Document:

Exhibit 10.31

 

2007 STOCK INCENTIVE PLAN
 FOR KEY EMPLOYEES OF

LAUREATE EDUCATION, INC. AND ITS SUBSIDIARIES

 

1.                                 Purpose of Plan

 

The 2007 Stock Incentive Plan for Key Employees of Laureate Education, Inc. and its Subsidiaries (the “Plan”) is designed:

 

(a)          to promote the long term financial interests and growth of Laureate Education, Inc. (the “Company”) and its Subsidiaries by attracting and retaining management and other personnel and key service providers with the training, experience and ability to enable them to make a substantial contribution to the success of the Company’s business;

 

(b)          to motivate management personnel by means of growth-related incentives to achieve long range goals; and

 

(c)          to further the alignment of interests of participants with those of the stockholders of the Company through opportunities for increased stock, or stock-based ownership in the Company.

 

2.                                   Definitions

 

As used in the Plan, the following words shall have the following meanings:

 

(a)          “Affiliate” means with respect to any Person, any entity directly or indirectly controlling, controlled by or under common control with such Person.

 

(b)          “Board” means the Board of Directors of the Company.

 

(c)          “Change in Control” means (a) the first to occur of any of the following: (i) the sale of all or substantially all of the assets of Parent or the Company, as applicable, to a Person (or Group of Persons acting in concert) or (ii) sale by Parent, any Investor or any of their respective Affiliates, to a Person (or Group acting in concert) that results in more than 50% of the equity interests of Parent or the Company, as applicable, being held by a Person (or Group acting in concert), which may include any Investor or any of their respective Affiliates; provided, however, that in no event shall the Transaction constitute a Change in Control nor shall any relationship among any Investors created by the occurrence of the Transaction be deemed to, defacto, create a Group for purposes of this clause (a) and (b) in the case of the occurrence of an event identified in clause (a), also results in any Person or Group acting in concert that acquired more than 50% of the equity interests of Parent or the Company, as applicable, having the ability to appoint a majority of the applicable board of directors.

 

(d)                             “Code” means the United States Internal Revenue Code of 1986, as amended.

 

(e)          “Committee” means the Compensation Committee of the Board (or, if no such committee is appointed, the Board).

 

 

(f)           “Common Stock” or “Share” means the common stock, par value $0.01 per share, as may be restated, of the Company, which may be authorized but unissued, or issued and reacquired.

 

(g)          “Employee” means a person, including an officer, in the regular employment of the Company or any other Service Recipient who, in the opinion of the Committee, is, or is expected to have involvement in the management, growth or protection of some part or all of the business of the Company or any other Service Recipient.

 

(h)                              “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(i)           “Fair Market Value” means, on a per Share basis, (i)i if there is a public market for the Shares on such date, the average of the high and low closing bid prices of the Shares on such stock exchange on which the Shares are principally trading on the applicable date, or, if there were no sales on such date, on the closest preceding date on which there were sales of Shares, or (ii) if there is no public market for the Shares on such date, the fair markl-1value of the Shares as determined in good faith by the Board, which determination shall take into account an appraisal of the fair market value of the Shares conducted by Duff & Phelps (or such other nationally recognized appraisal firm as the Board may select), which appraisal shall be conducted at least annually.

 

G)           “.Qrim1”means an award made to a Participant pursuant to the Plan and described in Section 5, including, without limitation, an award of a Stock Option, Stock Appreciation Right, Other Stock-Based Award or Dividend Equivalent Right (as such ti:rm.s are defined in Section 5), or any combination of the foregoing.

 

(k)          “Grant Agreement” means an agreement between the Company and a Participant that sets forth the terms, conditions and limitations applicable to a Grant.

 

(1)          “Group” means “group,” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

(m)         “Investors” means all persons and entities set forth on Schedule I to the Summary of Terms of Stockholders Agreement, which is Schedule B to the Amended and Restated Interim Investors Agreement, entered into as of June 3, 2007 by and among Parent and the other parties appearing on the signature pages thereto.

 

(n)          “Management Stockholder’s Agreement” shall mean that certain Management Stockholder’s Agreement between the applicable Participant and the Company.

 

(o)          “Merger” means the merger of L Curve Sub Inc. with and into Laureate Education Inc. as contemplated by the Merger Agreement.

 

(p)          “Merger Agreement” means the Amended and Restated Agreement and Plan of Merger, dated as June 3, 2007 (as amended, supplemented, restated or otherwise modified from time to time.

 

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(q)          “Parent” means Wengen Alberta, Limited Partnership, an Alberta Limited Partnership.

 

(r)           “Participant” means an Employee, non-employee member of the Board, consultant or other person having a service relationship with the Company or any other Service Recipient, to whom one or more Grants have been made and remain outstanding.

 

(s)           “Person” means “person,” as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act.

