Document:

EX-4.3

 

EXHIBIT 4.3

[Face of Certificate]

IL

[LOGO]

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

common stock

CUSIP 457985 20 8

SEE REVERSE FOR CERTAIN DEFINITIONS

THIS CERTIFIES that

is the owner of

FULLY-PAID AND NON-ASSESSABLE SHARES, $.01 PER SHARE PAR VALUE, OF THE COMMON STOCK OF INTEGRA
LIFESCIENCES HOLDINGS CORPORATION transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon the surrender of this Certificate properly endorsed.
This Certificate is not valid until countersigned and registered by the Transfer Agent and
Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly
authorized officers.

Dated:

[SEAL]

/Sig/

Secretary

/Sig/

Chairman of the Board

Countersigned and Registered:

AMERICAN STOCK TRANSFER & TRUST COMPANY

Transfer Agent and Registrar

By

Authorized Officer

[Reverse of Certificate]

The Corporation IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. THE CORPORATION will furnish
without charge to each stockholder who so requests the powers, designations, preferences, and
relative, participating, optional, or other special rights of each class of stock or series thereof
and the qualifications, limitations or restrictions of such preferences and/or rights.

The following abbreviations, when used in the inscription on the face of this certificate, shall be
construed as though they were written out in full according to applicable laws or regulations:

 

 

TEN COM-as tenants in common

TEN ENT-as tenants by the entireties

JT TEN-as joint tenants with right of survivorship and not as tenants in common

	 	 	 	 	 	 	 	 	 
	UNIF GIFT MIN ACT-

	 	 	Custodian	 	 	 	 
	 

	 	 

(Cust)
	 	 	 	 

(Minor)
	 	 
	 	 	under Uniform Gifts to Minors
	 

	 	Act	 	 	 	 	 	 
	 	 	 
	 	 
	 	 	(State)
	 	 

Additional abbreviations may also be used though not in the above list.

For value
received, ___ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

 

Please print or typewrite name and address including postal zip code of assignee

 

 

 

Shares of the capital stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint

 

Attorney to transfer the said stock on the books of the within-named Corporation with full power of
substitution in the premises.

Dated, ____________________________

 

 

 

 

The signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers,
Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee
Medallion Program), pursuant to S.E.C. Rule 17Ad-15.

NOTICE: The signature to this assignment must correspond with the name as written upon the face of
the Certificate, in every particular, without alteration or enlargement, or any change whatever.exv10w1

 

Exhibit 10.1

AMERICAN PUBLIC EDUCATION, INC.

2002 STOCK INCENTIVE PLAN, as amended

As
amended August 2, 2002 to increase the Stock Subject to the Plan
to 165,000 shares,

As amended July 24, 2002 to change the name of the plan,

As amended July 28, 2005 to increase the Stock Subject to the Plan to 200,000 shares and

As amended August 3, 2007 to reflect the 11-for-1 stock split of the common stock of the
 Company
resulting in the Stock Subject to the Plan being 2,200,000 shares

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. PURPOSE 
	 	 	1	 
	2. DEFINITIONS 
	 	 	1	 
	3. ADMINISTRATION OF THE PLAN 
	 	 	4	 
	3.1 Board
	 	 	4	 
	3.2 Committee
	 	 	5	 
	3.3 Grants
	 	 	5	 
	3.4 Deferral Arrangement
	 	 	6	 
	3.5 No Liability
	 	 	6	 
	4. STOCK SUBJECT TO THE PLAN 
	 	 	6	 
	5. GRANT ELIGIBILITY 
	 	 	7	 
	5.1 Employees and Other Service Providers
	 	 	7	 
	5.2 Successive Grants
	 	 	7	 
	5.3 Limitations on Incentive Stock Options
	 	 	7	 
	6. AWARD AGREEMENT 
	 	 	7	 
	7. TERMS AND CONDITIONS OF OPTIONS 
	 	 	7	 
	7.1 Option Price
	 	 	7	 
	7.2 Vesting
	 	 	8	 
	7.3 Term
	 	 	8	 
	7.4 Exercise of Options on Termination of Service
	 	 	8	 
	7.5 Limitations on Exercise of Option
	 	 	9	 
	7.6 Exercise Procedure
	 	 	9	 
	7.7 Right of Holders of Options
	 	 	9	 
	7.8 Delivery of Stock Certificates
	 	 	9	 
	8. TRANSFERABILITY OF OPTIONS 
	 	 	9	 
	8.1 Transferability of Options
	 	 	9	 
	8.2 Family Transfers
	 	 	10	 
	9. RESTRICTED STOCK 
	 	 	10	 
	9.1 Grant of Restricted Stock
	 	 	10	 
	9.2 Restrictions
	 	 	10	 
	9.3 Restricted Stock Certificates
	 	 	11	 
	9.4 Rights of Holders of Restricted Stock
	 	 	11	 
	9.5 Termination of Service
	 	 	11	 
	9.6 Purchase and Delivery of Stock
	 	 	11	 
	10. FORM OF PAYMENT 
	 	 	12	 
	10.1 General Rule
	 	 	12	 
	10.2 Surrender of Stock
	 	 	12	 
	10.3 Cashless Exercise
	 	 	12	 
	10.4 Promissory Note
	 	 	12	 
	11. WITHHOLDING TAXES 
	 	 	13	 
	12. RESTRICTIONS ON TRANSFER OF SHARES OF STOCK 
	 	 	13	 
	12.1 Right of First Refusal
	 	 	13	 
	12.2 Repurchase and Other Rights
	 	 	13	 
	12.3 Installment Payments
	 	 	14	 
	12.3.1 General Rule
	 	 	14	 
	12.3.2 Exception in the Case of Stock Repurchase Right
	 	 	14	 

