1999 Stock Option Plan - Capella Education Co.
AMENDED AND RESTATED
CAPELLA EDUCATION COMPANY
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1999 Stock Option Plan (the "Plan") is to
promote the interests of Capella Education Company, a Minnesota corporation (the
"Company"), and its stockholders by providing personnel of the Company and any
parent or subsidiaries thereof, and any other individuals and entities who
provide services to the Company or any parent or subsidiaries in the capacity of
non-employee directors or advisors or consultants, with an opportunity to
acquire a proprietary interest in the Company and thereby develop a stronger
incentive to put forth maximum effort for the continued success and growth of
the Company. In addition, the opportunity to acquire a proprietary interest in
the Company will aid in attracting and retaining personnel of outstanding
ability.
2. ADMINISTRATION.
(a) General. This Plan shall be administered by a committee of two
or more directors of the Company (the "Committee") appointed by the Company's
Board of Directors (the "Board"). If the Board has not appointed a committee to
administer this Plan, then the Board shall constitute the Committee. The
Committee shall have the power, subject to the limitations contained in this
Plan, to fix any terms and conditions for the grant or exercise of any award
under this Plan. A majority of the members of the Committee shall constitute a
quorum for any meeting of the Committee, and the acts of a majority of the
members present at any meeting at which a quorum is present or the acts
unanimously approved in writing by all members of the Committee shall be the
acts of the Committee. Subject to the provisions of this Plan, the Committee may
from time to time adopt such rules for the administration of this Plan as it
deems appropriate. The decision of the Committee on any matter affecting this
Plan, or the rights and obligations arising under this Plan or any award granted
hereunder, shall be final, conclusive and binding upon all persons, including
without limitation the Company, stockholders and optionees.
(b) Indemnification. To the full extent permitted by law, (i) no
member of the Committee or person to whom authority under this Plan is delegated
shall be liable for any action, omission or determination taken or made in good
faith with respect to this Plan or any award granted hereunder and (ii) the
members of the Committee and each person to whom authority under this Plan is
delegated shall be entitled to indemnification by the Company against and from
any loss incurred by such member or person by reason of any such actions and
determinations.
(c) Delegation of Authority. The Committee may delegate all or any
part of its authority under this Plan to the Chief Executive Officer of the
Company for purposes of granting and administering awards granted to persons
other than persons who are then subject to the reporting requirements of Section
16 of the Securities Exchange Act of 1934, as amended
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(the "Exchange Act"). The Chief Executive Officer of the Company may, in turn,
delegate all or a portion of the delegated authority to such other officer or
officers of the Company as the Chief Executive Officer may determine.
(d) Committee Composition when Common Stock is Publicly Traded. At
the time that the Company's common stock is publicly traded, any options granted
to persons subject to Section 16 of the Exchange Act shall be granted by the
Board or a Committee consisting of at least two or more Non-Employee Directors,
in accordance with Rule 16b-3 and any options intended to qualify as
performance-based compensation within the meaning of Section 162(m) shall be
granted by the Committee consisting of two or more Outside Directors, in
accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
(e) Action by Board. Notwithstanding subparagraph 2(a) above, any
grant of awards hereunder to any director of the Company who is not an employee
of the Company at the time of grant ("Non-Employee Director Award"), and any
action taken by the Company with respect to any Non-Employee Director Award,
including any amendment thereto, and any acceleration of the vesting of any
option constituting a Non-Employee Director Award, any extension of the time
within which any option constituting a Non-Employee Director Award may be
exercised, any determination pursuant to paragraph 8 relating to the payment of
the purchase price of Shares (as defined in paragraph 3 below) subject to an
option constituting a Non-Employee Director Award, or any action pursuant to
paragraph 9 relating to the payment of withholding taxes, if any, through the
use of Shares with respect to a Non-Employee Director Award shall be subject to
prior approval by the Board.
3. SHARES. The shares that may be made subject to awards granted under
this Plan shall be authorized and unissued shares of Common Stock of the
Company, par value $0.10 per share ("Shares," and each individually a "Share"),
and they shall not exceed 1,150,000 Shares in the aggregate, subject to
adjustment as provided in paragraph 13, below, except that, if any option lapses
or terminates for any reason before such option has been completely exercised,
the Shares covered by the unexercised portion of such option may again be made
subject to options granted under this Plan. An Option may not be exercisable for
a fraction of a Share.