 

(t)           “Sale Participation Agreement” shall mean that certain Sale Participation Agreement between the applicable Participant and Parent.

 

(u)          “Service Recipient” shall mean the Company or any of its Subsidiaries or Affiliates that satisfies the definition of “service recipient” within the meaning of Proposed Treasury Regulation Section l.409A- l(g) (or any successor regulation) with respect to which the person is a “service provider’’ (within the meaning of Treasury Regulation Section l.409A-l(f) (or any successor regulation).

 

(v)          “Subsidiary”means any corporation or other entity in an unbroken chain of corporations or other entities beginning with the Company if each of the corporations or other entities, or group of commonly controlled corporations or other entities, other than the last corporation or other entity in the unbroken chain then owns stock or other equity interests possessing 50% or more of the total combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in such chain.

 

(w)         “Transaction” means the acquisition by the Investors (indirectly through Parent) of the Company as contemplated by the Merger Agreement.

 

3.                                  Administration of Plan

 

(a)          The Plan shall be administered by the Committee. The Committee may adopt its own rules of procedure, and action of a majority of the members of the Committee taken at a meeting, or action taken without a meeting by unanimous written consent, shall constitute action by the Committee. The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules. Any such interpretations, rules, and administration shall be consistent with the basic purposes of the Plan.

 

(b) The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under the Plan, subject to applicable law and such conditions and limitations as the Committee shall prescribe, except that only the Committee may designate and make Grants to Participants.

 

(c)          The Committee may employ counsel, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company, and the officers and directors of the Company shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of

 

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the Committee, nor any employee or representative of the Company shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Grants, and all such members of the Committee, employees and representatives shall be fully protected and indemnified to the greatest extent permitted by applicable law by the Company with respect to any such action, determination or interpretation.

 

4.            Eligibility

 

The Committee may from time to time make Grants under tile Plan to such Employees, or other persons having a relationship with Company or any other Service Recipient, and in such form and having such terms, conditions and limitations as the Committee may determine. The terms, conditions and limitations of each Grant under the Plan shall be set forth in a Grant Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, that such Grant Agreement shall contain provisions dealing with the treatment of Grants in the event of the termination of employment or other service relationship, death or disability of a Participant, and may also include provisions concerning the treatment of Grants in the event of a Change in Control.

 

5.                                   Grants

 

From time to time, the Committee will determine the forms and amounts of Grants for Participants. Such Grants may take the following forms in the Committee’s sole discretion:

 

(a)          Stock Optjons - These are options to purchase Common Stock (“Stock Options”). At the time of Grant the Committee shall determine, and shall include in the Grant Agreement or other Plan rules, the option exercise period, the option exercise price, vesting requirements, and such other terms, conditions or restrictions on the grant or exercise of the option as the Committee deems appropriate including, without limitation, the right to receive dividend equivalent payments on vested Stock Options. Notwithstanding the foregoing, the exercise price per Share of a Stock Option shall in no event be less than the Fair Market Value on the date the Stock Option is granted (subject to later adjustment pursuant to Section 8 hereof). In addition to other restrictions contained in the Plan, a Stock Option granted under this Section 5(a) may not be exercised more than 10years after the date it is granted. Payment of the Stock Option exercise price shall be made (i) in cash, (ii) with the consent of the Committee, in Shares (any such Shares valued at Fair Market Value on the date of exercise) that the Participant has held for at least six months (or such other period of time as may be required by the Company’s accountants in order to avoid adverse accounting treatment applying generally accepted accounting principles), (iii) through the withholding of Shares (any such Shares valued at Fair Market Value on the date of exercise) otherwise issuable upon the exercise of the Stock Option in a mann.er that is compliant with applicable Jaw, or (iv) a combination of the foregoing methods, in each such case, in accordance with the terms of the Plan, the Grant Agreement and any applicable guidelines of the Committee in effect at the time.

 

(b)          Stock Appreciation Rights - The Committee may grant “Stock Appreciation Rights” (as hereinafter defined) independent of, or in connection with, the grant of a Stock Option or a portion thereof. Each Stock Appreciation Right shall be subject to such other terms as the Committee may determine. The exercise price per Share of a Stock Appreciation Right shall in no

 

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event be less than the Fair Market Value on the date the Stock Appreciation Right is granted. Each “Stock Appreciation Right” granted independent of a Stock Option shall be defined as a right of a Participant, upon exercise of such Stock Appreciation Right, to receive an amount equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one Share over (B) the exercise price per Share of such Stock Appreciation Right, multiplied by (ii) the number of Shares covered by the Stock Appreciation Right. Payment of the Stock Appreciation Right shall be made in Shares or in cash, or partly in Shares and partly in cash (any such Shares valued at the Fair Market Value on the date of the payment), all as shall be determined by the Committee.