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	 	 	Page
	12.4 Publicly Traded Stock
	 	 	14	 
	12.5 Legend
	 	 	14	 
	13. PARACHUTE LIMITATIONS 
	 	 	14	 
	14. REQUIREMENTS OF LAW 
	 	 	15	 
	14.1 General
	 	 	15	 
	14.2 Rule 16b-3
	 	 	16	 
	14.3 Financial Reports
	 	 	16	 
	15. EFFECT OF CHANGES IN CAPITALIZATION 
	 	 	16	 
	15.1 Changes in Stock
	 	 	16	 
	15.2 Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs
	 	 	17	 
	15.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control
	 	 	17	 
	15.4 Adjustments
	 	 	18	 
	15.5 No Limitations on Company
	 	 	18	 
	16. DURATION AND AMENDMENTS 
	 	 	19	 
	16.1 Term of the Plan
	 	 	19	 
	16.2 Amendment and Termination of the Plan
	 	 	19	 
	17. GENERAL PROVISIONS 
	 	 	19	 
	17.1 Disclaimer of Rights 
	 	 	19	 
	17.2 Nonexclusivity of the Plan 
	 	 	19	 
	17.3 Captions 
	 	 	20	 
	17.4 Other Award Agreement Provisions 
	 	 	20	 
	17.5 Number and Gender 
	 	 	20	 
	17.6 Severability 
	 	 	20	 
	17.7 Governing Law 
	 	 	20	 
	18. EXECUTION 
	 	 	21	 

- ii -

 

AMERICAN PUBLIC EDUCATION, INC.

2002 STOCK INCENTIVE PLAN

     American Public Education, Inc., a Delaware corporation (the “Company”), sets forth herein the
terms of its 2002 Stock Incentive Plan (the “Plan”) as follows:

1. PURPOSE

     The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability
to attract and retain highly qualified officers, directors, key employees, and other persons, and
to motivate such officers, directors, key employees, and other persons to serve the Company and its
Affiliates and to expend maximum effort to improve the business results and earnings of the
Company, by providing to such officers, directors, key employees and other persons an opportunity
to acquire or increase a direct proprietary interest in the operations and future success of the
Company. To this end, the Plan provides for the grant of stock options and restricted stock in
accordance with the terms hereof. Stock options granted under the Plan may be nonqualified stock
options or incentive stock options, as provided herein.

2. DEFINITIONS

     For purposes of interpreting the Plan and related documents (including Award Agreements), the
following definitions shall apply:

     2.1 “Affiliate” means, with respect to the Company, any company or other trade or business
that controls, is controlled by or is under common control with the Company within the meaning of
Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

     2.2 “Award Agreement” means the stock option agreement, restricted stock agreement or other
written agreement between the Company and a Grantee that evidences and sets out the terms and
conditions of a Grant.

     2.3 “Benefit Arrangement” shall have the meaning set forth in Section 13 hereof.

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

     2.5 “Cause” means, as determined by the Board and unless otherwise provided in an applicable
employment agreement with the Company or an Affiliate, (i) gross negligence or willful misconduct
in connection with the performance of duties; (ii) conviction of a criminal offense (other than
minor traffic offenses); or (iii) material breach of any term of any employment, consulting or
other services, confidentiality, intellectual property or non-competition agreements, if any,
between the Service Provider and the Company or an Affiliate.

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     2.6 “Change of Control” means (i) the dissolution or liquidation of the Company or a merger,
consolidation, or reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company
to another person or entity, or (iii) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving entity) which results in any person or entity
(other than persons who are shareholders or Affiliates immediately prior to the transaction) owning
50% or more of the combined voting power of all classes of stock of the Company.

     2.7 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

     2.8 “Committee” means a committee of, and designated from time to time by resolution of, the
Board, which shall consist of one or more members of the Board.

     2.9 “Company” means American Military University, Inc.

     2.10 “Disability” means the Grantee is unable to perform each of the essential duties of such
Grantee’s position by reason of a medically determinable physical or mental impairment which is
potentially permanent in character or which can be expected to last for a continuous period of not
less than 12 months; provided, however, that, with respect to rules regarding expiration of an
Incentive Stock Option following termination of the Grantee’s Service, Disability shall mean the
Grantee is unable to engage in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12 months.

     2.11 “Effective Date” means April 18, 2002, the date the Plan is approved by the Board.

     2.12 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended.

     2.13 “Fair Market Value” means the value of a share of Stock, determined as follows: if on
the Grant Date or other determination date the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on The Nasdaq Stock Market, Inc., or is publicly
traded on an established securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (if there is more than one such
exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date
or such other determination date (or if there is no such reported closing price, the Fair Market
Value shall be the mean between the highest bid and lowest asked prices or between the high and low
sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the
next preceding day on which any sale shall have been reported. If the Stock is not listed on such
an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value
of the Stock as determined by the Board in good faith.

     2.14 “Family Member” means a person who is a spouse, former spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law,

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son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including
adoptive relationships, of the Grantee, any person sharing the Grantee’s household (other than a
tenant or employee), a trust in which any one or more these persons have more than fifty percent of
the beneficial interest, a foundation in which any one or more of these persons (or the Grantee)
control the management of assets, and any other entity in which one or more these persons (or the
Grantee) own more than fifty percent of the voting interests; provided, however, that to the extent
required by applicable law, the term Family Member shall be limited to a person who is a spouse,
former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law,
including adoptive relationships, of the Grantee or a trust or foundation for the exclusive benefit
of any one or more of these persons.