4. ELIGIBLE PARTICIPANTS. Options may be granted under this Plan to any
employee of the Company, or any parent or subsidiary thereof, including any such
person who is also an officer or director of the Company or any parent or
subsidiary thereof. Non-statutory stock options (as defined in subparagraph 5(a)
below) also may be granted to (i) any director of the Company who is not an
employee of the Company or any parent or subsidiary thereof, (ii) other
individuals or entities who are not employees but who provide services to the
Company or a parent or subsidiary thereof in the capacity of an advisor or
consultant, and (iii) any individual or entity that the Company desires to
induce to become an employee, but any such grant shall be contingent upon such
individual or entity becoming employed by the Company or a parent or subsidiary
thereof. References herein to "employment" and similar terms (except "employee")
shall include the providing of services in the capacity of an advisor or
consultant
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or as a director. The employees and other individuals and entities to whom
options may be granted pursuant to this paragraph 4 are referred to herein as
"Eligible Participants."
5. TERMS AND CONDITIONS OF OPTIONS.
(a) General. Subject to the terms and conditions of this Plan, the
Committee may, from time to time during the term of this Plan, grant to Eligible
Participants options to purchase such number of Shares of the Company on such
terms and conditions as the Committee may determine. In determining the Eligible
Participants to whom options shall be granted and the number of Shares to be
covered by each option, the Committee may take into account the nature of the
services rendered by the respective Eligible Participants, their present and
potential contributions to the success of the Company, and such other factors as
the Committee in its sole discretion may deem relevant. The date and the time of
approval by the Committee of the granting of an option shall be considered the
date and the time of the grant of such option. The Committee in its sole
discretion may designate whether an option granted to an employee is to be
considered an "incentive stock option" (as that term is defined in Section 422
of the Code, or any amendment thereto) or a non-statutory stock option (an
option granted under this Plan that is not intended to be an "incentive stock
option"). The Committee may grant both incentive stock options and non-statutory
stock options to the same employee. However, if an incentive stock option and a
non-statutory stock option are awarded simultaneously, such options shall be
deemed to have been awarded in separate grants, shall be clearly identified, and
in no event shall the exercise of one such option affect the right to exercise
the other. To the extent that the aggregate Fair Market Value (as defined in
paragraph 7 below) of Shares with respect to which incentive stock options are
exercisable for the first time by any employee during any calendar year (under
all incentive stock option plans of the Company and its parent and subsidiary
corporations) exceeds $100,000, such options shall be treated as non-statutory
stock options. Notwithstanding the foregoing, no incentive stock option may be
granted under this Plan unless this Plan is approved by the stockholders of the
Company within twelve months after the effective date of this Plan. The maximum
number of Shares subject to options that may be granted to any one individual
under the Plan in any fiscal year of the Company (the "Maximum Annual Grant") is
400,000 Shares (subject to adjustment pursuant to paragraph 13 hereof). The
granting of an option to a person shall give such person no rights as a
stockholder except as to Shares issued to such person.
(b) Purchase Price. The purchase price of each Share subject to an
option granted pursuant to this paragraph 5 shall be fixed by the Committee,
subject, however, to the remainder of this subparagraph 5(b). For non-statutory
stock options, such purchase price may be set at any price the Committee may
determine. In the case of a non-statutory stock option intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the per Share exercise price shall be no less than 100% of the Fair Market
Value per share on the date of grant. For incentive stock options, such purchase
price shall be no less than 100% of the Fair Market Value of a Share on the date
of grant, provided that if such incentive stock option is granted to an employee
who owns, or is deemed under Section 424(d) of the Code to own, at the time such
option is granted, stock of the Company (or
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of any parent or subsidiary of the Company) possessing more than 10% of the
total combined voting power of all classes of stock therein (a "10%
Stockholder"), such purchase price shall be no less than 110% of the Fair Market
Value of a Share on the date of grant.
(c) Vesting. Each option agreement provided for in paragraph 6 shall
specify when each option granted under this Plan shall become exercisable with
respect to the Shares covered by the option. Each option agreement may specify
certain conditions under which options granted under this Plan shall be
immediately exercisable, including the occurrence of a change in control of the
Company. Notwithstanding the provisions of any option agreement provided for in
paragraph 6, the Committee may, in its sole discretion, declare at any time that
any option granted under this Plan shall be immediately exercisable. Unless the
Committee provides otherwise, vesting of Options granted hereunder shall be
tolled during any unpaid leave of absence.