 

(c)          Other Stock-Based Awards - The Committee may grant or sell awards of Shares, awards of restricted Shares and awards that are valued in whole or in part by reference to, or are otherwise based on the Fair Market Value of: Shares (including, without limitation, restricted stock units). Such “Other Stock-Based Awards” shall be in such form, and dependent on such conditions, as the Committee may determine, including, without limitation, the right to receive, or vest with respect to, one or more Shares (or the equivalent cash value of such Shares) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. Other Stock-Based Awards may be granted alone or in addition to any other Grants under the Plan. Subject to the provisions of the Plan, the Committee shall determine to whom and when Other Stock-Based Awards will be made, the number of Shares to be awarded under (or otherwise related to) such Other Stock-Based Awards; whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of cash and Shares; and all other terms and conditions of such awards (including, without limitation, the vesting provisions thereof and provisions ensuring that all Shares so awarded and issued shall be fully paid and non-assessable).

 

(d)          Dividend Equivalent Rights -The Committee may grant Dividend Equivalent Rights either alone or in connection with the grant of a Stock Option or Stock Appreciation Right. A “Dividend Equivalent Right” shall be the right to receive a payment in respect of one Share (whether or not subject to a Stock Option) equal to the amount of any dividend paid in respect of one Share held by a shareholder in the Company. Each Dividend Equivalent Right shall be subject to such terms as the Committee may determine.

 

6.                                   Limitations and Conditions

 

(a)          The number of Shares available for Grants under this Plan shall be 36,930,969, subject to adjustment as provided for in Sections 8 and 9, unless restricted by applicable law. Shares related to Grants that are forfeited, terminated, canceled, expire unexercised, withheld to satisfy tax withholding obligations, or are repurchased by the Company shall immediately become available for new Grants.

 

(b)          No Grants shall be made under the Plan beyond ten years after Augustl6, 2007, the effective date of the Plan (the “Effective Date”), but the terms of Grants made on or before the expiration of the Plan may extend beyond such expiration. At the time a Grant is made or amended or the terms or conditions of a Grant are changed in accordance with the terms of the Plan or the Grant Agreement, the Committee may provide for limitations or conditions on such Grant.

 

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(c)          Nothing contained herein shall affect the right of the Company or any other Service Recipient to terminate any Participant’s employment or other service relationship at any time or for any reason.

 

(d)          Other than as specifically provided in the Management Stockholder’s Agreement or Sale Participation Agreement, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the Participant.

 

(e)          Participants shall not be, and shall not have any of the rights or privileges of, stockholders of the Company in respect of any Shares purchasable in connection with any Grant unless and until certificates representing any such Shares have been issued by the Company to such Participants (or book entry representing such Shares has been made and such Shares have been deposited with the appropriate registered book-entry custodian).

 

(f)          No election as to benefits or exercise of any Grant may be made during a Participant’s lifetime by anyone other than the Participant except by a legal representative appointed for or by the Participant.

 

(g)          Absent express provisions to the contrary, any Grant under this Plan shall not be deemed compensation for purposes of computing benefits or contributions under any retirement or severance plan of the Company or any other Service Recipient and shall not affect any benefits under any other benefit plan of any kind now or subsequently in effect under which the availability or amount of benefits is related to level of compensation. This Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

(h)          Unless the Committee determines otherwise, no benefit or promise under the Plan shall be secured by any specific assets of the Company or any other Service Recipient, nor shall any assets of the Company or any other Service Recipient be designated as attributable or allocated to the satisfaction of the Company’s obligations under the Plan.

 

7.                                   Transfers and Leaves of Absence

 

For purposes of the Plan, unless the Committee determines otherwise; (a) a transfer of a Participant’s employment without an intervening period of separation among the Company and any other Service Recipient shall not be deemed a termination of employment, and (b) a Participant who is granted in writing a leave of absence or who is entitled to a statutory leave of absence shall be deemed to have remained in the employ of the Company (and any other Service Recipient) during such leave of absence.

 

8.                                  Adjustments

 

Following completion of the Merger and recapitalization and stock split transactions contemplated in connection therewith. In the event of any stock split, spin-off, share combination, reclassification, recapitalization, liquidation, dissolution, reorganization, merger, Change in

 

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Control, payment of a dividend (other than a cash dividend paid as part of a regular dividend program) or other similar transaction or occurrence which affects the equity securities of the Company or the value thereof, the Committee shall (i) adjust the number and kind of shares subject to the Plan and available for or covered by Grants, (ii) adjust the share prices related to outstanding Grants, and/or (iii) take such other action (including, without limitation providing for payment of a cash amount to holders of outstanding Grants), in each case as it deems reasonably necessary to address, on an equitable basis, the effect of the applicable corporate event on the Plan and any outstanding Grants, provided that any adjustment shall be done in a manner that complies with Section 409A of the Code, to the extent possible. Any such adjustment made or action taken by the Committee in accordance with the preceding sentence shall be final and binding upon holders of Options and upon the Company.

