Document:

Exhibit 10.2.11

 

EXHIBIT 10.2.11

FOURTH AMENDMENT

TO

AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

	 	 	 
	 

	 	September 26, 2005

WELLS FARGO FOOTHILL, INC., as Agent and Lender

One Boston Place, 18th Floor

Boston, Massachusetts 02108

Ladies and Gentlemen:

     Wells Fargo Foothill, Inc., as Arranger and Administrative Agent (“Agent”), the
lenders (“Lenders”) from time to time parties to the Loan Agreement (as defined below),
Advanced Lighting Technologies, Inc., an Ohio corporation (“Parent”), and each of Parent’s
Subsidiaries identified as a borrower on the signature pages hereof (such Subsidiaries, together
with Parent, are referred to hereinafter each individually as a “Borrower”, and
individually and collectively, jointly and severally, as “Borrowers”) have entered into
certain financing arrangements pursuant to (a) that certain Amended and Restated Loan and Security
Agreement, dated as of December 10, 2003, among Agent, Lenders, Borrowers and the other Loan
Parties (as the same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Loan Agreement”), (b) that certain EXIM Credit
Agreement dated as of December 10, 2003, among Agent, Lenders, Borrowers and the other Loan
Parties, and (c) all other Loan Documents at any time executed and/or delivered in connection
therewith or related thereto. All capitalized terms used herein shall have the meaning assigned
thereto in the Loan Agreement, unless otherwise defined herein.

     Borrowers and the other Loan Parties have requested that Agent amend and modify certain terms
of the Loan Agreement as hereinafter provided and Agent has agreed to make such amendments and
modifications, on and subject to the terms and conditions contained in this Fourth Amendment to
Amended and Restated Loan and Security Agreement (this “Amendment”).

     In consideration of the foregoing and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Agent, Lenders, Borrowers and the other Loan
Parties hereby agree as follows:

1. Amendments to Loan Agreement.

     A. Definitions

          (a) Base Rate Margin. The definition of the term “Base Rate Margin” set forth in
Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as
follows:

 

 

     “Base
Rate Margin” means, with respect to each portion of an Advance or Term Loan, as the
case may be, that is a Base Rate Loan, the percentage set forth in the table below, as
adjusted concurrently with each adjustment of the TTM EBITDA:

	 	 	 	 	 	 	 	 	 
	“If TTM EBITDA is:	 	Advance	 	Term Loan
	less than $25,000,000
	 	 	1.00	%	 	 	1.50	%
	 
	 	 	 	 	 	 	 	 
	greater than
or equal to $25,000,000
	 	 	 	 	 	 	 	 
	but less than or equal to $28,000,000
	 	 	0.75	%	 	 	1.25	%
	 
	 	 	 	 	 	 	 	 
	greater than $28,000,000 but less than
	 	 	 	 	 	 	 	 
	or equal to $30,000,000
	 	 	0.50	%	 	 	1.00	%
	 
	 	 	 	 	 	 	 	 
	greater than $30,000,000 but less than
	 	 	 	 	 	 	 	 
	or equal to $32,000,000
	 	 	0.25	%	 	 	0.75	%
	 
	 	 	 	 	 	 	 	 
	greater than $32,000,000
	 	 	0.00	%	 	 	0.50	%”

          (b) Borrowing Base. Paragraph (b) of the definition of the term “Borrowing Base” set
forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read
as follows:

               ”(b) the least of

	 	(w)	 	the sum of (i) $7,500,000,
plus (ii) the lesser of (x) $2,500,000, and (y) an amount equal
to fifty percent (50%) of the Value of the Eligible In-Transit
Inventory of Borrowers;
	 
	 	(x)	 	the sum of (i) fifty percent
(50%) of the Value of Eligible Inventory of Borrowers, plus (ii)
the lesser of (x) $2,500,000, and (y) an amount equal to fifty
percent (50%) of the Value of the Eligible In-Transit Inventory
of Borrowers;
	 
	 	(y)	 	the sum of (i) eighty percent
(80%) of the then extant Net Liquidation Percentage of the Value
of the Eligible Inventory of Borrowers, plus (ii) the lesser of
(x) $2,500,000, and (y) an amount equal to eighty percent (80%)
of the then extant Net Liquidation Percentage of the Value of
the Eligible In-Transit Inventory of Borrowers; and

2

 

	 	(z)	 	one hundred percent (100%) of the
amount of availability created by clause (a) above,

plus”

          (c) Canadian Guarantor Base. Paragraph (b) of the definition of the term
“Canadian Guarantor Base” set forth in Section 1.1 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

               ”(b) the least of

	 	(w)	 	the sum of (i) $1,500,000,
plus (ii) the lesser of (x) $1,000,000, and (y) an amount equal
to fifty percent (50%) of the Value of the Eligible In-Transit
Inventory of the Canadian Guarantor;
	 
	 	(x)	 	the sum of (i) fifty percent
(50%) of the Value of Eligible Inventory of the Canadian
Guarantor, plus (ii) the lesser of (x) $1,000,000, and (y) an
amount equal to fifty percent (50%) of the Value of the Eligible
In-Transit Inventory of the Canadian Guarantor;
	 
	 	(y)	 	the sum of (i) eighty percent
(80%) of the then extant Net Liquidation Percentage of the Value
of the Eligible Inventory of the Canadian Guarantor, plus (ii)
the lesser of (x) $1,000,000, and (y) an amount equal to eighty
percent (80%) of the then extant Net Liquidation Percentage of
the Value of the Eligible In-Transit Inventory of the Canadian
Guarantor; and
	 
	 	(z)	 	one hundred percent (100%) of the
amount of availability created by clause (a) above,

minus”

          (d) Eligible In-Transit Inventory. Section 1.1 of the Loan Agreement is hereby amended
by the insertion therein of the following term in the appropriate alphabetical sequence:

          “Eligible In-Transit Inventory” means finished goods inventory, consisting of
lamps and ballasts manufactured or purchased by Venture Power Systems India Private Limited
or Venture Lighting India Limited, each formed under the laws of India, that Agent, in its
sole discretion, deems eligible for borrowing purposes and that is in transit (x) to VL’s
facility in Solon, Ohio, with respect to inventory of VL, (y) to one of the facilities of
the UK Guarantors, respectively, located in England, with respect to inventory of a UK
Guarantor, or (z) to the facility of the Canadian Guarantor in

3

 

Mississauga, Ontario, with respect to inventory of the Canadian Guarantor;
provided, that (a) title to such Eligible In-Transit Inventory has passed to a
Borrower, (b) such Eligible In-Transit Inventory is at all times fully insured and subject
to a first priority security interest and lien in favor of Agent (except for any possessory
lien upon such goods in the possession of a freight carrier or shipping company securing
only the freight charges for the transportation of such goods), and (c) all documents,
notices, instruments, statements and bills of lading relating to such Eligible In-Transit
Inventory which Agent, in its Permitted Discretion, may deem necessary or desirable to
evidence and/or to give effect to and protect the liens, security interests and other rights
of Agent in connection therewith have been delivered to Agent.”

          (e) LIBOR Rate Margin. The definition of the term “LIBOR Rate Margin” set forth in
Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as
follows:

     “LIBOR Rate Margin” means, with respect to each portion of an Advance
or Term Loan, as the case may be, that is a LIBOR Rate Loan, the percentage set
forth in the table below, as adjusted from time to time concurrently with each
adjustment of the TTM EBITDA:

	 	 	 	 	 	 	 	 	 
	“If TTM EBITDA is:	 	Advance	 	Term Loan
	less than $25,000,000
	 	 	3.0	%	 	 	3.50	%
	 
	 	 	 	 	 	 	 	 
	greater than or equal to $25,000,000
	 	 	 	 	 	 	 	 
	but less than or equal $28,000,000
	 	 	2.75	%	 	 	3.25	%
	 
	 	 	 	 	 	 	 	 
	greater than $28,000,000 but less than
	 	 	 	 	 	 	 	 
	or equal to $30,000,000
	 	 	2.5	%	 	 	3.0	%
	 
	 	 	 	 	 	 	 	 
	greater than $30,000,000 but less than
	 	 	 	 	 	 	 	 
	or equal to $32,000,000
	 	 	2.25	%	 	 	2.75	%
	 
	 	 	 	 	 	 	 	 
	greater than $32,000,000
	 	 	2.0	%	 	 	2.5	%”

          (f) TTM EBITDA. Section 1.1 of the Loan Agreement is hereby amended by the addition
thereto of the following term to be inserted into Section 1.1 in the appropriate alphabetical
sequence:

     “TTM EBITDA” means Adjusted EBITDA, calculated on a rolling basis as at
the end of each fiscal quarter of Parent, for the twelve-month period ending at the
end of such fiscal quarter, as adjusted, with respect to each fiscal quarter, on the
first day of the calendar month immediately following the date of Agent’s receipt of
the financial statements and accompanying certificate of Parent’s chief financial
officer required to be delivered to Agent with respect to such fiscal quarter
pursuant to Section 6.3 hereof; provided, however, that if any
financial

4

 

statement and/or officer’s certificate with respect to a fiscal quarter has not been
delivered to Agent on or prior to the last day prescribed for its delivery in
Section 6.3(a), then, for purposes of the definitions herein of “Base Rate Margin”
and “LIBOR Rate Margin”, respectively, TTM EBITDA shall, from and after such last
day until such date as the financial statements and/or officer’s certificate is
delivered to Agent, be deemed to be less than $25,000,000 .”

          (g) UK Guarantor Base. Paragraph (b) of the definition of the term “UK Guarantor
Base” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety
to read as follows:

               “(b) the least of

	 	(i)	 	(i) $1,500,000 plus (ii)
the lesser of (x) $1,000,000, and (y) an amount equal to fifty
percent (50%) of the Value of the Eligible In-Transit
Inventory of the UK Guarantors;
	 
	 	(ii)	 	the sum of (i) fifty percent
(50%) of the Value of Eligible Inventory of the UK Guarantors,
plus (ii) the lesser of (x) $1,000,000, and (y) an amount equal
to fifty percent (50%) of the Value of the Eligible In-Transit
Inventory of the UK Guarantors;
	 
	 	(iii)	 	the sum of (i) eighty percent
(80%) of the then extant Net Liquidation Percentage of the Value
of the Eligible Inventory of the UK Guarantors, plus (ii) the
lesser of (x) $1,000,000, and (y) an amount equal to eighty
percent (80%) of the then extant Net Liquidation Percentage of
the Value of the Eligible In-Transit Inventory of the UK
Guarantors, and
	 
	 	(iv)	 	one hundred percent (100%) of the
amount of availability created by clause (a) above,

minus”

     B. Collateral Reporting

          Section 6.2 of the Loan Agreement is hereby amended and restated in its entirety to read as
follows:

“6.2 Collateral Reporting.  Provide Agent, (with copies for each Lender) with the following
documents at the following times in form satisfactory to Lenders:

5

 

	 	 	 
	Weekly

	 	(a) a consolidating roll forward of
Accounts aging from the prior week
with supporting documentation as
requested by Agent,
	 
	 	 
	 

	 	(b) notice of all returns, disputes
or claims in excess of $50,000
individually or $100,000 in the
aggregate,
	 
	 	 
	 

	 	(c) without limiting anything
contained in the definition of the
term “Eligible In-Transit Inventory”
set forth in Section 1.1 hereof,
notice of any shipment of Inventory
to a Borrower from Venture Power
Systems India Private Limited or
Venture Lighting India Limited on
terms other than FOB shipping point,
	 
	 	 
	Biweekly (twice
per month)

	 	(d) detailed aging, by total, of the
Accounts, it being acknowledged that
such report shall be delivered
electronically,
	 
	 	 
	 

	 	(e) a detailed aging, by vendor, of
each Loan Party’s accounts payable
(including any intercompany accounts
payable), it being acknowledged that
such report shall be delivered
electronically,
	 
