exchange for property, which
reduces the number of outstanding Stock and increases the percentage ownership by any
person to more than 50% of Company stock will be treated as a Change in Control;

 

 

	 	(c)	 	Individuals who constitute the Board immediately after the Effective Date (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of the
Board during any 12-month period, provided that any person becoming a Director
subsequent thereto whose election or nomination for election was approved by a vote of
a majority of the Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person is named as a
nominee for Director, without written objection to such nomination) shall be an
Incumbent Director, provided, however, that no individual initially elected or
nominated as a Director of the Company as a result of an actual or threatened election
contest with respect to Directors or as a result of any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director;
	 
	 	(d)	 	Any person or persons acting as a group acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person or
persons) assets from the Company that have a total gross fair market value of at least
forty percent (40%) of the total gross fair market value of all the assets of the
Company immediately prior to such acquisition. For purposes of this section, gross
fair market value means the value of the assets of the Company, or the value of the
assets being disposes of, without regard to any liabilities associated with such
assets. The event described in this paragraph (d) shall not be deemed to be a Change
in Control if the assets are transferred to (i) any owner of Company stock in exchange
for or with respect to the Company’s stock, (ii) an entity in which the Company owns,
directly or indirectly, at least fifty percent (50%) of the entity’s total value or
total voting power, (iii) any person that owns, directly or indirectly, fifty percent
(50%) of the Company stock, (iv) an entity in which a person described in (d)(3) above
owns at least fifty percent (50%) of the total value or voting power. For purposes of
this section, and except as otherwise provided, a person’s status is determined
immediately after the transfer of the assets; or
	 
	 	(e)	 	Upon the happening of any other event(s) designated in the Code, or regulations
or guidance thereunder, as a Change in Control for purposes of Section 409A of the
Code.

     Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person owning more that fifty (50%) of the Company stock acquires additional
Company stock. In no event will a Change in Control be deemed to have occurred, with respect to
the Participant, if an employee benefit plan maintained by the Company or an Affiliate or the
Participant is part of a purchasing group that consummates the transaction that would otherwise
result in a Change in Control. The employee benefit plan or the Participant will be deemed “part
of a purchasing group” for purposes of the preceding sentence if the plan or the Participant is an
equity participant in the purchasing company or group, except where participation is: (i) passive
ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership
of equity participation in the purchasing company or group that is otherwise not significant, as
determined prior to the Change in Control by a majority of the nonemployee continuing directors.

 

 

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Committee” shall mean the Compensation Committee of the Board of Directors, the composition
of which shall at all times satisfy the provisions of Code Section 162(m) and shall consist of at
least two directors who are “independent directors” within the meaning of the NASDAQ marketplace
rules, and “non-employee directors” within the meaning of Exchange Act Rule 16b-3.

     “Company” means PLATO Learning, Inc., a Delaware corporation, and any successor thereto as
provided in Article 19.

     “Consultant” means any person, including an advisor, engaged by the Company or an Affiliate to
render services to such entity and who is not a Director or an Employee.

     “Director” means any individual who is a member of the Board of Directors.

     “Disability” shall mean:

	 	(a)	 	A physical or mental condition that would qualify a Participant for a
disability benefit under the long-term disability plan of the Company applicable to him
or her;
	 
	 	(b)	 	If the Participant is not covered by such a long-term disability plan,
disability as defined for purposes of eligibility for a disability award under the
Social Security Act;
	 
	 	(c)	 	When used in connection with the exercise of an Incentive Stock Option
following termination of employment, disability within the meaning of Code Section
22(e)(3); or
	 
	 	(d)	 	Such other condition as may be determined by the Committee to constitute
“disability” under Code Section 409A.

     “Effective Date” means March 2, 2006 subject to the Plan’s adoption by the Board and approval
of the Plan by the Company’s shareholders.

     “Employee” means any person employed by the Company or an Affiliate in a common law
employee-employer relationship. A Participant shall not cease to be an Employee for purposes of
this Plan in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or among the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed, on the one hundred
and eighty-first (181st) day of such leave any Incentive Stock Option held by the Participant shall
cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company.

 

 

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.

     “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant
to an Option.

     “Fair Market Value” of a Share on any given date shall be determined by the Committee as
follows:

	 	(a)	 	If the Share is listed for trading on the National Association of Securities
Dealers, Inc. (NASDAQ) National Market System or one or more national securities
exchanges, the last reported sales price on the NASDAQ or such principal exchange on
the date in question, or if such Share shall not have been traded on such principal
exchange on such date, the last reported sales price on the NASDAQ or such principal
exchange on the first day prior thereto on which such Share was so traded;
	 
	 	(b)	 	If the Share is not listed for trading, by any means determined fair and
reasonable by the Committee, which determination shall be final and binding on all
parties; or
	 
	 	(c)	 	Where the Participant pays the Exercise Price and/or any related withholding
taxes to the Company by tendering Shares issuable to the Participant upon exercise of
an Option, the actual sale price of the Shares.

     “Incentive Stock Option” or “ISO” means an option to purchase Shares granted under Article 6
that is designated as an Incentive Stock Option and that is intended to meet the requirements of
Code Section 422.

     “Non-statutory Stock Option” or “NQSO” means an option to purchase Shares granted under
Article 6 that is not intended to meet the requirements of Code Section 422.

     “Option” means an Incentive Stock Option or a Nonstatutory Stock Option, as described in
Article 6.

     “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Code
Section 424(e).

     “Participant” means an Employee, Consultant or Director whom the Committee has selected to
participate in the Plan pursuant to Section 5.2 and who has an Award outstanding under the Plan.

     “Performance-Based Exception” means the performance-based exception from the tax deductibility
limitations of Code Section 162(m) and any regulations promulgated thereunder.

     “Performance Period” means the time period during which performance objectives must be met in
order for a Participant to earn Performance Shares granted under Article 9.

 

 

     “Performance Share” means an Award of Shares with an initial value equal to the Fair Market
Value of a Share on the date of grant, which is based on the Participant’s attainment of certain
performance objectives specified in the Award Agreement, as described in Article 9.

     “Personal Leave” means a leave of absence as described in Section 5.3.

     “Plan” means the PLATO Learning, Inc. 2006 Stock Incentive Plan, as set forth in this
document, and as amended from time to time.

     “Prior Plans” means the following equity incentive plans maintained by the Company: (i) TRO
Learning, Inc. 1997 Stock Incentive Plan; (ii) TRO Learning, Inc. 1997 Non-Employee Directors Stock
Option Plan; (iii) PLATO Learning, Inc. 2000 Stock Incentive Plan; (iv) PLATO Learning, Inc. 2000
Nonemployee Directors Stock Option Plan; and (v) PLATO Learning, Inc. 2002 Stock Plan, as amended
and including its sub-plan, the PLATO Learning United Kingdom Share Option Plan.

     “Restriction Period” means the period during which the transfer of Shares of Restricted Stock
is limited in some way (based on the passage of time, the achievement of performance objectives, or
the occurrence of other events as determined by the Committee, in its sole discretion) or the
Restricted Stock is not vested.

     “Restricted Stock” means a contingent grant of Shares awarded to a Participant pursuant to
Article 8. The Shares awarded to the Participant will vest over the Restricted Period and
according to the time-based or performance-based criteria, specified in the Award Agreement.

     “Restricted Stock Unit” or “RSU” means a notional account established pursuant to an Award
granted to a Participant, as described in Article 8, that is (a) valued solely by reference to
Shares, (b) subject to restrictions specified in the Award Agreement, and (c) payable only in
Shares. The RSUs awarded to the Participant will vest according to the time-based or
performance-based criteria specified in the Award Agreement.

     “Retirement” means Normal Retirement or Early Retirement. For purposes of this Plan, “Normal
Retirement” means retirement from active employment with the Company and any Affiliate of the
Company on or after age 65; or termination of employment on or after (a) reaching the age
established by the Company as the normal retirement age in any employment agreement between the
Participant and the Company or an Affiliate, or, in the absence of such an agreement (b) reaching
age sixty-two with ten years of service with the Company or an Affiliate, provided the retirement
is approved by the Chief Executive Officer of the Company, unless the Participant is an officer
subject to Section 16 of the Exchange Act, in which case the retirement must be approved by the
Committee. For purposes of this Plan, “Early Retirement” means retirement, with consent of the
Committee at the time of retirement, from active employment with the Company and any Affiliate of
the Company, when a minimum of 70 is determined by totaling the age of the employee and the number
of years of service as an active employee with the Company.

     “Service” means the provision of services to the Company or its Affiliates in the capacity of
(i) an Employee, (ii) a Director, or (iii) a Consultant. For purposes of this Plan, the transfer
of an Employee from the Company to an Affiliate, from an Affiliate to the Company or

 

 

from an Affiliate to another Affiliate shall not be a termination of Service. However, if the
Affiliate for which an Employee, Director or Consultant is providing services ceases to be an
Affiliate of the Company due to a sale, transfer or other reason, and the Employee, Director or
Consultant ceases to perform services for the Company or any Affiliate, the Employee, Director or
Consultant shall incur a termination of Service.