 

9.                                  Change in Control

 

In the event of a Change in Control: (a) if determined by the Committee in the applicable Grant Agreement or otherwise determined by the Committee in its sole discretion, any outstanding Grants then held by Participants which are unexercisable or otherwise unvested or subject to lapse restrictions may automatically be deemed exercisable or otherwise vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such Change in Control and (b) the Committee may, to the extent determined by the Committee to be permitted under Section 409A of the Code, but shall not be obligated to: (i) cancel such awards for fair value (as determined in the sole discretion of the Committee) which, in the case of Stock Options and Stock Appreciation Rights, may equal the excess, if any, of the value of the consideration to be paid in the Change in Control transaction to holders of the same number of Shares subject to such Stock Options or Stock Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Value of the Shares subject to such Stock Options or Stock Appreciation Rights) over the aggregate option price of such Stock Options or the aggregate exercise price of such Stock Appreciation Rights, as the case may be; (ii) provide for the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected Grants previously granted hereunder, as determined by the Committee in its sole discretion; or (iii) provide that for a period of at least 15 days prior to the Change in Control, any Stock Options or Stock Appreciation Rights shall be exercisable as to all Shares subject thereto and that upon the occurrence of the Change in Control such Stock Options or Stock Appreciation Rights shall terminate and be of no further force and effect.

 

10.                          Amendment and Termination

 

(a)          The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Grants as are consistent with this Plan, provided that no such action shall modify any Grant in a manner adverse to all Participants with respect to any outstanding Grants, other than pursuant to Section 8 or 9 hereof, without the Participant’s consent, except as such modification is provided for or contemplated in the terms of the Grant or this Plan.

 

(b) The Board may amend, suspend or terminate the Plan, except that no such action, other than an action under Section 8 or 9 hereof, may be taken which would, without stockholder approval, increase the aggregate number of Shares available for Grants under the Plan, decrease

 

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the price of outstanding Grants, change the requirements relating to the Committee, extend the term of the Plan or be materially adverse to all Participants with respect to any outstanding Grants.

 

(c)          This Plan is intended to comply with Section 409A of the Code and will be interpreted in a manner intended to comply with Section 409A of the Code. Notwithstanding anything herein to the contrary, (i) if at the time of the Participant’s termination of employment with any Service Recipient the Participant is a “specified employee” as defined in Section 409A of the Code, as determined by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of service is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Participant) until the date that is six months and one day following the Participant’s termination of employment with all Service Recipients (or the earliest date as is permitted under Section 409A of the Code), if such payment or benefit is payable upon a termination of employment and (ii) if any other payments of money or other benefits due to the Participant hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred, if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board. The Company shall use commercially reasonable efforts to implement the provisions of this Section 10(c) in good faith; provided that none of the Company, the Committee or any of the Company’s employees, directors or representatives shall have any liability to Participants with respect to this Section 10(c).

 

11.                          Governing Law; International Participants

 

(a)          This Plan shall be governed by and construed in accordance with the laws of Maryland applicable therein.

 

(b)          With respect to Participants who reside or work outside the United States of America, the Committee may, in its sole discretion, amend the terms of the Plan or awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or any other Service Recipient.

 

12.                          Withholding Taxes

 

The Company shall have the right to deduct from any payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to deliver Shares upon the exercise of a Stock Option that the Participant pays to the Company such amount as may be requested by the Company for the purpose of satisfying any liability for such withholding taxes; provided. however, that a Participant may satisfy the minimum amount of such taxes due upon exercise of any Stock Option through the withholding of Shares (valued at Fair Market Value on the date of exercise) otherwise issuable upon the exercise of such Stock Option.

 

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13.                           Effective Date and Termination Dates

 

The Plan shall be effective on August 17, 2007 and shall terminate ten years later, subject to earlier termination by the Board pursuant to Section 10.

 

9Exhibit 10.32

 

STOCK OPTION AGREEMENT

 

THIS AGREEMENT, dated as of                                 (the “Grant Date”) is made by and between Laureate Education, Inc., a Maryland  corporation (hereinafter referred to as the “Company”), and the individual whose name is set forth on the signature page hereof, who is  an employee of the Company or any other Service Recipient, hereinafter referred to as the “Optionee”.  Any capitalized terms herein not otherwise defined in Article I shall have the meaning set forth in the 2007 Stock Incentive Plan for Key Employees of Laureate Education, Inc. and its Subsidiaries (the “Plan”).  You must return an executed copy of this Stock Option Agreement to the Company within 30 days of the date hereof.  If you fail to do so, the Options may be forfeited to the Company, at the sole election of the Administrator.