(d) Termination. Each option granted pursuant to this paragraph 5
shall expire, and all rights to purchase Shares thereunder shall terminate, on
the earliest of:
(i) ten years after the date such option is granted (or in the case
of an incentive stock option granted to a 10% Stockholder, five years
after the date such option is granted) or on such date prior thereto as
may be fixed by the Committee on or before the date such option is
granted;
(ii) the expiration of the period after the termination of the
optionee's employment within which the option is exercisable as specified
in paragraph 10(b) or 10(c), whichever is applicable (provided that the
Committee may, in any option agreement provided for in paragraph 6 or by
Committee action with respect to any outstanding option, extend the
periods specified in paragraph 10(b) and 10(c)); or
(iii) the date, if any, fixed for cancellation pursuant to paragraph
11 or 12 below.
6. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Committee may from
time to time determine, which agreement shall, among other things, designate
whether the options being granted thereunder are non-statutory stock options or
incentive stock options.
7. FAIR MARKET VALUE. For purposes of this Plan, the "Fair Market Value"
of a Share at a specified date shall, unless otherwise expressly provided in
this Plan, mean the closing or last sale price of a Share on the date
immediately preceding such date or, if no sale of Shares shall have occurred on
that date, on the next preceding day on which a sale of Shares occurred, on the
Composite Tape for New York Stock Exchange listed shares or, if Shares are not
quoted on the Composite Tape for New York Stock Exchange listed shares, on the
Nasdaq National Market or any similar system then in use or, if Shares are not
included in the Nasdaq
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National Market or any similar system then in use, on the Nasdaq SmallCap Market
or any similar system then in use, provided that if the Shares in question are
not quoted on any such system, Fair Market Value shall be what the Committee
determines in good faith to be 100% of the fair market value of a Share as of
the date in question. Notwithstanding anything stated in this paragraph 7, if
the applicable securities exchange or system has closed for the day by the time
the determination is being made, all references in this paragraph to the date
immediately preceding the date in question shall be deemed to be references to
the date in question.
8. MANNER OF EXERCISE OF OPTIONS.
(a) General. A person entitled to exercise an option granted under
this Plan may, subject to its terms and conditions and the terms and conditions
of this Plan, exercise it in whole at any time, or in part from time to time, by
delivery to the Company at its principal executive office, to the attention of
its Secretary, of written notice of exercise, specifying the number of Shares
with respect to which the option is being exercised and payment of the purchase
price of the Shares.
(b) Payment. The consideration to be paid for the Shares, including
the method of payment, shall be determined by the Committee (and in the case of
an Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (i) cash (including check, bank draft or money order); (ii)
delivery of optionee's promissory note with such recourse, interest, security
and redemption provisions as the Committee determines to be appropriate; (iii)
cancellation of indebtedness; (iv) shares of Common Stock of the Company already
owned by the optionee; (v) authorization of the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised; (vi) any
combination of the methods of payments described above; (vii) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law. Notwithstanding the foregoing, no person shall
be permitted to pay any portion of the purchase price with Shares if the
Committee, in its sole discretion, determines that payment in such manner is
undesirable.
9. TAX WITHHOLDING. Delivery of Shares upon exercise of any non-statutory
stock option granted under this Plan shall be subject to any required
withholding taxes. A person exercising a non-statutory stock option may, as a
condition precedent to receiving the Shares, be required to pay the Company a
cash amount equal to the amount of any required withholdings. In lieu of all or
any part of such a cash payment, the Committee may, but shall not be required
to, provide in any option agreement provided for in paragraph 6 (or provide by
Committee action with respect to any outstanding option) that a person
exercising an option may cover all or any part of the required withholdings, and
any additional withholdings up to the amount needed to cover the individual's
full FICA and federal, state and local income tax liability with respect to
income arising from the exercise of the option, through the delivery to the
Company of unencumbered Shares, through a reduction in the number of Shares
delivered to the person exercising the option or through a subsequent return to
the Company of Shares
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delivered to the person exercising the option (in each case, such Shares having
an aggregate Fair Market Value on the date of exercise equal to the amount of
the withholding taxes being paid through such delivery, reduction or subsequent
return of Shares).