     “Shares” means the shares of common stock, $0.01 par value, of the Company, or any successor
or predecessor equity interest in the Company.

     “Stock Appreciation Right” or “SAR” means an Award of the contingent right to receive Shares
or cash, as specified in the Award Agreement, in the future, based on the value, or the
appreciation in the value, of Shares, pursuant to the terms of Article 7.

     “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Code Section 424(f).

     “Vested” means, with respect to an Option, that such Option has become fully or partly
exercisable; provided, however, that notwithstanding its status as a Vested Option, an Option shall
cease to be exercisable pursuant to (and while exercisable shall be subject to) such terms as are
set forth herein and in the relevant Award Agreement. Similarly, terms such as “Vest,” “Vesting,”
and “Unvested” shall be interpreted accordingly.

Article 3. Administration

     3.1 The Committee. The Plan will be administered by the Committee, or by any other committee
appointed by the Board whose composition satisfies the “nonemployee director” requirements of Rule
16b-3 under the Exchange Act and the regulations of Rule 16b-3 under the Exchange Act, the
“independent director” requirements of the NASDAQ marketplace rules, and the “outside director”
provisions of Code Section 162(m), or any successor regulations or provisions.

     3.2 Authority of the Committee. Except as limited by law and subject to the provisions of
this Plan, the Committee will have full power to: select Employees, Directors and Consultants to
participate in the Plan; determine the sizes and types of Awards; determine the terms and
conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any
agreement or instrument entered into under the Plan; establish, amend or waive rules and
regulations for the Plan’s administration; and (subject to the provisions of Article 16) amend the
terms and conditions of any outstanding Award to the extent they are within the discretion of the
Committee as provided in the Plan. Further, the Committee will make all other determinations that
may be necessary or advisable to administer the Plan. As permitted by law and consistent with
Section 3.1, the Committee may delegate some or all of its authority under the Plan, including to
an officer of the Company to designate the Employees (other than such officer himself or herself)
to receive Options and to determine the number of Shares subject to the Options such Employees will
receive.

     The duties of the Committee or its delegatee shall also include, but shall not be limited to,
making disbursements and settlements of Awards, creating trusts, and determining whether to defer
or accelerate the vesting of, or the lapsing of restrictions or risk of forfeiture with respect to,
Options, Restricted Stock and Restricted Stock Units, and Stock Appreciation Rights.

 

 

Subject only to compliance with the express provisions of the Plan, the Committee or its
delegatee may act in its sole and absolute discretion in performing the duties specifically set
forth in the preceding sentence and other duties under the Plan.

     3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the
provisions of the Plan will be final, conclusive and binding on all persons, including, without
limitation, the Company, its Board of Directors, its shareholders, all Affiliates, Employees,
Participants and their estates and beneficiaries.

     3.4 Change in Control. In the event of a Change in Control, the Committee shall have the
discretion to accelerate the vesting of Awards, eliminate any restrictions applicable to Awards,
deem the performance measures to be satisfied, or take such other action as it deems appropriate,
in its sole discretion.

Article 4. Shares Subject to the Plan and Maximum Awards

     4.1 Number of Shares Available for Awards.

	 	(a)	 	Subject to adjustment as provided below and in Sections 4.2 and 4.3, the
maximum number of Shares that may be issued or transferred to Participants under the
Plan will be 1,794,904 Shares, which represents the number of Shares available for the
grant of future awards under the Company’s Prior Plans as of the Effective Date. No
additional awards will be made under any Prior Plan on or after the Effective Date.
Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired
Common Stock. Notwithstanding anything to the contrary contained herein: (i) all
Shares covered by an SAR or Option shall be considered issued or transferred pursuant
to the Plan to the extent it is exercised and without regard to whether Shares are
actually issued to the Participant upon such exercise; and (ii) the aggregate plan
limit above shall not be increased by Shares tendered in payment of an Option Exercise
Price, Shares withheld by the company to satisfy a tax withholding obligation, or
Shares repurchased by the Company with Exercise Price proceeds from the Participant.
	 
	 	(b)	 	The total number of Shares that may be issued or transferred in connection with
the Awards of Restricted Stock, Restricted Stock Units, Performance Shares or other
full value Stock Awards shall not exceed 750,000. The maximum number of Shares that
may be issued or transferred to Participants as Incentive Stock Options is 100,000.
The maximum number of Shares and Share equivalent units that may be granted during any
calendar year to any one Participant under all types of Awards available under the Plan
is 250,000 (on an aggregate basis); provided, however, that (i) the foregoing
limit will apply whether the Awards are paid in Shares or in cash; and (ii) the
Participant in connection with his or her first year of Service may be granted an
additional Award covering not more than an additional 200,000 Shares, which shall not
count against the limits set forth initially in this sentence. All limits described in
this Section 4.1(b) are subject to adjustment as provided in Section 4.3.

 

 

     4.2 Lapsed Awards. Any Shares subject to an Award under the Plan or the Prior Plan that, on
or after the Effective Date, are forfeited, canceled, settled or otherwise terminated without a
distribution of Shares to a Participant will revert to the Plan and thereafter be deemed to be
available again for Award.

     4.3 Adjustments in Authorized Shares.

	 	(a)	 	In the event of any merger, reorganization, consolidation, recapitalization,
separation, liquidation, split-up, share combination, or other such change in the
corporate structure of the Company affecting the Shares, such adjustment shall be made
in the number and class of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares subject to outstanding Awards granted under
the Plan, as may be determined to be appropriate and equitable by the Committee, in its
sole discretion, to prevent dilution or enlargement of rights and provided that the
number of Shares subject to any Award shall always be a whole number.
	 
	 	(b)	 	Fractional Shares resulting from any adjustment in Awards pursuant to this
section may be settled in cash or otherwise as the Committee determines. The Company
will give notice of any adjustment to each Participant who holds an Award that has been
adjusted and the adjustment (whether or not that notice is given) will be effective and
binding for all Plan purposes.

Article 5. Eligibility and Participation

     5.1 Eligibility. An Employee shall be deemed eligible for participation upon such Employee’s
first day of employment. Additionally, non-Employee Directors and Consultants and/or their
representatives who are chosen from time to time at the sole discretion of the Company to receive
one or more Awards are also eligible to participate in the Plan.

     5.2 Actual Participation. Subject to the provisions of the Plan, the Committee will, from
time to time, select those Employees, non-Employee Directors and Consultants to whom Awards will be
granted, and will determine the nature and amount of each Award.

     5.3 Personal Leave Status.

	 	(a)	 	Notwithstanding anything in the Plan to the contrary, the Committee, in its
sole discretion, reserves the right to designate a Participant’s leave of absence as
“Personal Leave.” No Options shall be granted to a Participant during Personal Leave.
A Participant’s Unvested Options shall remain Unvested during such Personal Leave and
the time spent on such Personal Leave shall not count towards the Vesting of such
Options. A Participant’s Vested Options that may be exercised pursuant to Section 6.6
hereof shall remain exercisable upon commencement of Personal Leave until the earlier
of (i) a period of one year from the date of commencement of such Personal Leave; or
(ii) the remaining exercise period of such Options. Notwithstanding the foregoing, if
a Participant returns to the Company from a Personal Leave of less than one year and
the Participant’s Options have not lapsed, the Options shall remain exercisable for the
remaining

 

 

	 	 	 	exercise period as provided at the time of grant and subject to the conditions
contained herein.
	 
	 	(b)	 	Upon returning to the Company from Personal Leave, the Participant must
complete six (6) months of Service before the Participant will be eligible to receive
any other Awards under the Plan.
	 
	 	(c)	 	The Committee, in its sole discretion, may waive or alter the provisions of
this Section 5.3 with respect to any Participant. The waiver or alteration of such
provisions with respect to any Participant shall have no effect on any other
Participant.

Article 6. Options

     6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted
to Employees, non-Employee Directors and Consultants in the number, and upon the terms, and at any
time and from time to time, as determined by the Committee.

     6.2 Award Agreement. Each Option grant will be evidenced by an Award Agreement that specifies
the Exercise Price, the duration of the Option, the number of Shares to which the Option pertains,
the manner, time and rate of exercise or Vesting of the Option, and such other provisions as the
Committee determines. The Award Agreement will also specify whether the Option is intended to be
an ISO or an NQSO.

     6.3 Exercise Price. The Exercise Price for each Share subject to an Option will be determined
by the Committee; provided, however, that the exercise price of Incentive Stock Options shall in
all cases be equal or greater to the Fair Market Value on the date the Option is granted.

     6.4 Duration of Options. Each Option will expire at the time determined by the Committee at
the time of grant, but no later than the tenth anniversary of the date of its grant.

     6.5 Dividend Equivalents. The Committee may, but will not be required to, provide under an
agreement for payments in connection with Options that are equivalent to dividends declared and
paid on the Shares underlying the Options prior to the date of exercise. Such dividend equivalent
agreement shall be separate and apart from the Award Agreement and shall be designed to comply
separately with Code Section 409A.

     6.6 Exercise of Options. Options will be exercisable at such times and be subject to such
restrictions and conditions as the Committee in each instance approves, which need not be the same
for each Award or for each Participant.