     2.15 “Grant” means an award of an Option or Restricted Stock under the Plan.

     2.16 “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of
which the Board approves a Grant, (ii) the date on which the recipient of a Grant first becomes
eligible to receive a Grant under Section 5 hereof, or (iii) such other date as may be specified by
the Board.

     2.17 “Grantee” means a person who receives or holds an Option or Restricted Stock under the
Plan.

     2.18 “Incentive Stock Option” means an “incentive stock option” within the meaning of Section
422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended
from time to time.

     2.19 “Nonqualified Stock Option” means a stock option that is not an Incentive Stock Option.

     2.20 “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

     2.21 “Option Price” means the purchase price for each share of Stock subject to an Option.

     2.22 “Other Agreement” shall have the meaning set forth in Section 13 hereof.

     2.23 “Plan” means this American Public Education, Inc. 2002 Stock Incentive Plan.

     2.24 “Purchase Price” means the purchase price for each share of Stock pursuant to a Grant of
Restricted Stock.

     2.25 “Reporting Person” means a person who is required to file reports under Section 16(a) of
the Exchange Act.

     2.26 “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 9
hereof, that are subject to restrictions and to a risk of forfeiture.

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     2.27 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter
amended.

     2.28 “Service” means service as an employee, officer, director or other Service Provider of
the Company or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a
Grantee’s change in position or duties shall not result in interrupted or terminated Service, so
long as such Grantee continues to be an employee, officer, director or other Service Provider of
the Company or an Affiliate. Subject to the preceding sentence, whether a termination of Service
shall have occurred for purposes of the Plan shall be determined by the Board, which determination
shall be final, binding and conclusive.

     2.29 “Service Provider” means an employee, officer or director of the Company or an Affiliate,
or a consultant or adviser currently providing services to the Company or an Affiliate.

     2.30 “Stock” means the common stock, $.01 par value per share, of the Company.

     2.31 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of
Section 424(f) of the Code.

     2.32 “Ten-Percent Stockholder” means an individual who owns more than ten percent (10%) of the
total combined voting power of all classes of outstanding stock of the Company, its parent or any
of its Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.

3. ADMINISTRATION OF THE PLAN

     3.1 Board.

     The Board shall have such powers and authorities related to the administration of the Plan as
are consistent with the Company’s articles of incorporation and by-laws and applicable law. The
Board shall have full power and authority to take all actions and to make all determinations
required or provided for under the Plan, any Grant or any Award Agreement, and shall have full
power and authority to take all such other actions and make all such other determinations not
inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan, any Grant or any Award Agreement. All
such actions and determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in writing in
accordance with the Company’s articles of incorporation and by-laws and applicable law. The
interpretation and construction by the Board of any provision of the Plan, any Grant or any Award
Agreement shall be final, binding and conclusive. To the extent permitted by law, the Board may
delegate its authority under the Plan to a member of the Board or an executive officer of the
Company who is a member of the Board.

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     3.2 Committee.

     The Board from time to time may delegate to one or more Committees such powers and authorities
related to the administration and implementation of the Plan, as set forth in Section 3.1 above and
in other applicable provisions, as the Board shall determine, consistent with the articles of
incorporation and by-laws of the Company and applicable law. In the event that the Plan, any Grant
or any Award Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken by or such determination may be
made by the applicable Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in Section 3.1. Unless otherwise expressly determined by
the Board, any such action or determination by the Committee shall be final, binding and
conclusive. To the extent permitted by law, the Committee may delegate its authority under the
Plan to a member of the Board or an executive officer of the Company who is a member of the Board.

     3.3 Grants.

     Subject to the other terms and conditions of the Plan, the Board shall have full and final
authority to:

	 	(i)	 	designate Grantees,
	 
	 	(ii)	 	determine the type or types of Grants to be made to a Grantee,
	 
	 	(iii)	 	determine the number of shares of Stock to be subject to a Grant,
	 
	 	(iv)	 	establish the terms and conditions of each Grant (including, but not limited
to, the Option Price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer,
or forfeiture of a Grant or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
	 
	 	(v)	 	prescribe the form of each Award Agreement evidencing a Grant, and
	 
	 	(vi)	 	amend, modify, or supplement the terms of any outstanding Grant.

     Such authority specifically includes the authority, in order to effectuate the purposes of the
Plan but without amending the Plan, to modify Grants to eligible individuals who are foreign
nationals or are individuals who are employed outside the United States to recognize differences in
local law, tax policy, or custom. As a condition to any Grant, the Board shall have the right, at
its discretion, to require Grantees to return to the Company Grants previously awarded under the
Plan. Subject to the terms and conditions of the Plan, any such subsequent Grant shall be upon
such terms and conditions as are specified by the Board at the time the new Grant is made. The
Board shall have the right, in its discretion, to make Grants in substitution or exchange for any
other grant under another plan of the Company, any Affiliate, or any business entity to be acquired
by the Company or an Affiliate. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of actions taken by

 - 5 - 

 

the Grantee in violation or breach of or in conflict with any non-competition agreement, any
agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof
or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise
in competition with the Company or any Affiliate thereof, to the extent specified in such Award
Agreement applicable to the Grantee. Furthermore, the Company may annul a Grant if the Grantee is
an employee of the Company or an Affiliate thereof and is terminated for Cause as defined in the
applicable Award Agreement or the Plan, as applicable.