10. TRANSFERABILITY AND TERMINATION OF EMPLOYMENT.
(a) Transferability. During the lifetime of an optionee, only such
optionee or his or her guardian or legal representative may exercise options
granted under this Plan, and no option granted under this Plan shall be
assignable or transferable by the optionee otherwise than by will or the laws of
descent and distribution or, with respect only to non-statutory stock options,
pursuant to a domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder; provided,
however, that any optionee may transfer a non-statutory stock option granted
under this Plan to a member or members of his or her immediate family (i.e., his
or her children, grandchildren and spouse) or to one or more trusts for the
benefit of such family members or partnerships in which such family members are
the only partners, if (i) the option agreement with respect to such options
expressly so provides either at the time of initial grant or by amendment to an
outstanding option agreement and (ii) the optionee does not receive any
consideration for the transfer. Any options held by any such transferee shall
continue to be subject to the same terms and conditions that were applicable to
such options immediately prior to their transfer and may be exercised by such
transferee as and to the extent that such option has become exercisable and has
not terminated in accordance with the provisions of the Plan and the applicable
option agreement. For purposes of any provision of this Plan relating to notice
to an optionee or to vesting or termination of an option upon the death,
disability or termination of employment of an optionee, the references to
"optionee" shall mean the original grantee of an option and not any transferee.
(b) Termination of Employment During Lifetime. During the lifetime
of an optionee who is an employee of the Company or any parent or subsidiary
thereof at the time of grant of an option, an option granted to such optionee
may be exercised only while the optionee is employed by the Company or by a
parent or subsidiary thereof, and only if such optionee has been continuously so
employed since the date the option was granted, except that:
(i) an option shall continue to be exercisable for three months after
termination of the optionee's employment, but (x) only to the extent that
the option was exercisable immediately prior to such optionee's
termination of employment, and (y) subject to any shorter time period for
exercise provided in paragraph 11 or 12; provided, however, that if
termination of the optionee's employment shall have been for Cause (as
hereinafter defined), any option held by such optionee shall expire, and
all rights to purchase Shares thereunder shall terminate, immediately upon
such termination; for purposes of this paragraph 10(b)(i), "Cause" shall
be deemed to exist upon (A) Optionee's failure or refusal substantially to
perform his duties to the full extent of his abilities for reasons other
than death or disability, after written notice to Optionee of such failure
or refusal providing Optionee 30 days to take corrective action, (B)
conviction of a
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felony crime, or commission of any act, the conviction for which would be
a felony conviction, (C) theft or misappropriation of the Company's
property, and (D) knowingly making a material false written statement to
the Company's Board of Directors regarding the affairs of the Company; and
(ii) in the case of an optionee who is disabled (as hereinafter
defined) while employed, an option shall continue to be exercisable for
one year after termination of such optionee's employment.
(c) Termination Upon Death. With respect to an optionee whose
employment terminates by reason of death, any option granted to such optionee
may be exercised within one year after the death of such optionee.
(d) Vesting Upon Disability or Death. In the event of the disability
(as hereinafter defined) or death of an optionee, any option granted to such
optionee that was not previously exercisable shall become immediately
exercisable in full if the disabled or deceased optionee shall have been
continuously employed by the Company or a parent or subsidiary thereof between
the date such option was granted and the date of such disability or death.
"Disability" of an optionee shall mean any physical or mental incapacitation
whereby such optionee is therefore unable for a period of twelve consecutive
months or for an aggregate of twelve months in any twenty-four consecutive month
period to perform his or her duties for the Company or any parent or subsidiary
thereof. "Disabled," with respect to any optionee, shall mean that such optionee
has incurred a Disability.
(e) Transfers and Leaves of Absence. For purposes of this Plan none
of the following shall be deemed a termination of employment: (1) the transfer
of employment of a person between any combination of the Company, a parent
corporation or a subsidiary thereof or of the Company; (2) the change of status
of a person from employee of the Company to consultant of the Company; or (3) a
leave of absence granted to such person and approved by the Committee. The terms
"parent" or "parent corporation" and "subsidiary" as used in this Plan shall
have the meaning ascribed to "parent corporation" and "subsidiary corporation",
respectively, in Sections 424(e) and (f) of the Code.
(f) Right to Terminate Employment. Nothing contained in this Plan,
or in any option granted pursuant to this Plan, shall confer upon any optionee
any right to continued employment by the Company or any parent or subsidiary of
the Company or limit in any way the right of the Company or any such parent or
subsidiary to terminate such optionee's employment at any time.