 

WHEREAS, the Company wishes to carry out the Plan, the terms of which are hereby incorporated by reference and made a part of this Agreement; and

 

WHEREAS, the Committee has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Option provided for herein to the Optionee as an incentive for increased efforts during his term of office with the Company or any other Service Recipient, and has advised the Company thereof and instructed the undersigned officers to issue said Option.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.

 

Section 1.1.   Annual Pro Rata EBITDA Target

 

“Annual Pro Rata EBITDA Target” shall have the meaning set forth on Schedule A attached hereto.

 

Section 1.2.   Cause

 

“Cause” shall mean “Cause” as such term may be defined in any employment agreement in effect at the time of termination of employment between the Optionee and the Company or any other Service Recipient, or, if there is no such employment agreement or such term is not defined therein, “Cause” shall mean (i) gross negligence or willful malfeasance by the Optionee in connection with the performance of his duties with respect to the Company and its Subsidiaries, (ii) conviction of, or pleading guilty or nolo contendere to any felony, (iii) theft, embezzlement, fraud or other similar conduct by the Optionee in connection with the performance of his or her duties with the Company and its Subsidiaries, or (iv) a willful and

 

 

material breach of any other applicable agreements with the Company and its Subsidiaries including, without limitation, engaging in any action in breach of any applicable restrictive covenants.

 

Section 1.3.   EBITDA

 

“EBITDA” shall have the meaning set forth on Schedule A attached hereto.

 

Section 1.4.   Fiscal Year

 

“Fiscal Year” shall mean the twelve month period ending December 31 of any given calendar year.

 

Section 1.5.   Good Reason

 

“Good Reason” shall mean “Good Reason” as such term may be defined in any employment agreement in effect at the time of termination of employment between the Optionee and the Company or any other Service Recipient, or, if there is no such employment agreement or such term is not defined therein, “Good Reason” shall mean, without the consent of the Optionee, (i) a reduction in base salary (other than a general reduction in base salary that affects all similarly situated employees), (ii) a substantial diminution in the Optionee’s title, duties and responsibilities, other than any isolated, insubstantial and inadvertent failure by the Company or its Subsidiaries that is not in bad faith, or (iii) a transfer of the Optionee’s primary workplace by more than fifty (50) miles from his or her current workplace; provided, however, that in any event, such conduct is not cured within ten (10) business days after the Optionee gives the Company notice of such event.

 

Section 1.6.   Offer Closing

 

“Offer Closing” shall mean July 12, 2007, which was the date of purchase by Parent or one or more of its Subsidiaries of shares of Common Stock in the tender offer contemplated by the Amended and Restated Agreement and Plan of Merger, dated as of June 3, 2007 among Parent, L Curve Sub Inc., a Maryland corporation, and the Company.

 

Section 1.7.   Option

 

“Option” shall mean the aggregate of the Time Option and the Performance Option granted under Section 2.1 of this Agreement.

 

Section 1.8.    Permanent Disability

 

“Permanent Disability” shall mean “Disability” as such term is defined in any employment agreement between Optionee and the Company or any other Service Recipient, or, if there is no such employment agreement or such term is not defined therein, “Disability” shall be as defined in the long-term disability plan of the Company.

 

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Section 1.9.   Performance Option

 

“Performance Option” shall mean the right and option to purchase, on the terms and conditions set forth herein, all or any part of an aggregate of the number of shares of Common Stock set forth on the signature page hereof opposite the term Performance Option.

 

Section 1.10.   Secretary

 

“Secretary” shall mean the Secretary of the Company.

 

Section 1.11.   Time Option

 

“Time Option” shall mean the right and option to purchase, on the terms and conditions set forth herein, all or any part of an aggregate of the number of shares of Common Stock set forth on the signature page hereof opposite the term Time Option.

 

ARTICLE II

GRANT OF OPTIONS

 

Section 2.1.    - Grant of Options

 

For good and valuable consideration, on and as of the date hereof the Company irrevocably grants to the Optionee the following Options: (a) the Time Option and (b) the Performance Option, in each case, on the terms and conditions set forth in this Agreement.

 

Section 2.2.    - Exercise Price

 

Subject to Section 2.4, the exercise price of the shares of Common Stock covered by the Option (the “Exercise Price”) shall be as set forth on the signature page hereof.

 

Section 2.3.    - No Guarantee of Employment

 

Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of any Service Recipient or shall interfere with or restrict in any way the rights of the applicable Service Recipient, which are hereby expressly reserved, to terminate the employment of the Optionee at any time for any reason whatsoever, with or without cause, subject to the applicable provisions of, if any, the Optionee’s employment agreement with or offer letter provided by any Service Recipient to the Optionee.

 

Section 2.4.    - Adjustments to Option

 

The Option shall be subject to the adjustment provisions of Sections 8 and 9 of the Plan.