     3.4 Deferral Arrangement.

     The Board may permit or require the deferral of any award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish, which may include provisions
for the payment or crediting of interest or dividend equivalents, including converting such credits
into deferred Stock equivalents and restricting deferrals to comply with hardship distribution
rules affecting 401(k) plans.

     3.5 No Liability.

     No member of the Board or of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Grant or Award Agreement.

4. STOCK SUBJECT TO THE PLAN

     Subject to adjustment as provided in Section 15 hereof and the limitation of the next
paragraph relating to Restricted Stock, the number of shares of Stock available for issuance under
the Plan shall be 2,200,0000. Stock issued or to be issued under the Plan shall be authorized but
unissued shares or, to the extent permitted by applicable law, issued shares that have been
reacquired by the Company. If any shares covered by a Grant are not purchased or are forfeited, or
if a Grant otherwise terminates without delivery of any Stock subject thereto, then the number of
shares of Stock counted against the aggregate number of shares available under the Plan with
respect to such Grant shall, to the extent of any such forfeiture or termination, again be
available for making Grants under the Plan. If the exercise price of any Option granted under the
Plan is satisfied by tendering shares of Stock to the Company (by either actual delivery or by
attestation), only the number of shares of Stock issued net of the shares of Stock tendered shall
be deemed delivered for purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.

     Notwithstanding the preceding paragraph, of the 90,000 shares of Stock available for issuance
under the Plan, no more than 15 percent (15%) of that amount (or 13,500 shares) shall be available
for issuance as Restricted Stock.

 - 6 - 

 

5. GRANT ELIGIBILITY

     5.1 Employees and Other Service Providers.

     Grants (including Grants of Incentive Stock Options, subject to Section 5.3) may be made under
the Plan to any employee, officer or director of, or other Service Provider providing services to,
the Company or any Affiliate. To the extent required by applicable state law, Grants within
certain states may be limited to employees and officers or employees, officers and directors.

     5.2 Successive Grants.

     An eligible person may receive more than one Grant, subject to such restrictions as are
provided herein.

     5.3 Limitations on Incentive Stock Options.

     An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is
an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the Grantee’s employer and its affiliates)
does not exceed $100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.

6. AWARD AGREEMENT

     Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in such form or
forms as the Board shall from time to time determine, which specifies the number of shares subject
to the Grant and provides for adjustment in accordance with Section 15. Award Agreements granted
from time to time or at the same time need not contain similar provisions but shall be consistent
with the terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify
whether such Options are intended to be Nonqualified Stock Options or Incentive Stock Options, and
in the absence of such specification such options shall be deemed Nonqualified Stock Options.

7. TERMS AND CONDITIONS OF OPTIONS

     7.1 Option Price.

     The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement
evidencing such Option. In the case of an Incentive Stock Option the Option Price shall not be
less than the Fair Market Value on the Grant Date of a share of Stock; provided,

 - 7 - 

 

however, that in the event that a Grantee is a Ten-Percent Stockholder, the Option Price of an
Incentive Stock Option granted to such Grantee shall be not less than 110 percent of the Fair
Market Value of a share of Stock on the Grant Date. To the extent required by applicable law, in
the case of a Nonqualified Stock Option, the Option Price shall be not less than 85 percent of the
Fair Market Value on the Grant Date of a share of Stock; provided, however, that in the event that
a Grantee is a Ten-Percent Stockholder, the Option Price shall be not less than 110 percent of the
Fair Market Value of a share of Stock on the Grant Date. In no case shall the Option Price of any
Option be less than the par value of a share of Stock.

     7.2 Vesting.

     Subject to Sections 7.3 and 15.3 hereof, each Option granted under the Plan shall become
exercisable at such times and under such conditions as shall be determined by the Board and stated
in the Award Agreement. For purposes of this Section 7.2, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest whole number. To the extent
required by applicable law, each Option shall become exercisable no less rapidly than the rate of
twenty percent (20%) per year for each of the first five (5) years from the Grant Date based on
continued Service. Subject to the preceding sentence, the Board may provide, for example, in the
Award Agreement for (i) accelerated exercisability of the Option in the event the Grantee’s Service
terminates on account of death, Disability or another event, (ii) expiration of the Option prior to
its term in the event of the termination of the Grantee’s Service, (iii) immediate forfeiture of
the Option in the event the Grantee’s Service is terminated for Cause or (iv) unvested Options to
be exercised subject to the Company’s right of repurchase with respect to unvested shares of Stock.

     7.3 Term.

     Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock
thereunder shall cease, upon the expiration of ten years from the Grant Date, or under such
circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option; provided, however, that in the
event that the Grantee is a Ten-Percent Stockholder, an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall not be exercisable after the expiration of five
years from its Grant Date.

     7.4 Exercise of Options on Termination of Service.

     Each Award Agreement shall set forth the extent to which the Grantee shall have the right to
exercise the Option following termination of the Grantee’s Service. Such provisions shall be
determined in the sole discretion of the Board, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
Notwithstanding the foregoing, to the extent required by applicable law, each Option shall provide
that the Grantee shall have the right to exercise the vested portion of any Option held at
termination for at least thirty (30) days following termination of Service with the Company for any
reason (other than for Cause), and that the Grantee shall have the right to

 - 8 - 

 

exercise the Option for at least six (6) months if the Grantee’s Service terminates due to
death or Disability.

