Document:

exv10w04

 

Exhibit 10.04

Execution Copy

FIFTH AMENDMENT TO CREDIT AGREEMENT

     This FIFTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), made and entered into as of June
30, 2005, is by and among PLATO Learning, Inc., a Delaware corporation (“PLI”), PLATO, Inc., a
Delaware corporation (“PI”), CyberEd, Inc., a Nevada corporation (“CyberEd”), TeachMaster
Technologies, Inc., a South Dakota corporation (“TeachMaster”), NetSchools Corporation, a Delaware
corporation (“NetSchools”), and Lightspan, Inc., a Delaware corporation (“Lightspan” and
collectively with PLI, PI, CyberEd, TeachMaster and NetSchools, the “Borrowers” and each, a
“Borrower”), the banks party to the Credit Agreement described herein (individually, a “Bank” and,
collectively, the “Banks”) and Wells Fargo Bank, National Association, a national banking
association (“Wells Fargo”), one of the Banks, as agent for the Banks (in such capacity, the
“Agent”).

RECITALS

     1. The Agent, the Banks and the Borrowers entered into a Credit Agreement dated as of
December 20, 2001 as amended by the First Amendment to Credit Agreement dated as of January
8, 2003, the Second Amendment to Credit Agreement dated as of September 17, 2003, the Third
Amendment and Consent Agreement dated as of November 14, 2003 and the Fourth Amendment to
Credit Agreement dated as of June 10, 2004 (as the same may be further amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).

     2. The Borrowers desire to amend certain provisions of the Credit Agreement, and Wells
Fargo, as the only Bank and the Agent, has agreed to make such amendments, subject to the
terms and conditions set forth in this Amendment.

AGREEMENT

     NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:

     Section 1. Capitalized Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement, unless the context shall
otherwise require.

     Section 2. Amendments. The Credit Agreement is hereby amended as follows:

     2.1 Definitions. Section 1.1 of the Credit Agreement is amended by amending the
definitions of “Maturity Date” and “Permitted Redemptions” to read in their
entireties as follows:

 

 

     “Maturity Date” means January 31, 2006.

     “Permitted Redemptions” means repurchase and redemption of shares of stock of
PLI, provided that: (a) no Default or Event of Default has occurred and continued at the
time of such repurchase and redemption; and (b) the aggregate purchase price of all shares
repurchased or redeemed shall not exceed $1,000,000 from June 30, 2005 through the Maturity
Date, if (i) such repurchase and redemption is conducted in accordance with the redemption
program approved by the Board of Directors of PLI; and (ii) proceeds of the Advances
hereunder shall not be used to fund any of such repurchase and redemption.

     Section 1.1 of the Credit Agreement is further amended by deleting the definition of
“Permitted Acquisition”.

     2.2 Restricted Payments. Section 6.5 of the Credit Agreement is amended to read in
its entirety as follows:

     Section 6.5 Restricted Payments. Either: (a) purchase or redeem or otherwise
acquire for value any shares of the Borrowers’ or any Subsidiary’s stock, declare or pay any
dividends thereon (other than stock dividends and dividends payable solely to the
Borrowers), make any distribution on, or payment on account of the purchase, redemption,
defeasance or other acquisition or retirement for value of, any shares of the Borrowers’ or
any Subsidiary’s stock or set aside any funds for any such purpose (other than payment to,
or an account of or for the benefit of, the Borrowers only), provided,
however, that PLI may make Permitted Redemptions, made in accordance with the terms
and limitations of the definition thereof; or (b) directly or indirectly make any payment
on, or redeem, repurchase, defease, or make any sinking fund payment on account of, or any
other provision for, or otherwise pay, acquire or retire for value, any Debt of the
Borrowers or any Subsidiary that is subordinated in right of payment to the Loans (whether
pursuant to its terms or by operation of law), except for regularly-scheduled payments of
interest and principal (which shall not include payments contingently required upon
occurrence of a change of control or other event) that are not otherwise prohibited
hereunder or under the document or agreement stating the terms of such subordination.

     2.3 Consolidation and Merger: Asset Acquisitions. Section 6.8 of the Credit Agreement
is amended to read in its entirety as follows:

     Section 6.8 Consolidation and Merger: Asset Acquisitions. Consolidate with or
merge into any Person, or permit any other Person to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all or
substantially all the assets of any other Person, except for the merger of any Subsidiary of
the Borrowers into a Borrower (provided such Borrower survives as the sole remaining entity)
or the merger of any Borrower into any other Borrower (provided that if PLI is a party, it
survives as the sole remaining entity).