     6.7 Payment. The holder of an Option may exercise the Option only by delivering a written
notice, or if permitted by the Committee, in its discretion and in accordance with procedures
adopted by it, by delivering an electronic notice of exercise to the Company setting forth the
number of Shares as to which the Option is to be exercised, together with full payment at the
Exercise Price for the Shares and any withholding tax relating to the exercise of the Option.

 

 

     The Exercise Price and any related withholding taxes will be payable to the Company in full
either: (a) in cash, or its equivalent, in United States dollars; (b) if permitted in the
governing Award Agreement, by tendering Shares owned by the Participant duly endorsed for transfer
to the Company, or Shares issuable to the Participant upon exercise of the Option; or (c) any
combination of (a) and (b); or (d) by any other means the Committee determines to be consistent
with the Plan’s purposes and applicable law. The Committee, in its discretion, may require that no
Shares may be tendered until such Shares have been owned by the Participant for at least six months
(or such other period determined by the Committee).

     6.8 Special Provisions for ISOs. Notwithstanding any other provision of this Article 6, the
following special provisions shall apply to any Award of Incentive Stock Options:

	 	(a)	 	The Committee may award Incentive Stock Options only to Employees.
	 
	 	(b)	 	An Option will not constitute an Incentive Stock Option under this Plan to the
extent it would cause the aggregate Fair Market Value of Shares with respect to which
Incentive Stock Options are exercisable by the Participant for the first time during a
calendar year (under all plans of the Company and its Affiliates) to exceed $100,000.
Such Fair Market Value shall be determined as of the date on which each such Incentive
Stock Option is granted.
	 
	 	(c)	 	If the Employee to whom the Incentive Stock Option is granted owns stock
possessing more than ten (10%) percent of the total combined voting power of all
classes of the Company or any Affiliate, then: (i) the exercise Price for each Share
subject to an Option will be at least one hundred ten percent (110%) of the Fair Market
Value of the Share on the Effective Date of the Award; and (ii) the Option will expire
upon the earlier of (A) the time specified by the Committee in the Award Agreement, or
(B) the fifth anniversary of the date of grant.
	 
	 	(d)	 	No Option that is intended to be an Incentive Stock Option may be granted under
the Plan until the Company’s shareholders approve the Plan. If such shareholder
approval is not obtained within 12 months after the Board’s adoption of the Plan, then
no Options may be granted under the Plan that are intended to be Incentive Stock
Options. No Option that is intended to be an Incentive Stock Option may be granted
under the Plan after the tenth anniversary of the date the Company adopted the Plan or
the Company’s shareholders approved the Plan, whichever is earlier.
	 
	 	(e)	 	An Incentive Stock Option must be exercised, if at all, by the earliest of (i)
the time specified in the Award Agreement, (ii) three months after the Participant’s
termination of Service for a reason other than death or Disability, or (iii) twelve
months after the Participant’s termination of Service for death or Disability.
	 
	 	(f)	 	An Option that is intended but fails to be an ISO shall be treated as an NQSO
for purposes of the Plan.

     6.9 Restrictions on Share Transferability. The Committee may impose such restrictions on any
Shares acquired through exercise of an Option as it deems necessary or advisable, including,
without limitation, restrictions under applicable federal securities laws,

 

 

under the requirements of any stock exchange or market upon which the Shares are then listed
or traded, and under any blue sky or state securities laws applicable to the Shares.

     6.10 Termination of Service. Unless the applicable Award Agreement provides otherwise and
subject to Section 6.8(e):

	 	(a)	 	If a Participant’s Service with the Company and any Affiliate terminates by
reason of death, any Option may thereafter be exercised, to the extent then
exercisable, by the legal representative of the estate or by the legatee of the
Participant under the will of the Participant, but may not be exercised after twelve
months from the date of such death or the expiration of the stated term of the Option,
whichever period is shorter. In the event of termination of Service by reason of death,
if, pursuant to its terms, any Incentive Stock Option is exercised after the expiration
of the exercise periods that apply for purposes of Code Section 422, the Option will
thereafter be treated as a Nonstatutory Stock Option. Options that are not exercisable
at the time of Participant’s death shall expire at the close of business on the date of
death.
	 
	 	(b)	 	If a Participant’s Service with the Company and any Affiliate terminates by
reason of Disability, any Option held by such Participant may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability, but may
not be exercised after twelve months from the date of such termination of Service or
the expiration of the stated term of the Option, whichever period is the shorter. In
the event of termination of Service by reason of Disability, if, pursuant to its terms,
any Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Code Section 422, the Option will thereafter be treated as a
Nonstatutory Stock Option. Options that are not exercisable at the time of such
termination of Service shall expire at the close of business on the date of such
termination.
	 
	 	(c)	 	If a Participant’s Service with the Company and any Affiliate terminates by
reason of Retirement, any Option held by such Participant may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Retirement, but may
not be exercised after thirty-six months from the date of such termination of Service
or the expiration of the stated term of the Option, whichever period is the shorter. In
the event of termination of Service by reason of Retirement, if, pursuant to its terms,
any Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Code Section 422, the Option will thereafter be treated as a
Nonstatutory Stock Option. Options that are not exercisable at the time of such
termination of Service by reason of Retirement shall expire at the close of business on
the date of such termination.
	 
	 	(d)	 	If a Participant’s Service terminates for any reason other than Death,
Disability or Retirement, any Option held by such Participant may thereafter be
exercised to the extent it was exercisable at the time of such termination, but may not
be exercised after 90 days after such termination, or the expiration of the stated term
of the Option, whichever period is the shorter. In the event of termination of Service
by reason other than Death, Disability or Retirement and if pursuant to its terms any
Incentive Stock Option is exercised after the expiration of the exercise periods that
apply for purposes

 

 

	 	 	 	of Code Section 422, the Option will thereafter be treated as a Nonstatutory Stock
Option. Options that are not exercisable at the time of such termination of Service
shall expire at the close of business on the date of such termination. In the event a
Participant’s Service with the Company is terminated for Cause, all unexercised Options
granted to such Participant shall immediately terminate.

     Each Option Award Agreement will set forth the extent to which the Participant has the right
to exercise the Option after his or her termination of Service. These terms will be determined by
the Committee in its sole discretion, need not be uniform among all Options, and may reflect, among
other things, distinctions based on the reasons for termination of Service. However,
notwithstanding any other provision herein to the contrary, no additional Options will Vest after a
Participant’s Service ceases or has terminated for any reason, whether such cessation or
termination is lawful or unlawful.

     6.11 Maximum Value Options. The Committee may establish, in an Option Award Agreement, a
maximum potential appreciation that may be delivered with respect to the Participant’s Options. In
the event a Participant exercises his or her Options when the Fair Market Value of the Shares
exceeds the maximum potential appreciation threshold set forth in the Award Agreement, the number
of Shares delivered to the Participant upon exercise will be reduced as necessary to effect the
maximum value restriction.

Article 7. Stock Appreciation Rights

     7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to
Participants at any time and from time to time, as determined by the Committee. Within the limits
of Article 4, the Committee will have sole discretion to determine the number of SARs granted to
each Participant and, consistent with the provisions of the Plan, to determine the terms and
conditions pertaining to SARs.

     The grant price for any SAR shall be determined by the Committee, but the grant price for any
SAR intended to be exempt from Code Section 409A shall in all cases be equal or greater to the Fair
Market Value on the date the Option is granted. If the Committee determines that an SAR shall have
a grant price that at any time can be less than the Fair Market Value on the date of grant, such
SAR shall be subject to the provisions of Article 13 of the Plan.

     7.2 Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee,
in its sole discretion, imposes.

     7.3 Award Agreement. Each SAR grant will be evidenced by an Award Agreement that specifies
the grant price, whether settlement of the SAR will be made in cash or in Shares, the term of the
SAR and such other provisions as the Committee determines.

     7.4 Term of SAR. The term of a SAR will be determined by the Committee, in its sole
discretion, but may not exceed ten years.

     7.5 Payment of SAR Amount. Upon exercise of a SAR with respect to a Share, a Participant will
be entitled to receive an amount equal to the excess, if any, of the Fair Market Value on the date
of exercise of the SAR over the grant price specified in the Award Agreement.

 

 

At the discretion of the Committee, the payment that may become due upon SAR exercise may be
made in cash, in Shares or in any combination of the two.

     7.6 Termination of Service. Each SAR Award Agreement will set forth the extent to which the
Participant has the right to exercise the SAR after his or her termination of Service. These terms
will be determined by the Committee, in its sole discretion, need not be uniform among all SARs
issued under the Plan, and may reflect, among other things, distinctions based on the reasons for
termination of Service.

Article 8. Restricted Stock and Restricted Stock Units

     8.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions
of the Plan, the Committee may, at any time and from time to time, grant Restricted Stock or
Restricted Stock Units to Participants in such amounts as it determines.