     7.5 Limitations on Exercise of Option.

     Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in
whole or in part, prior to the date the Plan is approved by the shareholders of the Company, or
after ten years following the Grant Date, or after the occurrence of an event referred to in
Section 15 hereof which results in termination of the Option.

     7.6 Exercise Procedure.

     An Option that is exercisable may be exercised by the Grantee’s delivery to the Company of
written notice of exercise on any business day, at the Company’s principal office, on the form
specified by the Company. Such notice shall specify the number of shares of Stock with respect to
which the Option is being exercised and shall be accompanied by payment in full of the Option Price
of the shares for which the Option is being exercised. The minimum number of shares of Stock with
respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser
of (i) 100 shares or such lesser number set forth in the applicable Award Agreement and (ii) the
maximum number of shares available for purchase under the Option at the time of exercise. The
Option Price shall be payable in a form described in Section 10.

     7.7 Right of Holders of Options.

     Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising
an Option shall have none of the rights of a shareholder (for example, the right to cash or
dividend payments or distributions attributable to the subject shares of Stock or to direct the
voting of shares of Stock) until the shares of Stock covered thereby are fully paid and issued to
such individual.

     7.8 Delivery of Stock Certificates.

     Promptly after the exercise of an Option by a Grantee and the payment in full of the Option
Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates
evidencing such Grantee’s ownership of the shares of Stock purchased upon such exercise of the
Option.

8. TRANSFERABILITY OF OPTIONS

     8.1 Transferability of Options.

     Except as provided in Section 8.2, during the lifetime of a Grantee, only the Grantee (or, in
the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise an Option. Except as provided in Section 8.2, no Option shall be assignable or

 - 9 - 

 

transferable by the Grantee to whom it is granted, other than by will or the laws of descent
and distribution.

     8.2 Family Transfers.

     If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or
part of an Option that is not an Incentive Stock Option to any Family Member. For the purpose of
this Section 8.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer
under a domestic relations order in settlement of marital property rights; or (iii) unless
applicable law does not permit such transfers, a transfer to an entity in which more than fifty
percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an
interest in that entity. Following a transfer under this Section 8.2, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, and shares of Stock acquired pursuant to the Option shall be subject to the same
restrictions on transfer of shares as would have applied to the Grantee. Subsequent transfers of
transferred Options are prohibited except to Family Members of the original Grantee in accordance
with this Section 8.2 or by will or the laws of descent and distribution. The events of
termination of Service under an Option shall continue to be applied with respect to the original
Grantee, following which the Option shall be exercisable by the transferee only to the extent, and
for the periods specified in the applicable Award Agreement, and the shares may be subject to
repurchase by the Company or its assignee.

9. RESTRICTED STOCK

     9.1 Grant of Restricted Stock.

     The Board may from time to time grant Restricted Stock to persons eligible to receive Grants
under Section 5 hereof, subject to such restrictions, conditions and other terms as the Board may
determine.

     9.2 Restrictions.

     At the time a Grant of Restricted Stock is made, the Board shall establish a restriction
period applicable to such Restricted Stock. Each Grant of Restricted Stock may be subject to a
different restriction period. The Board may, in its sole discretion, at the time a Grant of
Restricted Stock is made, prescribe conditions that must be satisfied prior to the expiration of
the restriction period, including the satisfaction of corporate or individual performance
objectives or continued Service, in order that all or any portion of the Restricted Stock shall
vest. To the extent required by applicable law, the vesting restrictions applicable to a Grant of
Restricted Stock shall lapse no less rapidly than the rate of twenty percent (20%) per year for
each of the first five (5) years from the Grant Date, based on continued Service.

     The Board also may, in its sole discretion, shorten or terminate the restriction period or
waive any of the conditions applicable to all or a portion of the Restricted Stock. The Restricted
Stock may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of

 - 10 - 

 

during the restriction period or prior to the satisfaction of any other conditions prescribed
by the Board with respect to such Restricted Stock.

     9.3 Restricted Stock Certificates.

     The Company shall issue, in the name of each Grantee to whom Restricted Stock has been
granted, stock certificates representing the total number of shares of Restricted Stock granted to
the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an
Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the
Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company, or the
restrictions lapse, or (ii) such certificates shall be delivered to the Grantee, provided, however,
that such certificates shall bear a legend or legends that complies with the applicable securities
laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and
the Award Agreement.

     9.4 Rights of Holders of Restricted Stock.

     Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall
have the right to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee
with respect to Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions applicable to the
original Grant.

     9.5 Termination of Service.

     Unless otherwise provided by the Board in the applicable Award Agreement, upon the termination
of a Grantee’s Service with the Company or an Affiliate, any shares of Restricted Stock held by
such Grantee that have not vested, or with respect to which all applicable restrictions and
conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Restricted
Stock, the Grantee shall have no further rights with respect to such Grant, including but not
limited to any right to vote Restricted Stock or any right to receive dividends with respect to
shares of Restricted Stock.

     9.6 Purchase and Delivery of Stock.

     The Grantee shall be required to purchase the Restricted Stock from the Company at a Purchase
Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by
such Restricted Stock or (ii) the Purchase Price, if any, specified in the Award Agreement relating
to such Restricted Stock. The Purchase Price shall be payable in a form described in Section 10
or, in the discretion of the Board, in consideration for past Services rendered to the Company or
an Affiliate. To the extent required by applicable law, the Purchase Price of a share of
Restricted Stock shall be not less than 85 percent of the Fair Market Value on the Grant Date of a
share of Stock; provided, however, that in the event that the Grantee is a Ten-

 - 11 - 

 

Percent Stockholder, the Purchase Price shall be not less than 100 percent of the Fair Market
Value on the Grant Date of a share of Stock.