     2.4 Consolidated Tangible Net Worth. Section 6.19 of the Credit Agreement is amended
to read in its entirety as follows:

2

 

     Section 6.19 Consolidated Tangible Net Worth. Permit the Consolidated
Tangible Net Worth at any time to be less than $20,000,000.

     2.5 Debt Service Coverage Ratio. Section 6.20 of the Credit Agreement is amended to
read in its entirety as follows:

     Section 6.20 Debt Service Coverage Ratio. Permit the Debt Service Coverage
Ratio as of the end of each period of four consecutive fiscal quarters to be less than 2.00
to 1.00, commencing with the four fiscal quarter ending on or about July 31, 2005.

     2.6 Leverage Ratio. Section 6.21 of the Credit Agreement is amended to read in its
entirety as follows:

     Section 6.21 Leverage Ratio. Permit the Leverage Ratio, determined as of the
last day of each fiscal quarter of the Borrowers, to be less than 3.00 to 1.00, commencing
with the fiscal quarter ending on or about July 31, 2005.

     Section 3. Effectiveness of this Agreement. The amendments contained in this
Amendment shall become effective upon delivery by each Borrower of, and compliance by each Borrower
with, the following:

     3.1 This Amendment duly executed by each Borrower.

     3.2 A copy of the resolutions of the Board of Directors of each of PLI, PI, CyberEd,
TeachMaster, NetSchools and Lightspan authorizing the execution, delivery and performance of this
Amendment certified as true and accurate by its Secretary or Assistant Secretary, along with a
certification by such Secretary or Assistant Secretary (i) certifying that there has been no
amendment to the Certificate of Incorporation or Bylaws of such Borrower since true and accurate
copies of the same were delivered to the Agent with a certificate of the Secretary of PLI, PI,
CyberEd and TeachMaster dated December 19, 2001, with a certificate of the Secretary of NetSchools
dated January 8, 2003, and with a certificate of the Secretary of Lightspan dated June 10, 2004,
and (ii) identifying each officer of such Borrower authorized to execute this Amendment and any
other instrument or agreement executed by such Borrower in connection with this Amendment
(collectively “Amendment Documents”), and certifying as to specimens of such officer’s signature
and such officer’s incumbency in such offices as such officer holds.

     3.3 [A good standing certificate for each Borrower from the State of its incorporation issued
at a date acceptable to the Agent]

     3.4 A non-refundable amendment fee in the amount of $15,625.

     3.5 Certified copies of all documents evidencing any necessary corporate action, consent or
governmental or regulatory approval (if any) with respect to this Amendment.

     3.6 The Borrowers shall have satisfied such other conditions as specified by the Agent,
including payment of all unpaid legal fees and expenses incurred by the Agent through the date of
this Amendment in connection with the Credit Agreement and the Amendment Documents.

3

 

     Section 4. Representations, Warranties, Authority, No Adverse Claim.

     4.1 Reassertion of Representations and Warranties, No Default. Each Borrower hereby
represents that on and as of the date hereof and after giving effect to this Amendment (a) all of
the representations and warranties contained in the Credit Agreement are true, correct and complete
in all respects as of the date hereof as though made on and as of such date, except for changes
permitted by the terms of the Credit Agreement and except for representations and warranties made
as of a specified date, and (b) there will exist no Default or Event of Default under the Credit
Agreement.

     4.2 Authority, No Conflict, No Consent Required. Each Borrower represents and
warrants that such Borrower has the power and legal right and authority to enter into this
Amendment and has duly authorized as appropriate the execution and delivery of this Amendment and
other agreements and documents executed and delivered by such Borrower in connection herewith by
proper corporate action, and neither this Amendment nor the agreements contained herein contravenes
or constitutes a default under any agreement, instrument or indenture to which such Borrower is a
party or a signatory or a provision of such Borrower’s Certificate of Incorporation, Bylaws or any
other agreement or requirement of law, or result in the imposition of any Lien on any of its
property under any agreement binding on or applicable to such Borrower or any of its property
except, if any, in favor of the Banks. Each Borrower represents and warrants that no consent,
approval or authorization of or registration or declaration with any Person, including but not
limited to any governmental authority, is required in connection with the execution and delivery by
such Borrower of this Amendment or other agreements and documents executed and delivered by such
Borrower in connection therewith or the performance of obligations of such Borrower therein
described, except for those which such Borrower has obtained or provided and as to which such
Borrower has delivered certified copies of documents evidencing each such action to the Agent.