     8.2 Deferral of Compensation into Restricted Stock Units. Subject to the terms and provisions
of the Plan, the Committee may, at any time and from time to time, allow (or require, as to
bonuses) selected Employees and Directors to defer the payment of any portion of their salary or
bonuses or both pursuant to this section. A Participant’s deferral under this section will be
credited to the Participant in the form of Shares of Restricted Stock Units. The Committee will
establish rules and procedures for the deferrals, as it deems appropriate and in accordance with
Article 13 of the Plan.

     If a Participant’s compensation is deferred under this Section 8.2, he or she will be
credited, as of the date specified in the Award Agreement, with a number of Restricted Stock Units
no less than the amount of the deferral divided by the Fair Market Value on that date, rounded to
the nearest whole unit.

     8.3 Award Agreement. Each grant of Restricted Stock or Restricted Stock Units will be
evidenced by an Award Agreement that specifies the Restriction Periods, the number of Shares or
Share equivalent units granted, and such other provisions as the Committee determines.

     8.4 Other Restrictions. Subject to Article 12, the Committee may impose such other conditions
or restrictions on any Restricted Stock or Restricted Stock Units as it deems advisable, including,
without limitation, restrictions based upon the achievement of specific performance objectives
(Company-wide, business unit, individual, or any combination of them), time-based restrictions on
vesting, and restrictions under applicable federal or state securities laws. The Committee may
provide that restrictions established under this Section 8.4 as to any given Award will lapse all
at once or in installments.

     The Company will retain the certificates representing Shares of Restricted Stock in its
possession until all conditions and restrictions applicable to the Shares have been satisfied.

     8.5 Payment of Awards. Except as otherwise provided in this Article 8, Shares covered by each
Restricted Stock grant will become freely transferable by the Participant after the last day of the
applicable Restriction Period, and Share equivalent units covered by a Restricted Unit will be paid
out in Shares to the Participant following the last day of the applicable Restriction Period, or on
the date provided in the Award Agreement.

 

 

     8.6 Voting Rights. During the Restriction Period, Participants holding Shares of Restricted
Stock may exercise full voting rights with respect to those Shares.

     8.7 Dividends and Other Distributions. During the Restriction Period, Participants awarded
Shares of Restricted Stock hereunder will be credited with regular cash dividends paid on those
Shares. Dividends on vested Shares shall be paid as soon as practicable as dividends are received
by other Company shareholders. Dividends on unvested Shares shall be subject to the same vesting
conditions as the underlying Shares, and will be targeted to be paid within 2-1/2 months following
the end of the calendar year in which the underlying Shares vest, but shall be paid no later than
the end of the calendar year following the year in which the underlying Shares vest unless
otherwise deferred pursuant to Article 13.

     An Award Agreement may provide that, during the Restriction Period, Participants awarded
Restricted Stock Units shall be credited with regular cash dividend equivalents paid with respect
to those Share equivalent units. Distribution of such dividend equivalents shall be made at such
time as permissible under Code Section 409A and the regulations and guidance issued thereunder.

     8.8 Termination of Service. Each Award Agreement will set forth the extent to which the
Participant has the right to retain unvested Restricted Stock or Restricted Stock Units after his
or her termination of Service. These terms will be determined by the Committee in its sole
discretion, need not be uniform among all Awards of Restricted Stock, and may reflect, among other
things, distinctions based on the reasons for termination of Service.

Article 9. Performance Shares

     9.1 Grant of Performance Shares. Subject to the terms of the Plan, Performance Shares may be
granted to Participants in such amounts and upon such terms, and at any time and from time to time,
as the Committee determines. The Award of Performance Shares may be based on the Participant’s
attainment of performance objectives, or the vesting of an Award of Performance Shares may be based
on the Participant’s attainment of performance objectives, each as described in this Article 9.

     9.2 Value of Performance Shares. Each Performance Share will have an initial value equal to
the Fair Market Value on the date of grant. The Committee will set performance objectives in its
discretion which, depending on the extent to which they are met, will determine the number or value
(or both) of Performance Shares that will be paid out to the Participant. For purposes of this
Article 9, the time period during which the performance objectives must be met will be called a
“Performance Period” and will be set by the Committee in its discretion.

     9.3 Earning of Performance Shares. Subject to the terms of this Plan, after the applicable
Performance Period has ended, the holder of Performance Shares will be entitled to receive payout
on the number and value of Performance Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding performance
objectives have been achieved.

     9.4 Award Agreement. Each grant of Performance Shares will be evidenced by an Award Agreement
specifying the material terms and conditions of the Award (including the form

 

 

of payment of earned Performance Shares), and such other provisions as the Committee
determines.

     9.5 Form and Timing of Payment of Performance Shares. Except as provided in Article 13, the
target payment date of earned Performance Shares will be within the first two and one-half (2-1/2)
months following the end of the later of the calendar year or tax year of the Company in which the
Performance Shares is earned, but in no event later than the end of the calendar year following the
calendar year in which the Performance Share is earned. The Committee will pay earned Performance
Shares in the form of cash, in Shares, or in a combination of cash and Shares, as specified in the
Award Agreement. Performance Shares may be paid subject to any restrictions deemed appropriate by
the Committee.

     9.6 Termination of Service. Each Award Agreement will set forth the extent to which the
Participant has the right to retain Performance Shares after his or her termination of Service.
These terms will be determined by the Committee, in its sole discretion, need not be uniform among
all Awards of Performance Shares, and may reflect, among other things, distinctions based on the
reasons for termination of Service.

Article 10.
Other Stock Awards.

     Subject to the terms of the Plan, other Stock Awards may be granted to Participants in such
amounts and upon such terms, and at any time and from time to time, as the Committee determines.

Article 11. Performance Measures

     Unless and until the Committee proposes and the Company’s shareholders approve a change in the
general performance measures set forth in this Article 11, the performance measure(s) to be used
for purposes of Awards designed to qualify for the Performance-Based Exception will be chosen from
among the following alternatives (or in any combination of such alternatives):

	 	(a)	 	net earnings;
	 
	 	(b)	 	operating earnings or income;
	 
	 	(c)	 	earnings growth;
	 
	 	(d)	 	net income (absolute or competitive growth rates comparative);
	 
	 	(e)	 	net income applicable to Shares;
	 
	 	(f)	 	cash flow, including operating cash flow, free cash flow, discounted cash flow
return on investment, and cash flow in excess of cost of capital;
	 
	 	(g)	 	earnings per Share;
	 
	 	(h)	 	return on shareholders’ equity (absolute or peer-group comparative);
	 
	 	(i)	 	stock price (absolute or peer-group comparative);
	 
	 	(j)	 	absolute and/or relative return on common shareholders’ equity;
	 
	 	(k)	 	absolute and/or relative return on capital;

 

 

	 	(l)	 	absolute and/or relative return on assets;
	 
	 	(m)	 	economic value added (income in excess of cost of capital);
	 
	 	(n)	 	customer satisfaction;
	 
	 	(o)	 	expense reduction;
	 
	 	(p)	 	ratio of operating expenses to operating revenues;
	 
	 	(q)	 	gross revenue or revenue by pre-defined business segment (absolute or
competitive growth rates comparative);
	 
	 	(r)	 	revenue backlog; and
	 
	 	(s)	 	margins realized on delivered services.

     The Committee will have the discretion to adjust targets set for preestablished performance
objectives; however, Awards designed to qualify for the Performance-Based Exception may not be
adjusted upward, except to the extent permitted under Code Section 162(m), to reflect accounting
changes or other events.

     If Code Section 162(m) or other applicable tax or securities laws change to allow the
Committee discretion to change the types of performance measures without obtaining shareholder
approval, the Committee will have sole discretion to make such changes without obtaining
shareholder approval. In addition, if the Committee determines it is advisable to grant Awards
that will not qualify for the Performance-Based Exception, the Committee may grant Awards that do
not so qualify.

Article 12. Beneficiary Designation

     Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is to be paid in case the
Participant should die before receiving any or all of his or her Plan benefits. Each beneficiary
designation will revoke all prior designations by the same Participant, must be in a form
prescribed by the Committee, and must be made during the Participant’s lifetime. If the
Participant’s designated beneficiary predeceases the Participant or no beneficiary has been
designated, benefits remaining unpaid at the Participant’s death will be paid to the Participant’s
estate or other entity described in the Participant’s Award Agreement.

Article 13. Deferrals and Code Section 409A

     13.1 Purpose. As provided in an Award Agreement, the Committee may permit or require a
Participant to defer receipt of cash or Shares that would otherwise be due to him or her under the
Plan or otherwise create a deferred compensation arrangement (as defined in Code Section 409A and
the applicable regulations and guidance thereunder) in accordance with this Article 13.

     13.2 Initial Deferral Elections. The deferral of an Award or compensation otherwise payable
to the Participant shall be set forth in the terms of the Award Agreement or as elected by the
Participant pursuant to such rules and procedures as the Committee may establish. Any such

 

 

initial deferral election by a Participant will designate a time and form of payment and shall be
made at such time as provided below:

	 	(a)	 	A Participant may make a deferral election with respect to an Award (or
compensation giving rise thereto) at any time in any calendar year preceding the year
in which services giving rise to such compensation or Award are rendered.
	 