     Upon the expiration or termination of the restriction period and the satisfaction of any other
conditions prescribed by the Board, having properly paid the Purchase Price, the restrictions
applicable to shares of Restricted Stock shall lapse, and, unless otherwise provided in the Award
Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

10. FORM OF PAYMENT

     10.1 General Rule.

     Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to
the Company.

     10.2 Surrender of Stock.

     To the extent the Award Agreement so provides, payment of the Option Price for shares
purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be
made all or in part through the tender to the Company of shares of Stock, which shares, if acquired
from the Company, shall have been held for at least six months at the time of tender and which
shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price
has been paid thereby, at their Fair Market Value on the date of exercise.

     10.3 Cashless Exercise.

     With respect to an Option only (and not with respect to Restricted Stock), to the extent the
Award Agreement so provides and the shares of Stock have become publicly traded, payment of the
Option Price for shares purchased pursuant to the exercise of an Option may be made all or in part
by delivery (on a form acceptable to the Board) of an irrevocable direction to a licensed
securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of
the sales proceeds to the Company in payment of the Option Price and any withholding taxes
described in Section 11.

     10.4 Promissory Note.

     To the extent the Award Agreement so provides, payment of the Option Price for shares
purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be
made all or in part with a full recourse promissory note executed by the Grantee. The interest
rate and other terms and conditions of such note shall be determined by the Board. The Board may
require that the Grantee pledge the Stock subject to the Grant for the purpose of securing payment
of the note. In no event shall stock certificate(s) representing the Stock be released to the
Grantee until such note is paid in full.

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11. WITHHOLDING TAXES

     The Company or any Affiliate, as the case may be, shall have the right to deduct from payments
of any kind otherwise due to a Grantee any Federal, state, or local taxes of any kind required by
law to be withheld with respect to the vesting of or other lapse of restrictions applicable to
Restricted Stock or upon the issuance of any shares of Stock upon the exercise of an Option. At
the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or Affiliate, as
the case may be, any amount that the Company or Affiliate may reasonably determine to be necessary
to satisfy such withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing
the Company or the Affiliate to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The
shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such
withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such
withholding obligation shall be determined by the Company or the Affiliate as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to
this Section 11 may satisfy his or her withholding obligation only with shares of Stock that are
not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

12. RESTRICTIONS ON TRANSFER OF SHARES OF STOCK

     12.1 Right of First Refusal.

     Subject to Section 12.4 below, a Grantee (or such other individual who is entitled to exercise
an Option or otherwise acquire shares pursuant to a Grant under the terms of this Plan) shall not
sell, pledge, assign, gift, transfer, or otherwise dispose of any shares of Stock acquired pursuant
to a Grant to any person or entity without first offering such shares to the Company for purchase
on the same terms and conditions as those offered the proposed transferee. The Company may assign
its right of first refusal under this Section 12.1 in whole or in part, to (1) any holder of stock
or other securities of the Company (a “Stockholder”), (2) any Affiliate or (3) any other person or
entity that the Board determines has a sufficient relationship with or interest in the Company.
The Company shall give reasonable written notice to the Grantee of any such assignment of its
rights. The restrictions of this Section 12.1 apply to any person to whom Stock that was
originally acquired pursuant to a Grant is sold, pledged, assigned, bequeathed, gifted, transferred
or otherwise disposed of, without regard to the number of such subsequent transferees or the manner
in which they acquire the Stock, but the restrictions of this Section 12.1 do not apply to a
transfer of Stock that occurs as a result of the death of the Grantee or of any subsequent
transferee (but shall apply to the executor, the administrator or personal representative, the
estate, and the legatees, beneficiaries and assigns thereof).

     12.2 Repurchase and Other Rights.

     Stock issued upon exercise of an Option or pursuant to the Grant of Restricted Stock may be
subject to such right of repurchase or other transfer restrictions as the Board may determine,

 - 13 - 

 

consistent with applicable law. Any such additional restriction shall be set forth in the
Award Agreement.

     12.3 Installment Payments.

          12.3.1 General Rule.

     In the case of any purchase of Stock or an Option under this Section 12, the Company or its
permitted assignee may pay the Grantee, transferee of the Option or other registered owner of the
Stock the purchase price in three or fewer annual installments. Interest shall be credited on the
installments at the applicable federal rate (as determined for purposes of Section 1274 of the
Code) in effect on the date on which the purchase is made. The Company or its permitted assignee
shall pay at least one-third of the total purchase price each year, plus interest on the unpaid
balance, with the first payment being made on or before the 60th day after the purchase.

          12.3.2 Exception in the Case of Stock Repurchase Right.

     If an Award Agreement authorizes, upon the Grantee’s termination of Service, the repurchase of
shares of Stock acquired by the Grantee pursuant to the exercise of an Option or under a Grant of
Restricted Stock, to the extent required by applicable law, payment shall be made in cash or by
cancellation of indebtedness within the later of 90 days from the date of termination of Service or
90 days from the date of exercise or purchase, as the case may be.

     12.4 Publicly Traded Stock.

     If the Stock is listed on an established national or regional stock exchange or is admitted to
quotation on The Nasdaq Stock Market, Inc., or is publicly traded in an established securities
market, the foregoing transfer restrictions of Sections 12.1 and 12.2 shall terminate as of the
first date that the Stock is so listed, quoted or publicly traded.