 

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ARTICLE III

PERIOD OF EXERCISABILITY

 

Section 3.1.    - Commencement of Exercisability

 

(a)                                 So long as the Optionee continues to be employed by the Company or any other Service Recipient through the applicable vesting date(s), the Option shall become exercisable pursuant to the following schedules:

 

(i)                                                             Time Option.  The Time Option shall become vested and exercisable with respect to the following percentage of Shares pursuant to the following schedule:

 

	
Vesting Date
    	
 
    	
Percentage of Shares subject to
   the Time Option that will become vested:
    	
 
    
	
January 28, 2012
    	
 
    	
20.00
    	
%
    
	
January 28, 2013
    	
 
    	
20.00
    	
%
    
	
January 28, 2014
    	
 
    	
20.00
    	
%
    
	
January 28, 2015
    	
 
    	
20.00
    	
%
    
	
January 28, 2016
    	
 
    	
20.00
    	
%
    

 

(ii)                                  Performance Option.

 

(A)                               The Performance Option shall be eligible to become vested and exercisable with respect to the following percentage of Shares (each such percentage of Shares identified below, an “Option Tranche”) upon the Board’s determination that the Company has attained the applicable Annual Pro Rata EBITDA Target in the applicable Fiscal Year, as follows:

 

	
If, in this
   Fiscal Year:
    	
 
    	
The Company achieves this Annual
   Pro Rata EBITDA Target:
    	
 
    	
Then this Percentage of Percentage of Shares
   subject to the Performance Option will vest:
    	
 
    
	
2011
    	
 
    	
$
    	
608,000,000
    	
 
    	
20.00
    	
%
    
	
2012
    	
 
    	
$
    	
718,000,000
    	
 
    	
20.00
    	
%
    
	
2013
    	
 
    	
$
    	
847,000,000
    	
 
    	
20.00
    	
%
    
	
2014
    	
 
    	
$
    	
1,000,000,000
    	
 
    	
20.00
    	
%
    
	
2015
    	
 
    	
$
    	
1,150,000,000
    	
 
    	
20.00
    	
%
    

 

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(B)                               Notwithstanding anything set forth in Section 3.1(a)(ii)(A) above, in the event that in any given Fiscal Year the Company fails to achieve 100% of the applicable Annual Pro Rata EBITDA Target, the Performance Option may still become vested as follows:

 

1)                                     if at least 95% of the applicable Annual Pro Rata EBITDA Target is achieved, 75% of the applicable Option Tranche will become vested; and

 

2)                                     if at least 90% of the applicable Annual Pro Rata EBITDA Target is achieved, 50% of the applicable Option Tranche will become vested.

 

(C)                               (1)  Notwithstanding anything set forth in Section 3.1(a)(ii)(A) or 3.1(a)(ii)(B) above, in the event that the Annual Pro Rata EBITDA Target is not achieved in a Fiscal Year listed in the table set forth in Section 3.1(a)(ii)(A) above (any such Fiscal Year, a “Missed Year” and the five Fiscal Years so listed, collectively, the “Initial Target Years”), then, during the Initial Target Years and through the end of the third Fiscal Year thereafter (each, an “Additional Year” and, the three year period, the “Catch Up Term”), the Option Tranche(s) (or any portion thereof) that was eligible to vest but failed to vest due to the Company’s failure to fully achieve the Annual Pro Rata EBITDA Target in such Missed Year shall nevertheless vest and become exercisable to the extent the Annual Pro Rata EBITDA Target for any one or more completed Fiscal Years that is subsequent to any Missed Year (a “Subsequent Year Target”), but within the Catch Up Term, is achieved.

 

(2)                                 The three Additional Year Pro Rata EBITDA Targets are:

 

	
Fiscal Year:
    	
 
    	
Annual Pro Rata EBITDA Target:
    	
 
    
	
2016
    	
 
    	
$
    	
1,322,500,000
    	
 
    
	
2017
    	
 
    	
$
    	
1,520,875,000
    	
 
    
	
2018
    	
 
    	
$
    	
1,749,006,250
    	
 
    

 

(3)                                 For avoidance of doubt, whichever percentage of an Option Tranche vests with respect to a Subsequent Year Target pursuant to clause Section 3.1(a)(ii), the Option Tranche for each Missed Year shall vest up to a percentage not to exceed the percentage of the Option Tranche vesting with respect to any Subsequent Year Target within the Initial Target Years and the Catch Up Term.  For example, if an Option Tranche does not vest because less than 90% of such Fiscal Year’s Target has been achieved, then: (a) if at least 90% but less than 95% of a Subsequent Year Target is achieved, 50% of the Missed Year’s Option Tranche shall then

 

5

 

vest; and (b) if in any subsequent Fiscal Year (assuming such Fiscal Year falls within the Initial Target Years and/or the Catch Up Term) at least 95% but less than 100% of such Subsequent Year Target is achieved, then an additional 25% of the Missed Year’s Option Tranche shall then vest; and (c) if in any subsequent Fiscal Year (assuming such Fiscal Year falls within the Initial Target Years and/or the Catch Up Term) 100% of such Subsequent Year Target is achieved, the remaining 25% of the Missed Year’s Option Tranche shall then vest.