	 	(b)	 	In the case of the first year in which a Participant becomes eligible to
receive an Award or defer compensation under the Plan (aggregating other plans of its
type as defined in Section 1.409A-1(c) of the applicable regulations), the Participant
may make a deferral election within 30 days after the date the Participant becomes
eligible to participate in the Plan; provided, that such election may apply only with
respect to the portion of the Award or compensation attributable to services to be
performed subsequent to the election.
	 
	 	(c)	 	Where the grant of an Award or payment of compensation, or their vesting is
conditioned upon the satisfaction of pre-established organizational or individual
performance criteria relating to a performance period of at least 12 consecutive months
in which the Participant performs Service, a Participant may make a deferral election
no later 6 months prior to the end of the applicable performance period.
	 
	 	(d)	 	Where the vesting of an Award is contingent upon the Participant’s continued
Service for a period of no less than 13 months, the Participant may make a deferral
election within 30 days of receiving an Award.
	 
	 	(e)	 	A Participant may make a deferral election in other circumstances and at such
times as may be permitted under Code Section 409A and any regulations or guidance
thereunder.

     13.3 Distribution Dates. Any deferred compensation arrangement created under the Plan shall
be distributed at such times as provided in the Award Agreement, which may be upon the earliest or
latest of one or more of the following:

	 	(a)	 	A fixed date as set forth in the Award Agreement or pursuant to a Participant’s
election;
	 
	 	(b)	 	the Participant’s death;
	 
	 	(c)	 	the Participant’s Disability;
	 
	 	(d)	 	a Change in Control;
	 
	 	(e)	 	an Unforeseeable Emergency, as defined in Section 409A and implemented by the
Committee;

 

 

	 	(f)	 	a Participant’s termination of Service, or in the case of a Key Employee (as
defined in Code Section 409A) six months following the Participant’s termination of
Service; or
	 
	 	(g)	 	such other events as permitted under Code Section 409A and the regulations and
guidance thereunder.

     13.4 Restrictions on Distributions. No distribution may be made pursuant to the Plan if the
Committee reasonably determines that such distribution would (i) violate Federal securities laws or
other applicable law; (ii) be nondeductible pursuant to Code Section 162(m); or (iii) violate a
loan covenant or similar contractual requirement of the Company causing material harm to the
Company. In any such case, distribution shall be made at the earliest date at which Company
determines such distribution would not trigger clauses (i), (ii) or (iii) above.

     13.5 Redeferrals. The Company, in its discretion, may permit Executive to make a subsequent
election to delay a distribution date, or, as applicable, to change the form distribution payments,
attributable to one or more events triggering a distribution, so long as (i) such election may not
take effect until at least twelve (12) months after the election is made, (ii) such election defers
the distribution for a period of not less than five years from the date such distribution would
otherwise have been made, and (iii) such election may not be made less than twelve (12) months
prior to the date the distribution was to be made.

     13.6 Termination of Deferred Compensation Arrangements. In addition, the Company may in its
discretion terminate the deferred compensation arrangements created under this Plan subject to the
following:

	 	(a)	 	the arrangement may be terminated within the 30 days preceding, or 12 months
following, a Change in Control provided that all payments under such arrangement are
distributed in full within 12 months after termination;
	 
	 	(b)	 	the arrangement may be terminated in the Company’s discretion at any time
provided that (i) all deferred compensation arrangements of similar type maintained by
the Company are terminated, (ii) all payments are made at least 12 months and no more
than 24 months after the termination, and (iii) the Company does not adopt a new
arrangement of similar type for a period of five years following the termination of the
arrangement;
	 
	 	(c)	 	the arrangement may be terminated within 12 months of a corporate dissolution
taxed under Code Section 331 or with the approval of a bankruptcy court pursuant to 11
U.S.C. 503(b)(1)(A) provided that the payments under the arrangement are distributed by
the latest of the (i) the end of the calendar year of the termination, (ii) the
calendar year in which such payments are fully vested, or (iii) the first calendar year
in which such payment is administratively practicable.

 

 

Article 14. Rights of Participants

     14.1 Employment and Service. Nothing in the Plan will confer upon any Participant any right
to continue in the employ or Service of the Company or any Affiliate, or interfere with or limit in
any way the right of the Company or any Affiliate to terminate any Participant’s employment or
Service at any time.

     14.2 Participation. No Employee, Consultant or Director will have the right to receive an
Award under this Plan, or, having received any Award, to receive a future Award.

Article 15. Amendment, Modification and Termination

     15.1 Amendment, Modification and Termination. The Committee may at any time and from time to
time, alter, amend, modify or terminate the Plan in whole or in part. The Committee will not,
however, increase the number of Shares that may be issued or transferred to Participants under the
Plan, as described in the first sentence of Section 4.1 (and subject to adjustment as provided in
Sections 4.2 and 4.3).

     Subject to the terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding Awards under the Plan, or accept the surrender of outstanding Awards (to the extent not
already exercised) and grant new Awards in substitution of them (to the extent not already
exercised). The Committee will not, however, modify any outstanding Option so as to specify a
lower Exercise Price, without the approval of the Company’s shareholders. Notwithstanding the
foregoing, no modification of an Award will materially alter or impair any rights or obligations
under any Award already granted under the Plan, without the prior written consent of the
Participant.

     15.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In
recognition of unusual or nonrecurring events (including, without limitation, the events described
in Section 4.3) affecting the Company or its financial statements, or in recognition of changes in
applicable laws, regulations, or accounting principles, and, whenever the Committee determines that
adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, the Committee may, using
reasonable care, make adjustments in the terms and conditions of, and the criteria included in,
Awards. In case of an Award designed to qualify for the Performance-Based Exception, the Committee
will take care not to make an adjustment that would disqualify the Award.

     15.3 Awards Previously Granted. No termination, amendment or modification of the Plan will
adversely affect in any material way any Award already granted, without the written consent of the
Participant who holds the Award.

     15.4 Compliance with Code Section 162(m). Awards will comply with the requirements of Code
Section 162(m), if the Committee determines that such compliance is desired with respect to an
Award available for grant under the Plan. In addition, if changes are made to Code Section 162(m)
to permit greater flexibility as to any Award available under the Plan, the Committee may, subject
to this Article 15, make any adjustments it deems appropriate.

 

 

Article 16. Nontransferability of Awards.

     Except as otherwise provided in a Participant’s Award Agreement, no Option, SAR, Performance
Share, Restricted Stock, or Restricted Stock Unit granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution, or pursuant to a domestic relations order (as defined in Code Section
414(p)). All rights with respect to Performance Shares, Restricted Stock and Restricted Stock
Units will be available during the Participant’s lifetime only to the Participant or his or her
guardian or legal representative. Except as otherwise provided in a Participant’s Award Agreement
or in paragraph (a) below, all Options and SARs will be exercisable during the Participant’s
lifetime only by the Participant or his or her guardian or legal representative. The Participant’s
beneficiary may exercise the Participant’s rights to the extent they are exercisable under the Plan
following the Participant’s death. The Committee may, in its discretion, require a Participant’s
guardian, legal representative or beneficiary to supply it with the evidence the Committee deems
necessary to establish the authority of the guardian, legal representative or beneficiary to act on
behalf of the Participant.

	 	(a)	 	Notwithstanding the foregoing, with respect to any Nonstatutory Stock Options,
each Participant shall be permitted at all times to transfer any or all of the Options,
or, in the event the Options have not yet been issued to the Participant, the Company
shall be permitted to issue any or all of the Options, to certain trusts designated by
the Participant as long as such transfer or issuance is made as a gift (i.e., a
transfer for no consideration, with donative intent), whether during lifetime or to
take effect upon (or as a consequence of) his or her death, to his or her spouse or
children. Gifts in trust shall be deemed gifts to every beneficiary and contingent
beneficiary, and so shall not be permitted under this paragraph (a) if the
beneficiaries or contingent beneficiaries shall include anyone other than such spouse
or children. Transfers to a spouse or child for consideration, regardless of the
amount, shall not be permitted under this Section.
	 
	 	(b)	 	Any Options issued or transferred under this Article 16 shall be subject to all
terms and conditions contained in the Plan and the applicable Award Agreement. If the
Committee makes an Option transferable, such Option shall contain such additional terms
and conditions, as the Committee deems appropriate.

Article 17. Withholding

     17.1 Tax Withholding. The Company will have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, the minimum amount necessary to satisfy federal,
state, and local taxes, domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising under this Plan.

     17.2 Share Withholding. With respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising
as a result of Awards granted hereunder, the Company may satisfy the minimum withholding
requirement for supplemental wages, in whole or in part, by withholding Shares

 

 

having a Fair Market Value (determined on the date the Participant recognizes taxable income
on the Award) equal to the minimum withholding tax required to be collected on the transaction.
The Participant may elect, subject to the approval of the Committee, to deliver the necessary funds
to satisfy the withholding obligation to the Company, in which case there will be no reduction in
the Shares otherwise distributable to the Participant.