	 	 
	Monthly (not later than the 15th
Business Day of each month except as
noted)

	 	(f) Inventory reports specifying
each Loan Party’s cost of its
Inventory, by category, it being
acknowledged that such reports shall
be delivered electronically,
	 
	 	 
	 

	 	(g) a Borrowing Base certificate
signed by Parent’s chief financial
officer confirming the calculation
of the then applicable Borrowing
Base as computed electronically by
Agent,
	 
	 	 
	 

	 	(h) a consolidating roll forward of
Accounts aging from the prior month
with supporting documentation,
including a separate sales journal
for each reporting entity, and a
collection journal and credit
register since the last such
schedule,
	 
	 	 
	 

	 	(i) a detailed calculation of the
Borrowing Base (including detail
regarding those Accounts that are
not Eligible Accounts and Inventory
that is not Eligible Inventory),
	 
	 	 
	 

	 	(j) a monthly detailed aging, by
total, of the Accounts, it being
acknowledged that such report shall
be delivered electronically,
	 
	 	 
	 

	 	(k) a monthly reconciliation of
actual Accounts to the Accounts
reported on Parent’s consolidated
financial statements, it being
acknowledged that such
reconciliation shall be delivered
with the statements required under
Section 6.3(a),
	 
	 	 
	 

	 	(l) Month-end final Inventory
reports and a reconciliation of
actual month-end final Inventory
reports to the Inventory reported on
Parent’s consolidated financial
statements, it being acknowledged
that such reconciliation shall be
delivered with the statements
required under Section 6.3(a),

6

 

	 	 	 
	 

	 	(m) Month-end final Eligible
In-Transit Inventory reports and a
reconciliation of actual month-end
final In-Transit Inventory reports
to the Eligible In-Transit Inventory
reported on Parent’s consolidated
financial statements, it being
acknowledged that such
reconciliation shall be delivered
with the statements required under
Section 6.3(a),
	 
	 	 
	 

	 	(n) Month-end payable reports and a
reconciliation of actual payables to
the payables reported on Parent’s
consolidated financial statements,
it being acknowledged that such
reconciliation shall be delivered
with the statements required under
Section 6.3(a),
	 
	 	 
	 

	 	(o) a report of cash balances of UK
Guarantors, Canadian Guarantor and
the Foreign Subsidiaries,
	 
	 	 
	 

	 	(p) a report of the outstanding
principal balance of the UK
Intercompany Loan and the Canadian
Intercompany Loan as of the last day
of the immediately preceding month,
together with a certificate signed
by Parent’s chief financial officer
confirming that during such month,
the principal balances of the
Canadian Intercompany Loan and the
UK Intercompany Loan, respectively,
did not on any day during such month
exceed the Canadian Guarantor Base
or the UK Guarantor Base,
respectively,
	 
	 	 
	Annually

	 	(q) a detailed listing of each Loan
Party’s customers, including the
address, telephone numbers and
contact personnel,
	 
	 	 
	Upon request by any Lender

	 	(r) copies of tax receipts
evidencing the payment of Taxes by
Canadian Guarantor and UK Guarantors
and satisfactory tax reporting,
including payroll, real estate and
excise taxes,
	 
	 	 
	 

	 	(s) cash flow statements (prepared
by month) analyzing actual cash flow
vs. projected cash flow in the
Projections, together with a
narrative explanation of material
variances,
	 
	 	 
	 

	 	(t) a report regarding each Loan
Party’s accrued, but unpaid, ad
valorem taxes,
	 
	 	 
	 

	 	(u) copies of invoices in connection
with the Accounts, credit memos,
remittance advices, deposit slips,
shipping and delivery documents in
connection with the Accounts and,
for Inventory and Equipment acquired
by Borrowers, Canadian Guarantor and
DSI purchase orders and invoices,
	 
	 	 
	 

	 	(v) such agreements with, and
notices to, customs brokers and
freight forwarders, copies of
documents of title, and other
documents, instruments and
agreements as Agent may, in its sole
discretion, from time to time deem
necessary or advisable to create,
perfect, preserve or evidence the
security interest of Agent in
Eligible In-Transit Inventory, and

7

 

	 	 	 
	 

	 	(w) such other reports as to the
Collateral, or the financial
condition of Borrowers or Guarantors
as any Lender may request in its
Permitted Discretion.

     C. Financial Covenants

          Section 7.20 of the Loan Agreement is hereby amended and restated in its entirety as follows:

          “7.20 Financial Covenants.

     (a) Minimum Adjusted EBITDA. Fail to maintain Adjusted EBITDA,
calculated on each of the Applicable Dates below on a rolling twelve (12)
month basis, of not less than the required amounts set forth below for the
twelve (12) month period preceding the Applicable Dates opposite such
amounts, respectively:

	 	 	 
	Applicable Amount	 	Applicable Date
	$22,000,000
	 	September 30, 2005
	$22,000,000
	 	December 31, 2005
	$22,000,000
	 	March 31, 2006
	$22,000,000
	 	June 30, 2006, and

as of the last day of each fiscal quarter after June 30, 2006, Adjusted
EBITDA, calculated on a rolling twelve (12) month basis, shall not be less
than an amount equal to eighty percent (80%) of the Adjusted EBITDA for such
date set forth in the then current Projections submitted by Borrowers and
accepted by Agent in its Permitted Discretion, provided
that, notwithstanding the foregoing, at no time after June 30, 2006
shall Adjusted EBITDA be less than $22,000,000.

     (b) Capital Expenditures. Make Capital Expenditures during the fiscal
year ending June 30, 2006 of an aggregate amount greater than $7,250,000, or
make, as of the last day of each fiscal year thereafter, Capital
Expenditures for such fiscal year of an aggregate amount greater than one
hundred and twenty percent (120%) of the Capital Expenditures for such
fiscal year set forth in the then current Projections submitted by Borrowers
and accepted by Agent in its Permitted Discretion; provided,
however, that for the purpose of this paragraph, Capital
Expenditures shall not include the purchase of the DSI facility contemplated
by Subsection 7.1(g) or any acquisition by a UK Guarantor, in each case, on
terms approved by Agent in its Permitted Discretion.”