     4.3 No Adverse Claim. Each Borrower warrants, acknowledges and agrees that no events
have taken place and no circumstances exist at the date hereof which would give such Borrower a
basis to assert a defense, offset or counterclaim to any claim of the Agent or any Banks with
respect to the Obligations.

     Section 5. Affirmation of Credit Agreement, Further References, Affirmation of Security
Interest. The Banks and each Borrower acknowledge and affirm that the Credit Agreement is
hereby ratified and confirmed in all respects and all terms, conditions and provisions of the
Credit Agreement, shall remain unmodified and in full force and effect. Each Borrower confirms to
the Banks that the Obligations are and continue to be secured by the security interest granted by
such Borrower in favor of the Agent under the Security Agreement executed by such Borrower, and all
of the terms, conditions, provisions, agreements, requirements, promises, obligations, duties,
covenants and representations of such Borrower under such documents and any and all other documents
and agreements entered into with respect to the obligations under the Credit Agreement are
incorporated herein by reference and are hereby ratified and affirmed in all respects by such
Borrower.

     Section 6. Merger and Integration, Superseding Effect. This Amendment from and after
the date hereof, embodies the entire agreement and understanding between the parties

4

 

hereto and supersedes and has merged into this Amendment all prior oral and written agreements
on the same subjects by and between the parties hereto with the effect that this Amendment shall
control with respect to the specific subjects hereof and thereof.

     Section 7. Severability. Whenever possible, each provision of this Amendment and any
other statement, instrument or transaction contemplated hereby or thereby or relating hereto or
thereto shall be interpreted in such manner as to be effective, valid and enforceable under the
applicable law of any jurisdiction, but, if any provision of this Amendment or any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be
held to be prohibited, invalid or unenforceable under the applicable law, such provision shall be
ineffective in such jurisdiction only to the extent of such prohibition, invalidity or
unenforceability, without invalidating or rendering unenforceable the remainder of such provision
or the remaining provisions of this Amendment or any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto in such jurisdiction, or affecting the
effectiveness, validity or enforceability of such provision in any other jurisdiction.

     Section 8. Successors. This Amendment shall be binding upon the Borrowers, the Agent
and the Banks and their respective successors and assigns, and shall inure to the benefit of the
Borrowers, the Agent and the Banks and the successors and assigns of the Agent and the Banks.

     Section 9. Legal Expenses. As provided in Section 9.4 of the Credit Agreement, the
Borrowers jointly and severally agree to reimburse the Agent, upon execution of this Amendment, for
all reasonable out-of-pocket expenses (including attorney’ fees and legal expenses of Dorsey &
Whitney LLP, counsel for the Agent) incurred in connection with the Credit Agreement, including in
connection with the negotiation, preparation and execution of this Amendment and all other
documents negotiated, prepared and executed in connection with this Amendment.

     Section 10. Headings. The headings of various sections of this Amendment have been
inserted for reference only and shall not be deemed to be a part of this Amendment.

     Section 11. Counterparts. This Amendment may be executed in several counterparts as
deemed necessary or convenient, each of which, when so executed, shall be deemed an original,
provided that all such counterparts shall be regarded as one and the same document, and either
party to this Amendment may execute any such agreement by executing a counterpart of such
agreement.

     Section 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MINNESOTA, EXCEPT TO THE EXTENT THE LAW OF ANY OTHER
JURISDICTION APPLIES AS TO THE PERFECTION OR ENFORCEMENT OF ANY SECURITY INTEREST IN ANY COLLATERAL
AND EXCEPT TO THE EXTENT EXPRESSLY PROVIDED TO THE CONTRARY IN THIS AGREEMENT.

[Remainder of page intentionally left blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date and year first above written.

	 	 	 	 	 
	 	 	PLATO LEARNING, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	PLATO, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	CYBERED, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	TEACHMASTER TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	NETSCHOOLS CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	LIGHTSPAN, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Agent and as Bank
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

1exv10w28

 

Exhibit 10.28

PLATO LEARNING, INC.