     12.5 Legend.

     In order to enforce the restrictions imposed upon shares of Stock under this Plan or as
provided in an Award Agreement, the Board may cause a legend or legends to be placed on any
certificate representing shares issued pursuant to this Plan that complies with the applicable
securities laws and regulations and makes appropriate reference to the restrictions imposed under
it.

13. PARACHUTE LIMITATIONS

     Notwithstanding any other provision of this Plan or of any other agreement, contract, or
understanding heretofore or hereafter entered into by a Grantee with the Company or any Affiliate,
except an agreement, contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an “Other Agreement”), and notwithstanding any formal or
informal plan or other arrangement for the direct or indirect provision of compensation to the
Grantee (including groups or classes of participants or beneficiaries of

 - 14 - 

 

which the Grantee is a member), whether or not such compensation is deferred, is in cash, or
is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a
“disqualified individual,” as defined in Section 280G(c) of the Code, any Options or Restricted
Stock held by that Grantee and any right to receive any payment or other benefit under this Plan
shall not become exercisable or vested (i) to the extent that such right to exercise, vesting,
payment, or benefit, taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as
a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee
from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less
than the maximum after-tax amount that could be received by the Grantee without causing any such
payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such
right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other
rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit
Arrangement would cause the Grantee to be considered to have received a Parachute Payment under
this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as
described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee’s sole discretion, to designate those rights, payments, or benefits under this Plan, any
Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid
having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment.

14. REQUIREMENTS OF LAW

     14.1 General.

     The Company shall not be required to sell or issue any shares of Stock under any Grant if the
sale or issuance of such shares would constitute a violation by the Grantee, any other individual
exercising a right emanating from such Grant, or the Company of any provision of any law or
regulation of any governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to a Grant upon any
securities exchange or under any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of
Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to
such Grant unless such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and any delay caused
thereby shall in no way affect the date of termination of the Grant. Specifically, in connection
with the Securities Act, upon the exercise of any right emanating from such Grant or the delivery
of any shares of Restricted Stock, unless a registration statement under the Securities Act is in
effect with respect to the shares of Stock covered by such Grant, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory to it that the
Grantee or any other individual exercising an Option may acquire such shares pursuant to an
exemption from registration under the Securities Act. Any determination in this connection by the
Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated
to,

 - 15 - 

 

register any securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an Option or the
issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the requirement that an
Option shall not be exercisable until the shares of Stock covered by such Option are registered or
are exempt from registration, the exercise of such Option (under circumstances in which the laws of
such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or
the availability of such an exemption. *********If, at any time prior to the time the Company
becomes an SEC-reporting company, the Company shall determine in its sole judgment that the sale or
issuance of any shares of Stock under any Grant or the resale of any shares of Stock acquired
pursuant to a Grant, based upon the circumstances at such time (including the number of holders of
options of the Company or other factors) and applicable rules, regulations, policies, statements or
other announcements by the SEC, could require the Company to file a registration statement or
become an SEC-reporting company under Section 12(g) of the Exchange Act or cause the Company to
fail to meet one or more exceptions to such a registration requirement, the Company may, to the
extent it deems necessary or desirable, prohibit the sale, issuance, or resale of such shares of
Stock until registration of such Stock or for such period as the Company determines to be
applicable based upon the foregoing.**************

     14.2 Rule 16b-3.

     During any time when the Company has a class of equity security registered under Section 12 of
the Exchange Act, it is the intent of the Company that Grants pursuant to the Plan and the exercise
of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law
and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event
that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan
in any respect necessary to satisfy the requirements of, or to take advantage of any features of,
the revised exemption or its replacement.

     14.3 Financial Reports.

     To the extent required by applicable law, not less often than annually, the Company shall
furnish to Grantees summary financial information including a balance sheet regarding the Company’s
financial condition and results of operations, unless such Grantees have duties with the Company
that assure them access to equivalent information. Such financial statements need not be audited.

15. EFFECT OF CHANGES IN CAPITALIZATION

     15.1 Changes in Stock.

     The number of shares for which Grants of Options and Restricted Stock may be made under the
Plan shall be proportionately increased or decreased for any increase or decrease in the

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number of shares of Stock on account of any recapitalization, reclassification, stock split,
reverse split, combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or for any other increase or decrease in such shares effected without
receipt of consideration by the Company occurring after the Effective Date ( any such event
hereafter referred to as a “Corporate Event”). In addition, subject to the exception set forth in
the last sentence of Section 15.4, the number of shares for which Grants are outstanding shall be
proportionately increased or decreased for any increase or decrease in the number of shares of
Stock on account of any Corporate Event. Any such adjustment in outstanding Options shall not
change the aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of an Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share. The conversion of any convertible securities of the
Company shall not be treated as an increase in shares effected without receipt of consideration. In
the event of any distribution to the Company’s stockholders of securities of any other entity or
other assets (other than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Company may, in such manner as the Company deems appropriate,
adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise
price of outstanding Options to reflect such distribution.