8

 

     D. Term Loan Increase

     On the date hereof, each Lender with a Term Loan Commitment agrees
(severally, not jointly or jointly and severally) to make an additional term
loan (collectively, the “Supplemental Term Loan”) to Borrowers in an
amount equal to such Lender’s Pro Rata Share of the Term Loan Amount minus
the aggregate outstanding principal amount, on the date immediately prior to
the date hereof, of the Term Loan. The Supplemental Term Loan shall, for all
purposes hereof, be deemed an advance of the Term Loan, shall be combined
and added to, on the date hereof, the principal amount of the Term Loan
outstanding on the date immediately prior to the date hereof, and shall be
payable in consecutive monthly principal installments of $183,333.33 each.
After giving effect to the Supplemental Term Loan, the outstanding principal
amount of the Term Loan (after adding the principal amount of the
Supplemental Term Loan to the principal amount of the Term Loan outstanding
on the date immediately prior to the date hereof) shall be equal to the Term
Loan Amount. Nothing contained herein is intended to limit, prejudice or
otherwise impair Agent’s and Lenders’ rights, or Borrower’s obligations,
under Section 2.2 of the Loan Agreement.

     2. Representations, Warranties and Covenants. In addition to the continuing
representations, warranties and covenants heretofore or hereafter made by Loan Parties to Agent and
Lenders pursuant to the Loan Agreement and the other Loan Documents, each Loan Party hereby
represents, warrants and covenants with and to Agent and Lenders as follows (which representations,
warranties and covenants are continuing and shall survive the execution and delivery hereof and
shall be incorporated into and made a part of the Loan Documents):

     (a) No Default or Event of Default exists on the date of this Amendment; and

     (b) This Amendment has been duly executed and delivered by each Loan Party and is in full
force and effect as of the date hereof, and the agreements and obligations of each Loan Party,
respectively, contained herein constitute its legal, valid and binding obligations, enforceable
against it in accordance with the terms hereof.

     3. Effect of this Amendment. Except as modified pursuant hereto, no other changes or
modifications to the Loan Agreement and the other Loan Documents are intended or implied and in all
other respects the Loan Agreement and the other Loan Documents are hereby specifically ratified,
acknowledged and confirmed by all parties hereto as of the effective date hereof. To the extent of
any conflict between the terms of this Amendment and any of the Loan Documents, the terms of this
Amendment shall control. The Loan Agreement, as amended hereby, the other Loan Documents and this
Amendment shall be read and be construed as one agreement.

     4. Condition To Continued Effectiveness. Each Borrower and other Loan Party
acknowledges and agrees that anything herein or in the Loan Agreement to the contrary
notwithstanding, an Event of Default shall occur, and this Amendment, and the amendments

9

 

effected hereby, shall cease to be of any further force or effect, if Borrowers fail to cause
the delivery to Agent, on or prior to March 31, 2006, of the original stock certificate(s)
representing sixty-six and one-half percent (66.5%) of the issued and outstanding capital stock of
Venture Lighting India Limited.

     5. Further Assurances. The parties hereto shall execute and deliver such additional
documents and take such additional actions as may be necessary or desirable to effectuate the
provisions and purposes of this Amendment.

     6. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND
ANY DISPUTE ARISING OUT OF THE RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).

     7. Amendment and Modification Fee. In consideration of the amendments and
modifications effected hereby, and in addition to all other fees, charges and expenses payable
pursuant to the terms of the Loan Agreement and the other Loan Documents, Borrowers shall pay to
Agent, for the ratable benefit of Lenders, an amendment and modification fee in the amount of Fifty
Thousand ($50,000) Dollars, which fee shall be fully earned, due and nonrefundable as of the date
hereof and shall not be subject to refund, rebate or proration for any reason whatsoever.

     8. Binding Effect. This Amendment shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and assigns.

     9. Counterparts. This Amendment may be executed in any number of counterparts, but
all of such counterparts when executed shall together constitute but one and the same agreement.
In making proof of this Amendment, it shall not be necessary to produce or account for more than
one counterpart thereof signed by each of the parties hereto.

     10. Entire Agreement. This Amendment sets forth the entire agreement of the
parties with respect to the subject matter hereof. This Amendment cannot be amended, otherwise
modified or terminated except in a writing executed by the party or parties to be charged.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	ADVANCED LIGHTING TECHNOLOGIES,
	 	 	INC., an Ohio corporation, as a Borrower and a
	 	 	Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F. Zerull
	 

	 	Title:
	 	V.P. and Chief Accounting Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

10

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

	 	 	 	 	 
	 	 	APL ENGINEERED MATERIALS, INC.,
	 	 	an Illinois corporation, as a Borrower and a Loan
	 	 	Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F.Zerull
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	VENTURE LIGHTING INTERNATIONAL,
	 	 	INC., an Ohio corporation, as a Borrower and a
	 	 	Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F. Zerull
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	BALLASTRONIX (DELAWARE), INC.,
	 	 	a Delaware corporation, as a Borrower and a Loan
	 	 	Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F. Zerull
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	LIGHTING RESOURCES INTERNATIONAL,
	 	 	INC., an Ohio corporation, as a Borrower and a
	 	 	Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F. Zerull
	 

	 	Title:
	 	Vice President
	 
	 	 	 	 
	 	 	VENTURE LIGHTING POWER SYSTEMS,
	 	 	NORTH AMERICA INC., a Nova Scotia
	 	 	corporation, as a Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Alfred R. Landry
	 

	 	 	 	 
	 

	 	Name:
	 	Alfred R. Landry
	 

	 	Title:
	 	President

[SIGNATURES CONTINUED ON NEXT PAGE]

11

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

	 	 	 	 	 
	 	 	PARRY POWER SYSTEMS LIMITED,
	 	 	a corporation organized under the laws of the
	 	 	United Kingdom, as a Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Sabu Krishnan
	 

	 	 	 	 
	 