1993 Employee Stock Purchase Plan

(As Amended by the Second Amendment)

     1. Purpose. The purpose of the 1993 Employee Stock Purchase Plan (the “Plan”) is to
provide employees of PLATO Learning Inc. (the “Company”) and its Subsidiary Companies (as
hereinafter defined in Section 14) with added incentive to continue in the employment of such
companies and to encourage increased efforts to promote the best interests of such companies by
permitting eligible employees to purchase shares of Common Stock of the Company, par value $.01 per
share (the “Stock”), at prices less than the then current market price thereof. The Plan is an
“employee stock purchase plan” under section 423 of the Internal Revenue Code of 1986, as amended
(the “Code”). The Company and its Subsidiary Companies are sometimes hereinafter called
collectively the “Participating Companies.”

     2. Eligibility. Participation in the Plan shall be open to all active employees of the
Participating Companies whose customary employment is for more than 20 hours per week. No right to
purchase Stock shall accrue under the Plan in favor of any person who is not an eligible employee,
and no eligible employee shall acquire such right to purchase (i) if, immediately after receiving
such right, such employee would own 5% or more of the total combined voting power or value of all
classes of stock of the Company or any subsidiary corporation (as defined in section 425(f) of the
Code), taking into account in determining stock ownership any stock attributable to such employee
under section 425(d) of the Code; or (ii) which would permit such employee’s rights to purchase
stock under all employee stock purchase plans from time to time in effect of the Company and its
Subsidiary Companies to accrue at a

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rate which exceeds $25,000 of fair market value of such stock for each calendar year, all
determined in the manner provided by section 423(b)(8) of the Code.

     3. Effective Date of Plan; Purchase Periods. The Plan shall become effective on such
date as may be specified by the Board of Directors (the “Board”) of the Company, provided that in
no event shall the Plan become effective unless within 12 months of the date of its adoption by the
Board it has been approved at a duly called meeting of the stockholders of the Company.

     Purchases of Stock shall occur on the last day of each Purchase Period, which shall be the
last Monday of December, March, June and September (“Purchase Dates”). The first Purchase Period
shall commence on the date designated by the Board or a committee of directors not eligible to
participate in the Plan (the “Committee”) designated by the Board to administer the Plan and shall
end on the first Purchase Date thereafter. Each subsequent Purchase Period shall end on the
following Purchase Date. So long as the Plan remains in effect, a new Purchase Period shall
commence on the day immediately following the end of the preceding Purchase Period.

     4. Basis of Participation. Employees who are eligible at the adoption of the Plan
shall be entitled to enroll in the Plan immediately. An employee who becomes eligible after the
adoption of the Plan shall be entitled to enroll in the Plan as of the first day of the month
commensurate with or following the month in which such employee shall first become eligible to
participate in the Plan. If an employee shall not enroll in the Plan as of the day he first
becomes eligible to enroll in the Plan, he shall be entitled to enroll in the Plan as of the first
day of any subsequent month within such Purchase Period. To enroll in the Plan, an eligible
employee shall execute and deliver a payroll deduction authorization card (the “Authorization”)

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that shall become effective either upon adoption of the Plan or upon the first day of the
month commensurate or following the date on which such Authorization is delivered. Each
Authorization shall direct that payroll deductions be made by the Participating Company who is the
employer of the eligible employee enrolling in the Plan for each payroll period ending during the
period while such employee is a participant in the Plan. The amount of each payroll deduction
specified in an Authorization for each such payroll period shall be an amount specified by the
employee greater than or equal to $5. The total amount deducted in any one calendar year shall not
exceed $21,250 (or such other amount that does not result in Purchases of Stock in excess of the
limit set forth in section 423(b)(8) of the Code).

     Payroll deductions shall be made for each employee in accordance with his Authorization until
his participation in the Plan terminates, his Authorization is revised, or the Plan terminates, all
as hereinafter provided.

     An employee may increase or decrease the amount of his payroll deductions each month by filing
an executed and revised Authorization with his employer. The increase or decrease shall take
effect as of the first day of the first full payroll period immediately following the delivery of a
revised Authorization. An employee may suspend payroll deductions at any time. Such suspension
shall not terminate the employee’s participation in the Plan and shall not affect his rights under
the Plan. The suspension shall take effect as of the first day of the first full payroll period
immediately following the delivery of a revised Authorization. Payroll deductions shall resume as
of the first day of the first full payroll period immediately following the delivery of a revised
Authorization. No other changes shall be permitted except that an employee may elect to terminate
his participation in the Plan as hereinafter provided.