Article 18. Indemnification

     Each person who is or has been a member of the Committee or the Board, and any officer or
Employee to whom the Committee has delegated authority under Section 3.1 or 3.2 of the Plan, will
be indemnified and held harmless by the Company from and against any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in connection with or as a
result of any claim, action, suit or proceeding to which he or she may be a party or in which he or
she may be involved by reason of any action taken, or failure to act, under the Plan. Each such
person will also be indemnified and held harmless by the Company from and against any and all
amounts paid by him or her in a settlement approved by the Company, or paid by him or her in
satisfaction of any judgment, of or in a claim, action, suit or proceeding against him or her and
described in the previous sentence, so long as he or she gives the Company an opportunity, at its
own expense, to handle and defend the claim, action, suit or proceeding before he or she undertakes
to handle and defend it. The foregoing right of indemnification will not be exclusive of any other
rights of indemnification to which a person who is or has been a member of the Committee or the
Board may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify him or her or hold him or her
harmless.

Article 19. Successors

     All obligations of the Company under the Plan or any Award Agreement will be binding on any
successor to the Company, whether the existence of the successor results from a direct or indirect
purchase of all or substantially all of the business or assets of the Company or both, or a merger,
consolidation, or otherwise.

Article 20. Breach of Restrictive Covenants

     An Award Agreement may provide that, notwithstanding any other provision of this Plan to the
contrary, if the Participant breaches any competition, nonsolicitation or nondisclosure provisions
contained in the Award Agreement, whether during or after termination of Service, the Participant
will forfeit:

     (a) any and all Awards granted or transferred to him or her under the Plan, including Awards
that have become Vested; and

     (b) the profit the Participant has realized on the exercise of any Options, which is the
difference between the Exercise Price of the Options and the applicable Fair Market Value of the
Shares (the Participant may be required to repay such difference to the Company).

 

 

Article 21. Legal Construction

     21.1 Number. Except where otherwise indicated by the context, any plural term used in this
Plan includes the singular and a singular term includes the plural.

     21.2 Severability. If any provision of the Plan is held illegal or invalid for any reason,
the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be
construed and enforced as if the illegal or invalid provision had not been included.

     21.3 Requirements of Law. The granting of Awards and the issuance of Share or cash payouts
under the Plan will be subject to all applicable laws, rules, and regulations, and to any approvals
by governmental agencies or national securities exchanges as may be required.

     21.4 Securities Law Compliance. As to any individual who is, on the relevant date, an
officer, director or ten percent beneficial owner of any class of the Company’s equity securities
that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of
the Exchange Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act, or any successor rule. To the extent any
provision of the Plan or action by the Committee fails to so comply, it will be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.

     If at any time the Committee determines that exercising an Option or SAR or issuing Shares
pursuant to an Award would violate applicable securities laws, the Option or SAR will not be
exercisable, and the Company will not be required to issue Shares. The Company may require a
Participant to make written representations it deems necessary or desirable to comply with
applicable securities laws. No person who acquires Shares under the Plan may sell the Shares,
unless he or she makes the offer and sale pursuant to an effective registration statement under the
Exchange Act, which is current and includes the Shares to be sold, or an exemption from the
registration requirements of the Exchange Act.

     21.5 Awards to Foreign Nationals and Employees Outside the United States. To the extent the
Committee deems it necessary, appropriate or desirable to comply with foreign law or practice and
to further the purposes of this Plan, the Committee may, without amending the Plan, (i) establish
rules applicable to Awards granted to Participants who are foreign nationals or are employed
outside the United States, or both, including rules that differ from those set forth in this Plan,
and (ii) grant Awards to such Participants in accordance with those rules.

     21.6 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for
incentive and deferred compensation. With respect to any payments or deliveries of Shares not yet
made to a Participant by the Company, the Participant’s rights are no greater than those of a
general creditor of the Company. The Committee may authorize the establishment of trusts or other
arrangements to meet the obligations created under the Plan, so long as the arrangement does not
cause the Plan to lose its legal status as an unfunded plan.

     21.7 Governing Law. To the extent not preempted by federal law, the Plan and all agreements
hereunder will be construed in accordance with and governed by the laws of the State of Minnesota.

 

 

     21.8 Electronic Delivery and Evidence of Award. The Company may deliver by email or other
electronic means (including posting on a web site maintained by the Company or by a third party)
all documents relating to the Plan or any Award hereunder (including, without limitation, any Award
Agreement and prospectus required by the SEC) and all other documents that the Company is required
to deliver to its securities holders (including, without limitation, annual reports and proxy
statements). In addition, evidence of an Award may be in electronic form, may be limited to
notation on the books and records of the Company and, with the approval of the Board, need not be
signed by a representative of the Company or a Participant. Any Shares that become deliverable to
the Participant pursuant to the Plan may be issued in certificate form in the name of the
Participant or in book entry form in the name of the Participant.

     21.9 No Limitation on Rights of the Company. The grant of the Award does not and will not in
any way affect the right or power of the Company to make adjustments, reclassifications or changes
in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.

     21.10 Participant to Have No Rights as a Shareholder. Before the date as of which he or she
is recorded on the books of the Company as the holder of any Shares underlying an Award, a
Participant will have no rights as a shareholder with respect to those Shares.exv4w2

 

EXHIBIT 4.2(a)

Form of

Employee Stock Option Agreement

 

 

PLATO LEARNING, INC.

EMPLOYEE STOCK OPTION AGREEMENT

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [Name of
Optionee] (the “Employee”) on this [day] day of [month], [year] (the “Option Date”), pursuant to
the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”), a non-qualified
stock option (the “Option”) to purchase from the Company [shares] shares of its Common Stock, $.01
par value (“Stock”), at the price of [$price] per share upon and subject to the terms and
conditions set forth below.

     1. Option Subject to Acceptance of Agreement.

     The Option shall be forfeited unless the Employee shall accept this Agreement by executing it
in the space provided below and return it to the Company within 60 days following the Option Date.

     2. Time and Manner of Exercise of Option.

     2.1 Maximum Term of Option. In no event may the Option be exercised, in whole or in
part, after 5:00 p.m., Minneapolis time, on the date, which is eight (8) years after the Option
Date (the “Expiration Date”).

     2.2 Exercise of Option. Except as otherwise provided in the Plan, the Option shall
become exercisable with respect to (i) 25% of the aggregate number of shares of Stock subject to
the Option on [date] (the “First Exercise Date”); (ii) with respect to 50% of the aggregate number
of shares subject to the Option on [date] (the “Second Exercise Date”); (iii) with respect to 75%
of the aggregate number of shares subject to the Option on [date] (the “Third Exercise Date”); and
(iv) with respect to 100% of the aggregate number of shares subject to the Option on [date] (the
“Fourth Exercise Date”) (the First Exercise Date, the Second Exercise Date, the Third Exercise
Date, and the Fourth Exercise Date each being referred to herein as an “Exercise Date”).

     2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the
Option may be exercised (i) by giving written notice to the Secretary of the Company or the
Secretary’s designee, specifying the number of whole shares to be purchased and accompanied by the
payment therefore in full in cash or, if permitted by the Compensation Committee, (A) in previously
owned whole shares of Stock (for which the Employee has good title, free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by reason of such exercise, (B) in cash by
a broker-dealer to whom the Employee has submitted an irrevocable notice of exercise, or (C) a
combination of cash and Stock as described in this Section; and (ii) by executing such documents as
the Company may reasonably request. No shares shall be issued until the full purchase price and
all applicable taxes have been paid.

 

 

     2.4 Termination of Option. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall terminate on its Expiration Date, or
earlier to the extent not exercised pursuant to Section 2.2 and pursuant to Section 6.10 of the
Plan. In the event that the Employee shall forfeit rights to purchase all or a portion of the
shares to which this Option relates, the Employee shall, within 10 days of the date of the
Company’s written request, return this Agreement to the Company for cancellation.

     3. Additional Terms and Conditions of Option.

     3.1 Withholding Taxes. As a condition precedent to any exercise of the Option, the
Employee shall, upon request by the Company, pay to the Company in addition to the purchase price
of the shares such amount of cash as the Company may be required to withhold, under all applicable
federal, state or local laws or regulations. The employee will recognize ordinary income at the
time of exercise in an amount equal to the excess, if any, of the fair market value of a share of
Common Stock at the time of exercise over the option price, multiplied by the number of shares as
to which the option is exercised. The Employee may elect, by written notice to the Company, to
satisfy part or all of the withholding tax requirements associated with the exercise by delivering
to the Company from shares of Stock already owned by the Employee, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the Employee under this
Section 3.1. Any such election shall be in accordance with, and subject to, applicable tax and
securities laws, regulations and rulings.

     3.2 Agreement Subject to Plan. This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith, except where specifically provided
otherwise in this Agreement. The Employee hereby acknowledges receipt of a copy of the Plan.

	 	 	 	 	 	 	 
	 	 	PLATO LEARNING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Company Executive]
	 	 

Accepted this _________ day of

______________________, 200_________

___________________________________

               [Name of Optionee]

 

 

EXHIBIT 4.2(b)

Form of

Employee Stock Option Agreement

Section 16 Employees

 

 

PLATO LEARNING, INC.