 

(b)                                 Notwithstanding any of the foregoing set forth in Section 3.1(a) above, upon the occurrence of a Change in Control (so long as the Optionee continues to be employed by the Company or any other Service Recipient through the date thereof):

 

(i)                                                             the Time Option shall become immediately exercisable as to 100% of the shares of Common Stock subject to such Option immediately prior to a Change in Control (but only to the extent such Option has not otherwise terminated or become exercisable); and

 

(ii)                                                          the Performance Option shall become immediately exercisable as to 100% of the shares of Common Stock subject to such Option immediately prior to a Change in Control (but only to the extent such Option has not otherwise terminated or become exercisable) only  if and to the extent the Board in its discretion elects to vest such Performance Options.

 

(c)                                  Notwithstanding the foregoing, no portion of the Option shall become exercisable as to any additional shares of Common Stock following the termination of employment of the Optionee for any reason and any Option, which is unexercisable as of the Optionee’s termination of employment, shall immediately expire without payment therefor.

 

Section 3.2.    – Expiration of Option

 

Except as otherwise provided in Section 5 or 6 of the Management Stockholder’s Agreement, the Optionee may not exercise any vested portion of the Option to any extent after the first to occur of the following events:

 

(a)                                 The tenth anniversary of the Grant Date so long as the Optionee remains employed with the Company or any Service Recipient through such date;

 

(b)                                 The first anniversary of the date of the Optionee’s termination of employment with the Company and all Service Recipients, if the Optionee’s employment is terminated by reason of death or Permanent Disability (unless earlier terminated as provided in clause (e) below);

 

(c)                                  Immediately upon the date of the Optionee’s termination of employment by the Company and all Service Recipients for Cause or by the Optionee without Good Reason (except due to death or Permanent Disability);

 

(d)                                 Ninety (90) days after the date of an Optionee’s termination of employment by the Company and all Service Recipients without Cause (for any reason other than as set forth in clause (b) above) or by the Optionee for Good Reason; or

 

6

 

(e)                                  The date the Option is terminated pursuant to Section 5 or 6 of the Management Stockholder’s Agreement; or

 

(f)                                   At the discretion of the Company, if the Committee so determines pursuant to Section 9 of the Plan.

 

ARTICLE IV

EXERCISE OF OPTION

 

Section 4.1.    – Person Eligible to Exercise

 

Except as otherwise provided in the Management Stockholder’s Agreement, during the lifetime of the Optionee, only the Optionee (or his or her duly authorized legal representative) may exercise an Option or any portion thereof.  After the death of the Optionee, any exercisable portion of an Option may, prior to the time when an Option becomes unexercisable under Section 3.2, be exercised by his personal representative or by any person empowered to do so under the Optionee’s will or under the then applicable laws of descent and distribution.

 

Section 4.2.    – Partial Exercise

 

Any exercisable portion of an Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.2; provided, however, that any partial exercise shall be for whole shares of Common Stock only.

 

Section 4.3.    – Manner of Exercise

 

An Option, or any exercisable portion thereof, may be exercised solely by delivering to the Secretary or his office all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2:

 

(a)                                 Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee;

 

(b)                                 (i) Full payment (in cash, by check or by a combination thereof) for the shares with respect to which such Option or portion thereof is exercised or (ii) to the extent permitted by the Committee in a manner that is compliant with the terms of the Plan, indication that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made by Optionee to the Company pursuant to clause (i) of this subsection (b);

 

(c)                                  (i) Full payment (in cash, by check or by a combination thereof) to satisfy the withholding tax obligation with respect to which such Option or portion thereof is exercised or (ii) to the extent permitted by the Committee in a manner that is compliant with the terms of

 

7

 

the Plan, indication that the Optionee elects to have the number of Shares that would otherwise be issued to the Optionee upon exercise of such Option (or portion thereof) reduced by a number of Shares having an aggregate Fair Market Value, on the date of such exercise, equal to the payment to satisfy the minimum withholding tax obligation that would otherwise be required to be made by the Optionee to the Company pursuant to clause (i) of this subsection (c);

 

(d)                                 A bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of Common Stock are being acquired for his or her own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the “Act”), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the Shares by such person is contrary to the representation and agreement referred to above; provided, however, that the Committee may, in its reasonable discretion, take whatever additional actions it deems reasonably necessary to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; and

 

(e)                                  In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

 

Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of Shares acquired on exercise of an Option does not violate the Act, and may issue stop-transfer orders covering such Shares.  Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of subsection (d) above and the agreements herein. The written representation and agreement referred to in subsection (d) above shall, however, not be required if the Shares to be issued pursuant to such exercise have been registered under the Act, and such registration is then effective in respect of such Shares.