	 	Name:
	 	Sabu Krishnan
	 

	 	Title:
	 	Director
	 
	 	 	 	 
	 	 	VENTURE LIGHTING EUROPE LTD.,
	 	 	a corporation organized under the laws of the
	 	 	United Kingdom, as a Loan Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Sabu Krishnan
	 

	 	 	 	 
	 

	 	Name:
	 	Sabu Krishnan
	 

	 	Title:
	 	Director
	 
	 	 	 	 
	 	 	DEPOSITION SCIENCES, INC.,
	 	 	an Ohio corporation, as a Borrower and a Loan
	 	 	Party
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Christopher F. Zerull
	 

	 	 	 	 
	 

	 	Name:
	 	Christopher F. Zerull
	 

	 	Title:
	 	Vice President

	 	 	 	 	 
	 

	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 
	 
	 	 	 	 
	WELLS FARGO FOOTHILL, INC.,	 	 
	a California corporation, as Agent and as	 	 
	a Lender	 	 
	 
	 	 	 	 
	By:

	 	/s/ John T. Leonard	 	 
	 	 	 	 	 
	Name:

	 	John T. Leonard	 	 
	Title:

	 	Vice President	 	 

12EX-10.01

 

Exhibit
10.01

MANAGEMENT INCENTIVE

COMPENSATION PLAN (“MICP”)

For Fiscal Year 2006

As approved by the Compensation Committee of the Company’s

Board of Directors on September 22, 2005

 

 

HIGHLIGHTS OF THE

MANAGEMENT INCENTIVE COMPENSATION PLAN

This Management Incentive Compensation Plan (“MICP”) is designed to reward participants for
achievement of desired results in support of our Company’s mission and values.

The plan will help retain key management by tying results to the incentive (variable) portion of
the total compensation package.

The plan will be predictable, fair, timely, objective, measurable and compliant with regulatory and
accreditation requirements.

The plan retains some flexibility to adjust formula bonus amounts to reflect current performance,
history, past practice, economic factors and other anomalies.

The plan provides both a short-term cash component tied to financial performance and a long-term
equity component tied to accomplishment of Key Performance Objectives.

2

 

EDMC VALUES STATEMENT

Education Management Corporation is an organization that possesses a value system, which is
the foundation of our enterprise. From these values emerge our vision and ultimately influences the
company mission:

	*	 	We believe that excellence in education is measured by practical outcomes, which enhance
the lives of students who contribute positively to the workplace.
	 
	*	 	We believe in education environments that are learner-centered and foster a culture of
learning.
	 
	*	 	We believe that the education we provide has its seeds in the expressed needs of the business
community.
	 
	*	 	We believe that our success is founded in our choice to empower stakeholders to be actively
involved in the Company’s decision-making process and ultimate goal achievement.
	 
	*	 	We choose the collaborative process in decision-making.
	 
	*	 	We are committed to operating our company in an ethical and prudent manner that provides a
maximum return to our shareholders.
	 
	*	 	We believe that employee ownership is essential to company growth and productivity.

EDMC VISION STATEMENT

Education Management Corporation is an international leader in postsecondary, career-focused
education, dedicated to meeting employers’ needs through qualified graduates. The organization is
committed to continuous improvement and profitable growth through collaborative partnerships with
all stakeholders. We fulfill our mission in a culture of learning which values responsibility,
participation, and personal and professional development. We are dedicated to excellence in
education through a learner-centered approach that fulfills the evolving needs of the marketplace.

3

 

EDMC MISSION STATEMENT

The mission of the Education Management Corporation system is to:

	*	 	Ensure student success by providing market-driven, competency-based education in the creative
and applied arts, behavioral sciences, health sciences, education, information technology,
legal studies and business fields;
	 
	*	 	Deliver learner-centered instruction by faculty who exhibit excellence in teaching, possess
appropriate academic credentials, and have industry-related experience;
	 
	*	 	Champion a culture of learning by continuous personal and professional development of
students, alumni, and employees;
	 
	*	 	Cultivate partnerships to meet the needs of employers, students, alumni, and the system’s
employees;
	 
	*	 	Enhance institutional effectiveness and profitability by improving processes and operations;
promoting teamwork and effective communications, and obtaining appropriate accreditations;
	 
	*	 	Drive national and international growth by reaching new markets, expanding existing markets,
developing new products, revising existing curricula, and supporting acquisitions and
start-ups;
	 
	*	 	Elevate the profile of the system on community, state, and national levels; and
	 
	*	 	Maximize the value of the shareholders’ investment.

4

 

PLAN OVERVIEW

The MICP is a program that provides incentive payments to designated members of the Senior
Management Team (“SMT”). The MICP is comprised of both Short-Term and Long-Term components:

Short-Term Cash Award Component

Annual cash bonuses are awarded for performance in key result areas: Earnings Per Share,
Revenue and Operating Income.

Weighting of the financial targets are assigned to each participant using one of three weight
distributions depending on the position held (see page 9).

With the achievement of the designated trigger objectives, bonuses are earned based on performance
against financial targets.

Performance above or below target is increased or reduced by 4 percentage points for each 1%
difference between plan and actual performance.

Maximum attainment is 150% of target performance in each category and in total.

Short-term target cash bonus amounts are communicated annually as a specific dollar amount. Bonus
targets are designated at the end of the prior year’s MICP process or as communicated in an Offer
Letter for new hires participating in the plan. Targets are pro-rated (in whole months) for
service of less than an entire fiscal year but greater than one quarter’s participation. Less than
one quarter’s participation in a fiscal year is not recognized, as there is no reasonable
expectation for acclimation and achievement outside regular position requirements.

Long-Term Equity Award Component

Annual equity awards are based on a participant’s performance on up to three Key Performance
Objectives (“KPOs”) inclusive of system-wide departmental and “menu” objectives developed in
support of EDMC’s Mission. Maximum attainment of equity awards is 100% of target shares available.

In any year in which KPO achievement falls below 100%, equity awards otherwise granted are reduced
proportionately, with a reduction of 4 percentage points for each 1% below 100% achievement.
Maximum attainment of equity awards is 100% of target shares available. Equity awards are not
provided in any year in which KPO achievement falls at or under 75%.