EMPLOYEE STOCK OPTION AGREEMENT

Section 16 Employees

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [Name of
Optionee] (the “Employee”) on this [day] day of [month], [year] (the “Option Date”), pursuant to
the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”), a non-qualified
stock option (the “Option”) to purchase from the Company [shares] shares of its Common Stock, $.01
par value (“Stock”), at the price of [$price] per share upon and subject to the terms and
conditions set forth below.

     1. Option Subject to Acceptance of Agreement.

     The Option shall be forfeited unless the Employee shall accept this Agreement by executing it
in the space provided below and return it to the Company within 60 days following the Option Date.

     2. Time and Manner of Exercise of Option.

     2.1 Maximum Term of Option. In no event may the Option be exercised, in whole or in
part, after 5:00 p.m., Minneapolis time, on the date, which is eight (8) years after the Option
Date (the “Expiration Date”).

     2.2 Exercise of Option. Except as otherwise provided in the Plan, the Option shall
become exercisable with respect to (i) 25% of the aggregate number of shares of Stock subject to
the Option on [date] (the “First Exercise Date”); (ii) with respect to 50% of the aggregate number
of shares subject to the Option on [date] (the “Second Exercise Date”); (iii) with respect to 75%
of the aggregate number of shares subject to the Option on [date] (the “Third Exercise Date”); and
(iv) with respect to 100% of the aggregate number of shares subject to the Option on [date] (the
“Fourth Exercise Date”) (the First Exercise Date, the Second Exercise Date, the Third Exercise
Date, and the Fourth Exercise Date each being referred to herein as an “Exercise Date”).

     2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the
Option may be exercised (i) by giving written notice to the Secretary of the Company or the
Secretary’s designee, specifying the number of whole shares to be purchased and accompanied by the
payment therefore in full in cash or, if permitted by the Compensation Committee, (A) in previously
owned whole shares of Stock (for which the Employee has good title, free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by reason of such exercise, (B) in cash by
a broker-dealer to whom the Employee has submitted an irrevocable notice of exercise, or (C) a
combination of cash and Stock as described in this Section; and (ii) by executing such documents as
the Company may reasonably request. No shares shall be issued until the full purchase price and
all applicable taxes have been paid.

     2.4 Termination of Option. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall terminate on its Expiration Date, or
earlier to the extent not exercised pursuant to Section 2.2 and pursuant to Section 6.10 of the

 

 

Plan. Upon termination of such Employee’s service with the Company for any reason other
than Death, Disability or Retirement, any Option held by such Employee may thereafter be exercised
to the extent it was exercisable at the time of such termination, but may not be exercised after
one year after such termination, or the expiration of the stated term of the Option, whichever
period is the shorter. Options that are not exercisable at the time of such termination of Service
shall expire at the close of business on the date of such termination. In the event an Employee’s
Service with the Company is terminated for Cause, all unexercised Options granted to such Employee
shall immediately terminate. In the event that the Employee shall forfeit rights to purchase all
or a portion of the shares to which this Option relates, the Employee shall, within 10 days of the
date of the Company’s written request, return this Agreement to the Company for cancellation.

     3. Additional Terms and Conditions of Option.

     3.1 Withholding Taxes. As a condition precedent to any exercise of the Option, the
Employee shall, upon request by the Company, pay to the Company in addition to the purchase price
of the shares such amount of cash as the Company may be required to withhold, under all applicable
federal, state or local laws or regulations. The employee will recognize ordinary income at the
time of exercise in an amount equal to the excess, if any, of the fair market value of a share of
Common Stock at the time of exercise over the option price, multiplied by the number of shares as
to which the option is exercised. The Employee may elect, by written notice to the Company, to
satisfy part or all of the withholding tax requirements associated with the exercise by delivering
to the Company from shares of Stock already owned by the Employee, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the Employee under this
Section 3.1. Any such election shall be in accordance with, and subject to, applicable tax and
securities laws, regulations and rulings.

     3.2 Agreement Subject to Plan. This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith, except where specifically provided
otherwise in this Agreement. The Employee hereby acknowledges receipt of a copy of the Plan.

	 	 	 	 	 	 	 
	 	 	PLATO LEARNING, INC.	 	 
	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Company Executive]	 	 

Accepted this _________ day of

______________________, 200_________

___________________________________

                [Name of Optionee]

 

 

EXHIBIT 4.2(c)

Form of

Employee Stock Option Agreement

Double Trigger Change of Control

 

 

PLATO LEARNING, INC.

EMPLOYEE STOCK OPTION AGREEMENT

Double Trigger Change of Control

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [Name of
Optionee] (the “Employee”) on this [day] day of [month], [year] (the “Option Date”), pursuant to
the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan (the “Plan”), a non-qualified
stock option (the “Option”) to purchase from the Company [shares] shares of its Common Stock, $.01
par value (“Stock”), at the price of [$price] per share upon and subject to the terms and
conditions set forth below.

     1. Option Subject to Acceptance of Agreement.

     The Option shall be forfeited unless the Employee shall accept this Agreement by executing it
in the space provided below and return it to the Company within 60 days following the Option Date.

     2. Time and Manner of Exercise of Option.

     2.1 Maximum Term of Option. In no event may the Option be exercised, in whole or in
part, after 5:00 p.m., Minneapolis time, on the date, which is eight (8) years after the Option
Date (the “Expiration Date”).

     2.2 Exercise of Option. Except as otherwise provided in the Plan, the Option shall
become exercisable with respect to (i) 25% of the aggregate number of shares of Stock subject to
the Option on [date] (the “First Exercise Date”); (ii) with respect to 50% of the aggregate number
of shares subject to the Option on [date] (the “Second Exercise Date”); (iii) with respect to 75%
of the aggregate number of shares subject to the Option on [date] (the “Third Exercise Date”); and
(iv) with respect to 100% of the aggregate number of shares subject to the Option on [date] (the
“Fourth Exercise Date”) (the First Exercise Date, the Second Exercise Date, the Third Exercise
Date, and the Fourth Exercise Date each being referred to herein as an “Exercise Date”).

     2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the
Option may be exercised (i) by giving written notice to the Secretary of the Company or the
Secretary’s designee, specifying the number of whole shares to be purchased and accompanied by the
payment therefore in full in cash or, if permitted by the Compensation Committee, (A) in previously
owned whole shares of Stock (for which the Employee has good title, free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by reason of such exercise, (B) in cash by
a broker-dealer to whom the Employee has submitted an irrevocable notice of exercise, or (C) a
combination of cash and Stock as described in this Section; and (ii) by executing such documents as
the Company may reasonably request. No shares shall be issued until the full purchase price and
all applicable taxes have been paid.

     2.4 Termination of Option. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall terminate on its Expiration Date, or
earlier to the extent not exercised pursuant to Section 2.2 and pursuant to Section 6.10 of the

 

 

Plan. Upon termination of such Employee’s service with the Company for any reason other than
Death, Disability or Retirement, any Option held by such Employee may thereafter be exercised to
the extent it was exercisable at the time of such termination, but may not be exercised after one
year after such termination, or the expiration of the stated term of the Option, whichever period
is the shorter. Options that are not exercisable at the time of such termination of Service shall
expire at the close of business on the date of such termination. In the event an Employee’s
Service with the Company is terminated for Cause, all unexercised Options granted to such Employee
shall immediately terminate. In the event that the Employee shall forfeit rights to purchase all
or a portion of the shares to which this Option relates, the Employee shall, within 10 days of the
date of the Company’s written request, return this Agreement to the Company for cancellation.

     2.5 Change in Control. Notwithstanding any other provisions as outlined in the Plan,
and unless otherwise specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities exchanges, upon a Change in Control
any and all outstanding Options will become immediately exercisable, after a Change in Control and
upon the Employee’s termination for any reason other than cause after a Change in Control, and will
remain exercisable throughout their entire term.

     3. Additional Terms and Conditions of Option.

     3.1 Withholding Taxes. As a condition precedent to any exercise of the Option, the
Employee shall, upon request by the Company, pay to the Company in addition to the purchase price
of the shares such amount of cash as the Company may be required to withhold, under all applicable
federal, state or local laws or regulations. The employee will recognize ordinary income at the
time of exercise in an amount equal to the excess, if any, of the fair market value of a share of
Common Stock at the time of exercise over the option price, multiplied by the number of shares as
to which the option is exercised. The Employee may elect, by written notice to the Company, to
satisfy part or all of the withholding tax requirements associated with the exercise by delivering
to the Company from shares of Stock already owned by the Employee, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the Employee under this
Section 3.1. Any such election shall be in accordance with, and subject to, applicable tax and
securities laws, regulations and rulings.

     3.2 Agreement Subject to Plan. This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith, except where specifically provided
otherwise in this Agreement. The Employee hereby acknowledges receipt of a copy of the Plan.

	 	 	 	 	 	 	 
	 	 	PLATO LEARNING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Company Executive]	 	 

Accepted this _________ day of

______________________, 200_________

___________________________________

                [Name of Optionee]

 

 

EXHIBIT 4.2(d)

Form of

Non-Employee Director Stock Option Agreement

 

 

PLATO LEARNING, INC.

NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [Name of
Non-Employee Director] (the “Non-Employee Director”) on this [day] day of [month], [year] (the
“Option Date”), pursuant to the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan
(the “Plan”), a non-qualified stock option (the “Option”) to purchase from the Company [shares]
shares of its Common Stock, $.01 par value (“Stock”), at the price of [$price] per share upon and
subject to the terms and conditions set forth below.

     1. Option Subject to Acceptance of Agreement.

     The Option shall be forfeited unless the Non-Employee Director shall accept this Agreement by
executing it in the space provided below and return it to the Company within 60 days following the
Option Date.

     2. Time and Manner of Exercise of Option.

     2.1 Maximum Term of Option. In no event may the Option be exercised, in whole or in
part, after 5:00 p.m., Minneapolis time, on the date, which is eight (8) years after the Option
Date (the “Expiration Date”).

     2.2 Exercise of Option. Except as otherwise provided in the Plan, the Option shall
become immediately exercisable with respect to 100% of the shares subject to the Option.

     2.3 Method of Exercise. Subject to the limitations set forth in this Agreement, the
Option may be exercised (i) by giving written notice to the Secretary of the Company or the
Secretary’s designee, specifying the number of whole shares to be purchased and accompanied by the
payment therefore in full in cash or, if permitted by the Compensation Committee, (A) in previously
owned whole shares of Stock (for which the Non-Employee Director has good title, free and clear of
all liens and encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable pursuant to the Option by reason of such exercise,
(B) in cash by a broker-dealer to whom the Non-Employee Director has submitted an irrevocable
notice of exercise, or (C) a combination of cash and Stock as described in this Section; and (ii)
by executing such documents as the Company may reasonably request. No shares shall be issued until
the full purchase price and all applicable taxes have been paid.

     2.4 Termination of Option. In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall terminate on its Expiration Date, or
earlier to the extent not exercised pursuant to Section 2.2 and pursuant to Section 6.10 of the
Plan. Upon termination of such Non-Employee Director’s service as a Director of the company after
the Non-Employee Director has served more than five years on the Board of the Company, the
unexercised portion of an Option held by such Non-Employee Director shall be exercisable through
the original term of the option. Upon termination of such Director’s service as a Director of the
Company before the Non-Employee Director has served more than five years on the Board of Directors,
the unexercised portion of an Option held by such Director shall be exercisable for a period of
one-year after termination. A director year starts as of the annual meeting date and ends the day
before the next year’s annual meeting date. In the event that the Non-Employee Director shall
forfeit rights to purchase all or a portion of the shares to which this Option relates,

 

 

the Non-Employee Director shall, within 10 days of the date of the Company’s written request,
return this Agreement to the Company for cancellation.

     2.5 Change in Control. Notwithstanding any other provisions as outlined in the Plan,
and unless otherwise specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities exchanges, upon a Change in Control
and upon the Non-Employee Director’s termination for any reason other than cause after a Change in
Control, any and all outstanding Options will
remain
exercisable throughout their entire term.

     3. Additional Terms and Conditions of Option.

     3.1 Withholding Taxes. As a condition precedent to any exercise of the Option, the
Non-Employee Director shall, upon request by the Company, pay to the Company in addition to the
purchase price of the shares such amount of cash as the Company may be required to withhold, under
all applicable federal, state or local laws or regulations. The Non-Employee Director will
recognize ordinary income at the time of exercise in an amount equal to the excess, if any, of the
fair market value of a share of Common Stock at the time of exercise over the option price,
multiplied by the number of shares as to which the option is exercised. The Non-Employee Director
may elect, by written notice to the Company, to satisfy part or all of the withholding tax
requirements associated with the exercise by delivering to the Company from shares of Stock already
owned by the Non-Employee Director, that number of shares having an aggregate Fair Market Value
equal to part or all of the tax payable by the Non-Employee Director under this Section 3.1. Any
such election shall be in accordance with, and subject to, applicable tax and securities laws,
regulations and rulings.

     3.2 Agreement Subject to Plan. This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith, except where specifically provided
otherwise in this Agreement. The Non-Employee Director hereby acknowledges receipt of a copy of
the Plan.

	 	 	 	 	 	 	 
	 	 	PLATO LEARNING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Company Executive]	 	 

Accepted this _________ day of

______________________, 200_________

___________________________________

               [Non-Employee Director]

 

 

EXHIBIT 4.2(e)

Form of

Non-Employee Director Restricted Stock Agreement

 

 

PLATO LEARNING, INC.

NON-EMPLOYEE DIRECTOR RESTRICTED STOCK AGREEMENT

     PLATO Learning, Inc., a Delaware corporation (the “Company”), hereby grants to [Name of
Non-Employee Director] (the “Non-Employee Director”) on this [day] day of [month], [year] (the
“Option Date”), pursuant to the provisions of the PLATO Learning, Inc. 2006 Stock Incentive Plan
(the “Plan”), [shares] shares of Restricted Stock of the Company’s Common Stock, $.01 par value
(“Restricted Stock”), with a fair market value of [$price] per share on the Date of Issuance, upon
and subject to the terms and conditions set forth below.

     1. Restricted Stock Subject to Acceptance of Agreement. The Restricted Stock shall be
forfeited unless the Non-Employee Director shall accept this Agreement by executing it in the space
provided below and return it to the Company within 60 days following the Restricted Stock Date.
The Restricted Stock shall be issued upon acceptance hereof by the Non-Employee Director and upon
satisfaction of the conditions of this Agreement.

     2. Lapse of Forfeiture Restrictions. The Restricted Stock is immediately vested, but
may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or
disposed of until the earlier of (i) the Non-Employee Director’s death, (ii) the Non-Employee
Director’s disability as determined by the Company, (iii) five years from the date of grant, (iv)
the Non-Employee Director’s retirement from the Board of Directors, (v) the Non-Employee Director’s
resignation from the Board Directors, or (vi) the occurrence of a Change-in-Control (as such terms
are defined in the Plan).

     3. Stock. A certificate or shares in book entry evidencing the Restricted Stock shall
be issued by the Company in the Non-Employee Director’s name, pursuant to which Non-Employee
Director shall have voting rights and shall be entitled to receive all dividends unless and until
the Restricted Stock are forfeited pursuant to the provisions of this Agreement. The certificate
or shares in book entry shall bear a legend evidencing the nature of the Restricted Stock, and the
Company will cause the certificate to be delivered upon issuance to the Secretary of the Company or
to such other depository as may be designated by the Company as a depository for safekeeping until
the forfeiture occurs or the Forfeiture Restrictions lapse pursuant to the terms of the Plan and
this award. The Non-Employee Director shall deliver to the Company a stock power, endorsed in
blank, relating to the Restricted Stock then subject to the Forfeiture Restrictions. Upon the
lapse of the Forfeiture Restrictions without forfeiture, the Company shall cause a new certificate
or certificates or shares in book entry form to be issued without legend in the name of the
Non-Employee Director for the shares upon which Forfeiture Restrictions lapsed. Notwithstanding
any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether
subject to restrictions or unrestricted) may be postponed for such period as may be required to
comply with applicable requirements of any national securities exchange or any requirements under
any law or regulation applicable to the issuance or delivery of such shares. The Company shall not
be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall
constitute a violation of any provision of any law or of any regulation of any governmental
authority or any national securities exchange.

 

 

     4. Tax Consequences. The Non-Employee Director has reviewed with the Non-Employee
Director’s own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Non-Employee Director is
relying solely on such advisors and not on any statements or representations of the Company or any
of its agents. The Non-Employee Director understands that the Non-Employee Director (and not the
Company) shall be responsible for the Non-Employee Director’s own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement. As a condition
precedent to the issuance of Restricted Stock, the Non-Employee Director shall, upon request by the
Company, deliver to the Company at the time of such receipt or lapse, as the case may be, such
amount of money or shares of unrestricted stock as the Company may require to meet its withholding
obligation under applicable tax laws or regulations, and, if the Non-Employee Director fails to do
so, the Company is authorized to withhold from any cash or stock remuneration then or thereafter
payable to Non-Employee Director any tax required to be withheld by reason of such resulting
compensation income.

     5. Status of Restricted Stock. The Non-Employee Director agrees that the Restricted
Stock will not be sold or otherwise disposed of in any manner, which would constitute a violation
of any applicable federal or state securities laws. Non-Employee Director also agrees (i) that the
certificates representing the Restricted Stock may bear such legend or legends as the Company deems
appropriate in order to assure compliance with applicable securities laws, (ii) that the Company
may refuse to register the transfer of the Restricted Stock on the stock transfer records of the
Company if such proposed transfer would be in the opinion of counsel satisfactory to the Company
constitute a violation of any applicable securities law and (iii) that the Company may give related
instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted
Stock.

     6. Agreement Subject to Plan. This Agreement is subject to the provisions of the
Plan, and shall be interpreted in accordance therewith, except where specifically provided
otherwise in this Agreement. The Non-Employee Director hereby acknowledges receipt of a copy of
the Plan.

	 	 	 	 	 	 	 
	 	 	PLATO LEARNING, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Company Executive]	 	 

Accepted this _________ day of

______________________, 200_________

___________________________________

               [Non-Employee Director]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}]]