 

Section 4.4.    – Conditions to Issuance of Stock Certificates

 

The Shares deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares, which have then been reacquired by the Company.  Such Shares shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of an Option or portion thereof prior to fulfillment of all of the following conditions:

 

(a)                                 The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary or advisable;

 

(b)                                 The execution by the Optionee of the Management Stockholder’s Agreement and a Sale Participation Agreement; and

 

8

 

(c)                                  The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience or as may otherwise be required by applicable law.

 

Section 4.5.   – Rights as Stockholder

 

The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any Shares purchasable upon the exercise of the Option or any portion thereof unless and until certificates representing such Shares shall have been issued by the Company to such holder upon satisfaction of the conditions set forth in Section 4.4 or unless book entry representing such Shares has been made and such Shares have been deposited with the appropriate registered book-entry custodian.  Upon fulfillment of such conditions, the Company shall be required to issue and deliver such certificate or certificates, unless book entry representing such Shares has been made and such Shares have been deposited with the appropriate registered book-entry custodian.

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1.    – Administration

 

The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option.  In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.

 

Section 5.2.    – Option Not Transferable

 

Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.

 

Section 5.3.    – Notices

 

Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 5.3, either party may hereafter designate a different address for notices to

 

9

 

be given to him.  Any notice, which is required to be given to the Optionee, shall, if the Optionee is then deceased, be given to the Optionee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.3.  Any notice shall have been deemed duly given when (i) delivered in person, (ii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.

 

Section 5.4.    – Titles; Pronouns

 

Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.  The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

 

Section 5.5.    – Applicability of Plan, Management Stockholder’s Agreement and Sale Participation Agreement

 

The Option and the Shares issued to the Optionee upon exercise of the Option shall be subject to all of the terms and provisions of the Plan, the Management Stockholder’s Agreement and a Sale Participation Agreement, to the extent applicable to the Option and such Shares. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.  In the event of any conflict between this Agreement or the Plan and the Management Stockholder’s Agreement or the Sale Participation Agreement, the terms of the Management Stockholder’s Agreement or Sale Participation Agreement, as applicable, shall control.

 

Section 5.6.    – Amendment; Entire Agreement

 

Subject to Section 10 of the Plan, this Agreement may be amended only by a writing executed by the parties hereto, which specifically states that it is amending this Agreement.  This Agreement constitutes the entire agreement among the parties with respect to any agreements regarding any equity-based incentive awards and supersedes all prior and contemporaneous agreements (including any change in control, executive retention, employment or other agreements regarding the vesting of any equity-based awards, or payment of cash or Shares in respect of any equity-based awards upon a termination of employment), discussions, understandings and negotiations, whether written or oral, with respect to any of the foregoing.

 

Section 5.7.    Governing Law

 

The laws of the State of Maryland shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

10

 

Section 5.8.    –  Arbitration

 

In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator.  Such arbitration process shall take place within the Baltimore, Maryland  metropolitan area.  The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be entered in any court having jurisdiction thereof.  Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator.

 

Section 5.9.   Section 409A

 

Notwithstanding anything herein to the contrary, (i) if at the time of the Optionee’s termination of employment with any Service Recipient the Optionee is a “specified employee” as defined in Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Optionee) until the date that is six months and one day following the Optionee’s termination of employment with all Service Recipients (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to the Optionee hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax or result in an additional cost to the Company.  The Company shall consult with its legal counsel and tax accountants in good faith regarding the implementation of the provisions of this Section 5.9, which shall be done only in a manner that is reasonably acceptable to the senior executives of the Company; provided that none of the Service Recipients nor any of its employees or representatives shall have any liability to the Optionee with respect thereto.

 

Section 5.10.   Counterparts

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 

11

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

 

	
 
    	
LAUREATE   EDUCATION, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Robert   W. Zentz
    
	
 
    	
Title:
    	
Senior   Vice President, Secretary and General Counsel
    

 

[signature page to the Stock Option Agreement]

 

 

	
OPTIONEE:
    	
 
    	
 
    
	
 
    	
[name]
    	
 
    
	
 
    	
 
    	
 
    
	
Address: (to be completed by Optionee:)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Options Granted: [number of   options]
    	
 
    
	
 
    	
 
    	
 
    
	
Terms of OPTIONS:
    	
 
    
	
 
    	
Grant Date: [date]
    	
 
    
	
 
    	
Exercise Price: [price] per share
    	
 
    
	
 
    	
Expiration:  10 years
    	
 
    
	
 
    	
Time Option:
    	
 
    
	
 
    	
Performance Option:
    	
 
    

 

	
 
    	
** Terms of Time Options and Performance Options included   in Option Agreement
    

 

[signature page to the Stock Option Agreement]

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