5

 

Equity awards are provided to participants in the form of Restricted Shares of EDMC common stock.
Unlike options, restricted shares, when granted to participants, cost the participant nothing.
Restricted stock awards are subject to tax at the time of vesting based on the fair market value of
the stock on the date of vesting. At the time of grant, information will be provided to the
participant, including the Prospectus which provides additional information regarding the grant,
and a restricted stock award agreement.

SHORT-TERM CASH AWARD COMPONENT

TRIGGERS

The triggers are designated by the EDMC Executive Committee and pertain to leading indicators
relevant to the Company’s mission. For the 2006 Fiscal Year, participants have the following
triggers which determine whether or not the Short-Term Cash Component of the Plan is funded:

Trigger #1

[REDACTED]

Trigger #2 (If Trigger #1 is Achieved)

Non-Argosy Trigger: Achieve                     % placement and $                     average salary. Minimum:                     %
of both targets or                     % placement and $                     average salary respectively. School positions will
be measured by the school’s planned rates. In the event a School does not yet have a graduating
class, the Corporate placement and average salary trigger will apply. Group and Education System
positions will be measured against the targets and actuals of the group of locations they serve.
($ & % for each location will be determined by the EDMC Career Services Department and approved by
the Management Committee.) Both benchmarks must be achieved in order to satisfy the trigger.

     Argosy Trigger: By June 30, 2006, Argosy University shall:

	 	(I)	 	[REDACTED]

For CS employees (assigned to Process Levels ending in XX001), achievement of minimum
objectives of Argosy and Non-Argosy triggers are weighted as follows:

	 	•	 	85% of target opportunity is available for calculation based on attainment of
the Non-Argosy trigger;
	 
	 	•	 	15% of target opportunity is available for calculation based on attainment of
the Argosy trigger.

6

 

This applies to all EDMC Corporate MICP participants. In the event either the Argosy or Non-Argosy
trigger is not achieved, the target opportunity will be reduced by the appropriate percentage, as
noted above. For example, if a CS MICP participant’s target bonus award is $12,000, and only the
Argosy trigger is achieved, the participant’s target bonus award potential is reduced by 85%, to
$1,800.

The application of triggers for MICP participants assigned to shared service locations will be
negotiated and agreed among the participant, School Presidents and GVP, as appropriate, at the
beginning of the performance year and communicated to CS – Executive Compensation for documentation
of appropriate targets.

If no minimum performance triggers are met, the Short-Term Cash Award will not be paid.

TARGET CASH BONUS AWARD OPPORTUNITY

     The target cash bonus award opportunity will be expressed as a specific dollar amount. The
target dollar amount will be determined as a designated percentage of the participant’s base salary
as of September 1 of the applicable fiscal year for which the plan is based, or in the case of new
participants, as of the effective date of eligibility in the Plan. Target cash bonus awards may be
pro-rated, as determined by the EDMC Executive Committee, based on organizational changes during
the fiscal year.

FINANCIAL COMPONENTS

Financial Components are based on position and drive the final calculation of the cash bonus
award:

	 	•	 	Earnings per Share and Revenue drive the award calculation for elected EDMC Corporate
Officers, excluding System Heads and Group Vice Presidents.
	 
	 	•	 	Revenue and Operating Income drive the award calculation for Education System Heads and
Group Vice Presidents.
	 
	 	•	 	Operating Income applies for all other positions.

For all positions regardless of position, performance below target is calculated at a reduction of
4 percentage points for each 1% miss; performance above target is increased by 4 percentage points
for each 1% above target. Maximum attainment is 150% of target performance in each category and in
total.

The application of financial components for MICP participants assigned to shared service locations
will be negotiated and agreed among the participant, School Presidents and GVP, as appropriate, at
the beginning of the performance year and

7

 

communicated to CS – Executive Compensation for documentation of appropriate targets.

Title IV Regulations provide that positions in the same organizational level be compensated at the
same bonus percentage for that component of the bonus opportunity that is based on enrollment
success, including operating income/profit. For this reason, for Directors of Admissions, Deans
and/or others in the same organizational unit, the Short-Term Cash component may also include
consideration for KPO performance that is not based on enrollment success or operating
income/profit. All participants impacted by the Title IV Regulations referenced here will be
notified, as appropriate, and will be assigned a KPO that will impact a portion of their Short-Term
Cash Award opportunity. In addition, with the exception of School Presidents, EC positions in
start-up locations will not be eligible for the Short-Term Cash Award under MICP. Rather, they
will be eligible for a discretionary annual cash bonus. To the extent such bonuses are based on
enrollment success or operating income/profit, they will be compensated at the same bonus
percentage for organizational levels including Title IV covered participants. Such individuals
will be eligible, however, for the Long-Term Equity Award opportunity under the Plan.

8

 

FINANCIAL COMPONENT WEIGHTING

All positions have the financial components weighted according to one of the following
distributions:

	 	 	 	 	 	 	 	 	 
	 	 	Earnings Per Share	 	Revenue	 	Operating Income	 	Positions
	A
	 	75%	 	25%	 	NA	 	EDMC Corporate Officers*
	B
	 	NA	 	25%	 	75%	 	Group Vice Presidents & System Heads
	 
	 	 	 	 	 	 	 	Presidents, Campus Directors,
	 
	 	 	 	 	 	 	 	Location EC Members,
	 
	 	 	 	 	 	 	 	EDMC CS VPs & AVPs &
	C
	 	NA	 	NA	 	100%	 	Regional Specialists

 

	
	*Excluding Group Vice Presidents and System Heads

SHORT-TERM CASH AWARD CALCULATION

Performance against financial targets is certified by the EDMC Corporate Finance Department.
See miscellaneous provisions section with respect to Adjustments to Financial Targets and Actual
Results. All “exception” requests must be documented prior to Fiscal Year close according to
established procedure and receive EDMC CFO authorization.