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     Each participating employee’s payroll deductions shall be credited to his purchase account
under the Plan. Employees are not permitted to make lump sum contributions to purchase accounts
established on their behalf. On each Purchase Date, the amount in each purchase account will be
applied to the purchase of the number of whole shares of Stock determined by dividing (i) such
amount by (ii) the Purchase Price (as hereinafter defined) for such purchase period. Any remaining
amounts insufficient to purchase whole shares of stock will remain in the employee’s purchase
account and be applied toward the next purchase.

     5. Purchase Price. The purchase price (the “Purchase Price”) per share of Stock
hereunder for any Purchase Period shall be 85% of the fair market value of a share of Stock on (a)
the beginning of the Purchase Period (or the date Authorization, if later there within), or (b) the
Purchase Date, whichever is lower; provided that if such percentage results in a fraction of one
cent, the Purchase Price shall be increased to the next higher full cent. The fair market value of
a share of Stock on the Purchase Date shall be deemed to be the closing price of the Stock on the
NASDAQ National Market System on such day, or if there shall be no such sale of the Stock on such
day, then on the next following business day on which there shall have been such a sale. In no
event, however, shall the Purchase Price be less than the par value of the Stock.

     6. Issuance of Shares. The shares purchased on behalf of each eligible employee
participating in the Plan will be considered to be issued and outstanding to his credit as of the
close of business on the Purchase Date. As soon as practicable after each Purchase Date,
individual statements showing the number of shares of Stock purchased on that Purchase Date on
behalf of each participant will be delivered to each participant. Upon request, a participant may
receive a stock certificate for whole shares of Stock that are purchased on the Purchase Date. As

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of the Purchase Date, those certificated shares of Stock will be issued to a nominee for the
benefit of the eligible employee. The certificated shares of Stock owned by each such employee
shall be held in an individual trust account established with an institutional trustee on behalf of
each participant. Within six months following each Purchase Date, none of the Participating
Companies, the nominee, or the trustee shall (i) release the shares of Stock purchased on behalf of
employees on such Purchase Date to such employees or (ii) sell such shares on behalf of such
employees; provided, however, that an employee may request the Committee to waive
the foregoing restrictions upon an appropriate demonstration of hardship. An employee may request
that a stock certificate be issued to him evidencing the number of shares of Stock purchased on his
behalf under the Plan for which he has not previously received a stock certificate, except that no
certificate shall be issued for less than nine shares. Such stock certificate shall evidence only
those shares that have been purchased under the Plan on behalf of the employee at least six months
prior to the Company’s receipt of the request for a stock certificate. Notwithstanding the
foregoing, an employee will be issued a certificate for his full shares when the Plan is
terminated. Certificates will not be issued for fractional shares. At such time as the Plan is
terminated, a cash payment will be made for the purchase by the Company of any fractional share
owned by an employee based upon the closing price of the Stock on the NASDAQ National Market System
on the date such termination takes effect, or if there shall be no such sale of the Stock on such
date, then on the next following business day on which there shall have been such a sale.

     No interest shall at any time accrue with respect to any amount credited to an employee’s
purchase account. After the close of each Purchase Period, a report will be made to each employee
participating in the Plan stating the entries made to his purchase account, the number of shares
purchased and the applicable Purchase Price.

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     7. [RESERVED]

     8. Termination of Participation. An employee may at any time elect to terminate his
participation in the Plan, except that no such termination shall be effective as to any Purchase
Period unless such election is received by his employer in writing prior to the beginning of such
Purchase Period. An employee’s participation in the Plan shall terminate upon the earliest of (i)
his cessation of eligibility under the Plan, (ii) his termination of employment with the
Participating Companies, and (iii) his death. The cash credited on the date of such termination to
such an employee’s purchase account shall be returned to him or his legal representative promptly.
Any shares of Stock held for the benefit of such employee shall remain in the individual trust
account until he or his legal representative (i) instructs the trustee to sell the shares on his
behalf, or (ii) requests that certificates be issued in the manner described in Section 6 of this
Plan; provided however, that such shares shall not be issued or sold within six months of their
purchase unless the Plan is terminated prior to that time.