(g) Expiration Date. In no event shall any option be exercisable at
any time after the time it shall have expired in accordance with paragraph 5(d)
of this Plan. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
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11. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the company, the Committee shall notify each optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Committee in its discretion may provide for an optionee to have the right to
exercise his or her Option until ten (10) days prior to such transaction as to
all of the Shares covered thereby, including Shares as to which the Option would
not otherwise be exercisable. In addition, the Committee may provide that any
Company repurchase option applicable to the Shares shall lapse as to all such
Shares, provided that the proposed dissolution or liquidation takes place at the
time and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.
12. MERGER. In the event of a merger of the Company with or into another
corporation or limited liability company, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option substituted by the successor entity or a parent or subsidiary
of the successor entity. In the event that the successor entity refuses to
assume or substitute for the Option, the optionee shall fully vest in and have
the right to exercise the Option as to all of the Shares, including Shares as to
which it would not otherwise be vested or exercisable. If an Option becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Committee shall notify the optionee in
writing or electronically that the Option shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share covered by the option immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, other securities or property) received
in the merger or sale of assets by holders of Common Stock of the Company for
each Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor entity or its parent, the Committee may, with the consent
of the successor entity, provide for the consideration to be received upon the
exercise of the Option, for each Share subject to the Option, to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. ADJUSTMENTS. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, or extraordinary dividend
or divestiture (including a spin-off), or any other change in the corporate
structure or Shares of the Company, the Committee (or if the Company does not
survive any such transaction, a comparable committee of the Board of Directors
of the surviving corporation) may, without the consent of any holder of an
option, make such adjustment as it determines in its discretion to be
appropriate as to the number and kind of securities subject to and reserved
under this Plan, the purchase price of each Share subject to outstanding
options, the Maximum Annual Grant and, in order to prevent dilution or
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enlargement of rights of participants in this Plan, the number and kind of
securities issuable upon exercise of outstanding options and the exercise price
thereof.
14. SUBSTITUTE OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or any parent or
subsidiary thereof, or whose employer is about to become a subsidiary of the
Company, as the result of a merger or consolidation of the Company or a
subsidiary of the Company with another corporation, the acquisition by the
Company or a subsidiary of the Company of all or substantially all the assets of
another corporation or the acquisition by the Company or a subsidiary of the
Company of at least 50% of the issued and outstanding stock of another
corporation. The terms and conditions of the substitute options so granted may
vary from the terms and conditions set forth in this Plan to such extent as the
Board at the time of the grant may deem appropriate to conform, in whole or in
part, to the provisions of the stock options in substitution for which they are
granted, but with respect to stock options which are incentive stock options, no
such variation shall be permitted which affects the status of any such
substitute option as an incentive stock option.
15. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) General. No certificate for Shares distributable under this Plan
shall be issued and delivered unless the issuance of such certificate complies
with all applicable legal requirements including, without limitation, compliance
with the provisions of applicable state securities laws, the Securities Act of
1933, as amended, and the Exchange Act.
(b) Rule 16b-3. With respect to Eligible Participants who are
subject to the reporting requirements of Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of this Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
16 RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company
may reserve to itself and its assignees in the option agreement (a) a right of
first refusal to purchase Shares that an optionee (or a subsequent transferee)
may propose to transfer to a third party, (b) a right to repurchase a portion of
or all Shares held by an optionee, and (c) a restriction on the transfer of a
portion of or all Shares.
17. GOVERNING LAW. To the extent that federal laws do not otherwise
control, this Plan and all determinations made and actions taken under this Plan
shall be governed by the laws of the State of Minnesota without regard to the
conflicts of law provisions thereof, and construed accordingly.
18. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time amend,
suspend or discontinue this Plan; provided, however, that no amendment to this
Plan shall,
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without the consent of the holder of the option, alter or impair any option
previously granted under this Plan. To the extent considered necessary to comply
with applicable provisions of the Code, any such amendments to this Plan may be
made subject to approval by the stockholders of the Company.
19. TERM.
(a) Effective Date. This Plan shall be effective as of January 1,
2000.
(b) Termination. This Plan shall remain in effect until all Shares
subject to it are distributed or this Plan is terminated under paragraph 18
above. No award of an incentive stock option shall be made under this Plan more
than ten years after the effective date of this Plan (or such other limit as may
be required by the Code) if such limitation is necessary to qualify the option
as an incentive stock option.
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