Performance below target is calculated at a reduction of 4 percentage points for each 1% miss.
Performance above target is increased by 4 percentage points per each 1% over target. Maximum
attainment is 150% of target performance in each category and in total.

A Management Discretion Factor may be applied to any calculated bonus amount that may increase or
decrease the calculated amount by up to 20%. This factor is applied consistent with regulatory
requirements and only to adjust a bonus to provide for fairness, equity, recent performance changes
or environmental factors outside the participant’s control. This factor may be applied only when
the appropriate form is submitted and approved by an EDMC Executive Officer, and, in the case of a
School President at schools where there is a Board of Trustees, by the Board of Trustees.

The maximum payment is 150% of the target in each category and in total.

SHORT-TERM AWARD – EDMC SHARE PURCHASE FEATURE

Under the Short-Term Award Component, Corporate Officers and Presidents may elect to receive
20% or more of their annual Short-Term Award in the form of EDMC common stock. Those Senior
Management Team members who are not Corporate Officers and Presidents are also eligible for this
EDMC Share Purchase Feature provided they have five or more years of service as of the end of the
fiscal year for which the Short-Term

9

 

Award applies. If elected, EDMC shares are purchased with after-tax dollars. Any elections are
subject to share availability under EDMC’s 2003 Stock Incentive Plan, applicable security laws,
EDMC’s Policy Statement on Inside Information and Insider Trading, and such other restrictions
imposed from time to time by the Compensation Committee of EDMC’s Board of Directors.

SHORT-TERM CASH AWARD COMPONENT – BONUS EXAMPLES

Director of Student Services Jones has a base salary of $60,000 with a target bonus of
$12,000.

Assuming attainment of the triggers. . .

Example 1

In this example, Operating Income is achieved at 105% of target. Jones’ bonus is calculated as
120% of the target bonus. Since performance above plan is increased by 4 percentage points for
each 1% above plan, his performance for Operating Income is increased. His bonus is calculated as
$14,400 ($12,000 target x 120%).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Weighted	 
	Performance Measures	 	School’s Target	 	 	School’s Actual	 	 	% Attainment	 	 	Weight	 	 	Target %	 
	Operating Income
	 	$	1,000,000	 	 	$	1,050,000	 	 	 	105	%	 	 	100	%	 	 	120% 	(1)

 

			
	(1)	 	((5x4) +100) x 100% = 120% x $12,000 = $14,400

Example 2

In this example, Operating Income is achieved at only $950,000. As a result, Jones’ cash bonus is
reduced. Since performance below plan is reduced by 4 percentage points for each 1% miss, his
calculated bonus based on attainment on Operating Income is significantly lower. In this example,
his bonus is $9,600 ($12,000 target x 80%).

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Weighted	 
	Measures	 	School’s Targets	 	 	School’s Actual	 	 	% Attainment	 	 	Weight	 	 	Target %	 
	Operating Income
	 	$	1,000,000	 	 	$	950,000	 	 	 	95	%	 	 	100	%	 	 	80	%(2)

 

			
	(2)	 	(100 - (5x4)) x 100% = 80% x $12,000 = $9,600

If the triggers are not met, the Short-Term cash bonus is not awarded. Jones, however, is eligible
for the Long-Term equity award component based on achievement of his Key Performance Objectives.

10

 

LONG-TERM EQUITY AWARD COMPONENT

Each year, the Board determines the number of target restricted shares available to
participants under the Plan. Annual equity awards are earned based on achievement of Key
Performance Objectives (“KPOs”). In Fiscal Year 2006, of the total number of target restricted
shares granted to each participant in campus locations,                      restricted shares will be available to
such participant based on successful achievement of a                                                              KPO. (See examples
beginning on page 12.)

The percentage of KPOs achieved by a participant determines the percentage of restricted shares
earned. In any year in which KPO achievement falls below 100%, equity awards otherwise granted are
reduced proportionately, with a reduction of 4 percentage points for each 1% below 100%
achievement. Maximum attainment of equity awards is 100% of target shares available. Equity
awards are not earned in any year in which KPO achievement falls at
or under 75%. The Compensation Committee of the Company's Board of
Directors may add additional conditions to KPO achievement or
otherwise revise the terms under which restricted shares are earned
by the Company’s named executive officers in order to satisfy
the federal income tax deductibility requirements of
Section 162(m) of the Internal Revenue Code.

Equity awards earned based on KPO achievement are fully vested two years from the grant date. One
half of the awards earned vest on the first anniversary of the grant date; the remaining awards
earned vest on the second anniversary of the grant date.

Key Performance Objectives (“KPOs”)

Up to three weighted objectives, including System-wide and/or Departmental objectives, are
selected by participants each year. These KPOs are developed to support the Company’s mission and
must be specific, measurable, aligned, achievable, results oriented and time bound (SMART). Each
year, EDMC’s Executive Committee establishes and communicates KPOs to participants in a timely
manner to enable positive attainment of designated goals.

Systemwide Departmental KPOs are shared across the EDMC system as established by the SVP at CS for
the functional area. In addition, a “menu” of KPOs by functional area is established for selection
of UP TO TWO ADDITIONAL KPOs as agreed to by the participant and his/her direct supervisor. In
Fiscal Year 2006, all MICP Participants assigned to a campus location will be responsible for a
                                                             KPO. (See Appendix.) The                                                              KPO will be bonused at the same
number of restricted shares for all members of each multi-member organizational level that includes
a Director of Admissions. The application of KPOs for MICP participants assigned to shared service
locations will be negotiated and agreed among the participant, School Presidents and GVP, as
appropriate, at the beginning of the performance year.

At or before the beginning of the performance year, all KPO selections are documented on forms
provided for that purpose, are approved by the participant’s manager, and are then submitted to the
EDMC Manager, Executive Compensation and Equity Programs. All new participants to the program must
document KPOs upon hire, if there are more

11

 

than three months remaining in the fiscal year. Current year eligibility is not warranted for
those hired in the final quarter of the fiscal year.