     9. Termination or Amendment of the Plan. The Company, by action of the Board, or the
Committee may terminate the Plan at any time. Notice of termination shall be given to eligible
employees, but any failure to give such notice shall not impair the effectiveness of the
termination.

     Without any action being required, the Plan will terminate in any event if the maximum number
of shares of Stock to be sold under the Plan (as hereinafter provided in Section 13) has been
purchased. If at any time the number of shares remaining available for purchase under the Plan are
not sufficient to satisfy all then outstanding purchase rights, the Board or the committee may
determine an equitable basis of apportioning available shares

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among all eligible employees on whose behalf purchases would otherwise be made under the Plan.

     The Board or the Committee may amend the Plan from time to time in any respect in order to
meet changes in legal requirements or for any other reason; provided, however, that
no such amendment shall (a) materially adversely affect any purchase rights outstanding under the
Plan during the Purchase Period in which such amendment is to be effected, (b) increase the maximum
number of shares of Stock which may be purchased under the Plan unless such an increase is approved
by the Company’s shareholders, (c) decrease the Purchase Price of the Stock for any purchase period
below 85% of the fair market value of the Stock on the Purchase Date or (d) adversely affect of the
Plan’s status as an employee stock purchase plan under section 423 of the Code.

     Upon termination of the Plan, a stock certificate shall be issued to each eligible employee
participating in the Plan evidencing those whole shares of Stock held in his trust account, and the
amount credited to each eligible employee in his purchase account shall be distributed in cash,
along with a cash payment in lieu of fractional shares held in the eligible employee’s trust
account.

     10. Non-Transferability. Rights acquired under the Plan are not transferable and may
be exercised only by an employee.

     11. Stockholders’ Rights. No eligible employee shall by reason of the Plan have any
rights of a stockholder of the Company until and to the extent he shall be acquire shares of Stock
as herein provided.

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     12. Administration of the Plan. The Plan shall be administered so as to ensure that
all eligible employees participating in the Plan have the same rights and privileges as are
provided by section 423(b)(5) of the Code.

     Members of the Committee may be appointed from time to time by the Board and shall be subject
to removal by the Board. The decision of a majority in number of the members of the Committee in
office at the time shall be deemed to be the decision of the Committee.

     The Board or the Committee, from time to time, may approve the forms of any documents or
writings provided for in the Plan, may adopt, amend and rescind rules and regulations not
inconsistent with the Plan for carrying out the Plan and may construe the plan. The Board or the
Committee may delegate the responsibility for maintaining all or a portion of the records
pertaining to employees’ accounts to persons not affiliated with the Participating Companies. All
expenses of administering the Plan shall be paid by the Participating Companies, as determined by
the Committee.

     13. Maximum Number of Shares. The maximum number of shares of Stock which may be
purchased under the Plan is 150,000, subject, however, to adjustment as hereinafter set forth.
Stock sold hereunder will be authorized and unissued shares. If, during the term of the Plan, the
Company shall effect a stock split or reverse stock split or other capital readjustment, the
payment of a stock dividend, or other increase receiving compensation therefor in money, services
or property, then: (1) in the event of an increase in the number of such shares outstanding, the
number of Common Shares then subject to purchase hereunder shall be proportionately increased, and
the cash consideration payable per share shall be proportionately reduced; and (2) in the event of
a reduction in the number of such shares outstanding, the number

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of Common Shares then subject to purchase hereunder shall be proportionately reduced, and the
cash consideration payable per share shall be proportionately increased.

     14. Miscellaneous. Except as otherwise expressly provided herein, any Authorization,
election, notice or document under the Plan from an eligible employee shall be delivered to his
employer and, subject to any limitations specified in the Plan, shall be effective when so
delivered.

     The term “business day” shall mean any day that the NASDAQ National Market System is open for
business.

     The term “Subsidiary Companies” shall mean all corporations which are subsidiary corporations
(within the meaning of section 425(f) of the Code) of which the Company is the common parent.

     The masculine pronoun shall include the feminine.

     The Plan, and the Company’s obligation to sell and deliver shares of Stock hereunder, shall be
subject to all applicable federal, state and foreign laws, rules and regulations, and to such
approval by any regulatory or governmental agency as may, in the opinion of counsel for the
Company, be required.

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