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Exhibit 10.08
AMENDMENT
TO
MANAGEMENT INCENTIVE STOCK OPTION AGREEMENT
THIS AMENDMENT TO MANAGEMENT INCENTIVE STOCK OPTION AGREEMENT
("Amendment") is made and entered into as of January 19, 1995 by and between
EDUCATION MANAGEMENT CORPORATION, a Pennsylvania corporation (the "Company"),
and ________________, an officer or manager of the Company (the "Optionee").
WITNESSETH:
WHEREAS, EMC Holdings, Inc. (as predecessor-by-merger to the Company)
and the Optionee entered into that certain Management Incentive Stock Option
Agreement dated as of July 1, 1990 (the "Agreement") in connection with a grant
of stock options pursuant to the Company's Management Incentive Stock Option
Plan adopted effective as of July 1, 1990 (the "Plan"); and
WHEREAS, the Company has amended the Plan effective as of the date
hereof; and
WHEREAS, the Company and the Optionee desire to amend the Agreement in
order to adopt the modifications made to the Plan as of the date hereof, all of
which changes are beneficial to the Optionee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Amendment of Paragraph 4. Paragraph 4 of the Agreement is hereby
amended and restated in its entirety as follows:
4. Vesting: Exercise of Options.
(a) The option rights of the Optionee will be exercisable for a
five-year period, beginning on July 1, 1995 and ending on July 1, 2000
(the "Expiration Date"), provided that they have vested. Vesting will
occur with respect to the number of shares and on the date set forth
below; provided that the vesting requirements set forth in the following
sentence (the "Vesting Requirements") are determined to have been
satisfied, based upon the
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Company's audited financial statements or other information satisfactory
to the Committee.
Number of Shares Vesting Date
---------------- ------------
The first 2,425 Shares: July 1, 1991
(25% of total grant)
An additional 2,425 Shares: July 1, 1992
(25% of total grant)
An additional 2,425 Shares: July 1, 1993
(25% of total grant)
An additional 2,425 Shares: July 1, 1994
(25% of total grant)
(b) Options will vest annually as provided in Paragraph 4(a)
above, provided that the sum of (i) seven (7) times the Company's
consolidated earnings before marketing expense capitalization ("MEC"),
interest and taxes before giving effect to charges resulting from (A)
the amortization of the purchase price premium associated with the 1986
and 1989 recapitalizations of the Company; (B) contributions to the
Company's Employee Stock Ownership Plan ("ESOP"); (C) special non-cash
charges; and (D) options granted under the Plan, or any similar plan
adopted by the Company in the future ("HEBIT before MEC"), less (ii) the
consolidated total interest-bearing debt of the Company, including all
current maturities, short-term interest-bearing debt and capitalized
leases, but with such debt being reduced by the amount of cash and
equivalents ("Net Debt"), exceeds the following amounts at the close of
the then most recent fiscal year:
Fiscal Year 1991 $41 million
Fiscal Year 1992 $64 million
Fiscal Year 1993 $88 million
Fiscal Year 1994 $114 million
Fiscal Year 1995 $60.4 million
Fiscal Year 1996 $76.6 million
Fiscal Year 1997 $103.7 million
Fiscal Year 1998 $145.8 million
Fiscal Year 1999 $214.9 million
The sale or other disposition of any significant asset(s) will impact
the above calculation because of the effect on HEBIT before MEC, Net
Debt and other
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factors. The amounts described above will be appropriately revised upon
any such sale or other disposition.
(c) In the event that the vesting requirements are not
satisfied in any one year, the options that were not vested in that year
will vest in the next subsequent or later years if the vesting
requirements are met in the next subsequent or later years.
(d) Notwithstanding anything herein to the contrary, the date
on which options granted under this Agreement may be exercised (i) may
be accelerated by the Committee, in its sole discretion, and (ii) will
be accelerated and all options will be immediately vested and
exercisable, in the event of (A) a Change in Control (as defined below)
or (B) a Public Distribution (as defined below); provided, that, in the
case of a Public Distribution only, either:
(x) the per share value of the shares held by any of the
Institutional Investors, as such term is defined in the Stockholders
Agreement dated October 26, 1989, equals or exceeds the amount set
forth below at the time of the Public Distribution:
12/14/94 - 12/13/95 $3.50 per share
12/14/95 - 12/13/96 $4.20 per share
12/14/96 - 12/13/97 $5.04 per share
12/14/97 - 12/13/98 $6.05 per share
12/14/98 - 12/13/99 $7.26 per share
12/14/99 - 12/13/2000 $8.71 per share
(For purposes of this subparagraph (x), the per share value shall be
equal to the public offering price per share before underwriting
discounts and commissions); or
(y) the Company's HEBIT before MEC less Net Debt equals or
exceeds the amount set forth below in the fiscal year preceding the
fiscal year in which such Public Distribution occurs:
Fiscal Year 1995 $60.4 million
Fiscal Year 1996 $76.6 million
Fiscal Year 1997 $103.7 million
Fiscal Year 1998 $145.8 million
Fiscal Year 1999 $214.9 million
(e) For the purposes of this Agreement, "Public Distribution"
will mean a public offering of common stock of the Company pursuant to
an effective registration statement under the Securities Act of 1933, as
amended
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(the ("Act"), at the conclusion of which (i) the Company is required to
register shares of its common stock under Section 12(b) or (g) of the
Securities Exchange Act of 1934, as amended, and (ii) at least 25% of
the outstanding common stock of the Company shall have been sold to the
public pursuant to one or more effective registration statements under
the Act.
(f) For the purposes of this Agreement, "Change in Control"
will mean a transaction or series of transactions at the conclusion of
which any person, firm or entity, and its Affiliates (as such term is
defined in the Exchange and Repurchase Agreements dated October 26,
1989), becomes the record or beneficial owner of, and/or obtains the
right to purchase, more than 50% of the stock of the Company, or obtains
the power to elect a majority of the Board of Directors of the Company;
provided, however, that the issuance or transfer of shares, stock
options and/or other contract rights to acquire shares to (i) the ESOP
or (ii) one or more individuals who are employees of the Company and
hold options previously granted under the Plan will not be considered in
determining whether a "Change in Control" has occurred at the time of
such issuance or transfer unless the Compensation Committee of the
Company then determines (in its discretion) that it should be considered
for that purpose."
2. Amendment of Paragraph 12(b)(1). The second sentence of Paragraph
12(b)(1) of the Agreement is hereby amended and restated in its entirety as
follows:
"The purchase price to be paid per Share by the Company under this
Paragraph 12(b)(1) or Paragraph 12(b)(2) below will be (i) so long as the
Company has an ESOP and is required to obtain appraisals of its common
stock for the purposes of such ESOP, the most recent value of such stock as
determined by such appraisal; or (ii) if there is no appraisal of the
Company's stock which meets the requirements of this subparagraph, seven
(7) times the Company's HEBIT before MEC minus the Net Debt of the Company
for the immediately preceding year, divided by the number of shares (on a
fully diluted basis) as of the end of such year."
3. No Other Amendments. Except as expressly amended by this
Amendment, the Agreement, and each and every representation, warranty,
covenant, term and condition therein, are hereby specifically ratified and
confirmed.
4. Counterparts. This Amendment may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
5. Governing Law. This Amendment shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the date first above written.
EDUCATION MANAGEMENT CORPORATION
By:
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Senior Vice President
and Chief Financial Officer
EDUCATION MANAGEMENT CORPORATION
COMPENSATION COMMITTEE
By:
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--------------------------------
Signature
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