During the performance year, the participant meets periodically with his/her manager to review
accomplishments toward goal achievement. At the end of the performance year, the participant
provides final documentation on goal attainment to his/her manager, who then finalizes goal
achievement in conjunction with Divisional Central Staff Department Heads, with concurrence by the
EDMC Executive Committee.

LONG-TERM EQUITY AWARD — EXAMPLE

In addition to eligibility for the annual MICP cash award, the Board has granted Jones
eligibility to receive an annual award of 1,000 Restricted Shares, assuming 100% KPO achievement
for that year. Since Jones is assigned to a campus location,                      of these total shares will be
directly impacted by the achievement of a                                                              KPO, and the remaining   
                  
shares will
be directly impacted by achievement of the two additional KPOs selected.

Example #1

Jones achieved 100% on his three KPOs in FY2006 and earns 100% of his award potential, 1,000
shares, with one-half of those shares vesting on each of the two anniversaries following the grant
date.

Jones has three KPOs for the year including the                                                              KPO. Following the end of
the performance year, Jones’ achieved the following results:

	 	o	 	KPO #1 (Shared
                                                           )
— 100% Achievement
	 
		o	 	KPO #2                
               
               
               
            — 100% Achievement
	 
	 	o	 	KPO #3                
               
               
               
            — 100% Achievement
	 
	 	 	 	                 Average for KPO #2 & #3
               
                — 100% Achievement

Jones receives the following Restricted Shares based on this performance:

	 	o	 	KPO #1:
	 
	 	o	 	KPO # 2 & 3:
	 
	 	 	 	               
Total
               
=     1000 Restricted Shares

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total Shares Vested
	Grant	 	Annual Award	 	 	 	 	 	Shares Vested	 	Shares Vested	 	at End of
	Year	 	Potential	 	Annual Awards Earned	 	Year 1	 	Year 2	 	Year 2
	2006
	 	 	1,000	 	 	 	1,000	 	 	 	500	 	 	 	500	 	 	 	500	 

12

 

In future years, Jones may be eligible to receive additional grants if approved by the Board.

Example #2

Jones has three KPOs for the year including the                                                              KPO. Following the end of the
performance year, Jones’ achieved the following results:

	 	o	 	KPO #1 (Shared                                                             )  —  95% Achievement
	 
	 	o	 	KPO #2                
          
          
          
          
          
      —  80% Achievement
	 
	 	o	 	KPO #3                
          
          
          
          
          
      — 100% Achievement
	 
	 		 	                Average for KPO #2 & #3
          
          
         
 —  90% Achievement

Jones receives the following Restricted Shares based on this performance:

	 	o	 	KPO #1:                
       
  = 120
	 
	 	o	 	KPO # 2 & 3:                
   = 510
	 
	 	 	 	                Total                 = 630 Restricted Shares

In the example below, Jones vests in half of the above Restricted Shares on the first anniversary
of the grant, and vests in the remaining Shares on the second anniversary of the grant.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total Shares Vested
	Grant	 	Annual Award	 	 	 	 	 	 	 	 	 	 	 	 	 	at End of
	Year	 	Potential	 	Annual Awards Earned	 	Shares Vested Year 1	 	Shares Vested Year 2	 	Year 2
	2006
	 	 	1,000	 	 	 	630	 	 	 	315	 	 	 	315	 	 	 	630	 

In future years, Jones may be eligible to receive additional grants if approved by the Board.

CASH AND EQUITY AWARD PAYMENTS

Cash bonuses earned under the plan are paid to eligible employees through payroll, as soon as
administratively possible after the bonus amounts are determined and approved. All bonus payments
are subject to applicable tax withholdings. Equity awards are communicated as soon as
administratively possible following computation and approval by the Board.

13

 

To be eligible to receive cash bonus and equity awards under this plan, a participant must be
actively employed by EDMC or one of its subsidiaries on the date the award is made. Equity awards
are forfeited if employment terminates before vesting is achieved.

The EDMC Executive Committee may grant a payment under this plan to a former or inactive employee
for compelling reasons in its sole discretion.

MISCELLANEOUS PROVISIONS

Changing or Ending the Plan / Discretionary Authority

It is the intention of the Company that the plan has no expiration date, nor is it intended to
be temporary. However, the Company has the right to change the plan in any way and at any time and
is not required to give a reason for, or notice of the changes. Any special arrangement made by
the Company for an individual will constitute an amendment to this plan applicable only to that
individual. The Company has the right to end the plan (in whole or in part) at any time.

Adjustments to Financial Targets and Actual Results

The financial target used to determine bonus payments is meant to reflect the results of
normal operations that can be affected by the collective efforts of the MICP participants.
Accordingly, significant unusual items that are considered to be outside the normal operations of
the Company should be excluded from the calculation for the purpose of measuring actual results
against target for bonus purposes. Examples of such unusual items, which would result in an
adjustment, include but are not limited to the following:

	 	•	 	One-time income tax adjustments, favorable or unfavorable
	 
	 	•	 	Gain or loss on disposition of property or business unit
	 
	 	•	 	Settlement of lawsuit

The financial targets are based on the approved Plan for the fiscal year adjusted for unplanned
acquisitions or divestitures. Any such adjustment for such acquisitions is based on the financial
model which serves as the basis for Board of Directors approval for the transaction, or when a
significant lapse of time between approval and closing occurs, the first forecast for such
acquisition which is included in the consolidated EDMC forecast for the balance of the fiscal year.

Any adjustments to the financial target must be approved by the EDMC Executive Committee.

Clarification as to whether transactions are considered significant and unusual for the purpose of
adjusting results and bonus targets is made by EDMC’s Executive Committee, subject to ratification
by the Board Compensation Committee.

14

 

Governing law

The internal laws of The Commonwealth of Pennsylvania govern this plan. The plan is subject
to modification by the EDMC Executive Committee in the event of new or different Department of
Education regulations or interpretations.

Participation in the Plan

Participation in the plan does not constitute a guarantee of employment, nor is continued
participation in the plan guaranteed. Participants are notified of their right to participate in
the plan on an annual basis and receive a copy of this Plan.

No Assignment

No person having a benefit under the plan may assign or transfer that benefit.

15

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