			
	     15.2	 	Reorganization in Which the Company Is the Surviving Entity and in Which No
Change of Control Occurs.

     Subject to the exception set forth in the last sentence of Section 15.4, if the Company shall
be the surviving entity in any reorganization, merger, or consolidation of the Company with one or
more other entities and in which no Change of Control occurs, any Grant theretofore made pursuant
to the Plan shall pertain to and apply solely to the common stock shares to which a holder of the
number of shares of Stock subject to such Grant would have been entitled immediately following such
reorganization, merger, or consolidation, and in the case of Options, with a corresponding
proportionate adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation. Subject to any contrary
language in an Award Agreement evidencing a Grant of Restricted Stock, any restrictions applicable
to such Restricted Stock shall apply as well to any replacement shares received by the Grantee as a
result of the reorganization, merger or consolidation.

			
	     15.3	 	Reorganization, Sale of Assets or Sale of Stock Which Involves a Change of
Control.

     Subject to the exceptions set forth in the last sentence of this Section 15.3 and the last
sentence of Section 15.4 upon the occurrence of a Change of Control, (i) all outstanding shares of
Restricted Stock shall be deemed to have vested, and, with the exception of such restrictions
imposed under Section 12, all restrictions and conditions applicable to such shares of Restricted
Stock shall be deemed to have lapsed, immediately prior to the occurrence of such Change of
Control, and (ii) either of the following two actions shall be taken: (A) fifteen days prior to the
scheduled consummation of a Change of Control, all Options outstanding hereunder shall become
immediately exercisable and shall remain exercisable for a period of fifteen days, or (B) the Board
may elect, in its sole discretion, to cancel any outstanding Grants and pay or deliver, or

 - 17 - 

 

cause to be paid or delivered, to the holder thereof an amount in cash or securities having a
value (as determined by the Board acting in good faith), in the case of Restricted Stock, equal to
the formula or fixed price per share paid to holders of shares of Stock and, in the case of
Options, equal to the product of the number of shares of Stock subject to the Option (the “Option
Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid
to holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price applicable
to such Option Shares. With respect to the Company’s establishment of an exercise window, (i) any
exercise of an Option during such fifteen-day period shall be conditioned upon the consummation of
the event and shall be effective only immediately before the consummation of the event, and (ii)
upon consummation of any Change of Control the Plan, and all outstanding but unexercised Options
shall terminate. The Board shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than the time at which the Company gives
notice thereof to its shareholders. This Section 15.3 shall not apply to any Change of Control to
the extent that provision is made in writing in connection with such Change of Control for the
assumption or continuation of the Options and Restricted Stock theretofore granted, or for the
substitution for such Options and Restricted Stock for new common stock options and new common
stock restricted stock relating to the stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number of shares (disregarding any consideration
that is not common stock) and option prices, in which event the Plan and Options and Restricted
Stock theretofore granted shall continue in the manner and under the terms so provided.

     15.4 Adjustments.

     Adjustments under Section 15 related to shares of Stock or securities of the Company shall be
made by the Board, whose determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share. The Board may provide in the Award Agreements at the time of Grant, or
any time thereafter with the consent of the Grantee, for different provisions to apply to a Grant
in place of those described in Sections 15.1, 15.2 and 15.3.

     15.5 No Limitations on Company.

     The making of Grants pursuant to the Plan shall not affect or limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.

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16. DURATION AND AMENDMENTS

     16.1 Term of the Plan.

     The Effective Date of this Plan is the date of its adoption by the Board, subject to the
approval of the Plan by the Company’s stockholders. In the event that the stockholders fail to
approve the Plan within twelve (12) months after its adoption by the Board, any Grants already made
shall be null and void, and no additional Grants shall be made after such date. The Plan shall
terminate automatically ten (10) years after its adoption by the Board and may be terminated on any
earlier date as next provided.

     16.2 Amendment and Termination of the Plan.

     The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to
any shares of Stock as to which Grants have not been made. An amendment to the Plan shall be
contingent on approval of the Company’s stockholders only to the extent required by applicable law,
regulations or rules. No Grants shall be made after the termination of the Plan. No amendment,
suspension, or termination of the Plan shall, without the consent of the Grantee, alter or impair
rights or obligations under any Grant theretofore awarded under the Plan.

17. GENERAL PROVISIONS

     17.1 Disclaimer of Rights

     No provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon
any individual the right to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with any contractual or other right or authority of the Company either to
increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company or any
Affiliate. The obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the
Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the terms of the Plan.

     17.2 Nonexclusivity of the Plan

     Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the
Company for approval shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than under the Plan.

 - 19 - 

 

     17.3 Captions

     The use of captions in this Plan or any Award Agreement is for the convenience of reference
only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

     17.4 Other Award Agreement Provisions

     Each Grant awarded under the Plan may contain such other terms and conditions not inconsistent
with the Plan as may be determined by the Board, in its sole discretion.

     17.5 Number and Gender

     With respect to words used in this Plan, the singular form shall include the plural form, the
masculine gender shall include the feminine gender, etc., as the context requires.

     17.6 Severability

     If any provision of the Plan or any Award Agreement shall be determined to be illegal or
unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.

     17.7 Governing Law

     The validity and construction of this Plan and the instruments evidencing the Grants awarded
hereunder shall be governed by the laws of the Commonwealth of Virginia other than any conflicts or
choice of law rule or principle that might otherwise refer construction or interpretation of this
Plan and the instruments evidencing the Grants awarded hereunder to the substantive laws of any
other jurisdiction.

 - 20 - 

 

     18. EXECUTION

     To record adoption of the Plan by the Board as of April 18, 2002, and approval of the Plan by
the stockholders on                      ___, 2002, the Company has caused its authorized officer to execute
the Plan.

	 	 	 	 	 	 	 
	 	 	AMERICAN PUBLIC EDUCATION, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 - 21 -

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