EXHIBIT 10.6
CAPELLA EDUCATION COMPANY
1999 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
Name of Optionee:
No. of Shares Covered: Date of Grant:
Exercise Price Per Share: Expiration Date:
Exercise Schedule (Cumulative):
Date(s) of No. of Shares as to Which
Exercisability Option Becomes Exercisable
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This is an Incentive Stock Option Agreement ("Agreement") between Capella
Education Company, a Minnesota corporation (the "Company"), and the optionee
identified above (the "Optionee") effective as of the date of grant specified
above.
RECITALS
WHEREAS, the Company maintains the Capella Education Company 1999 Stock
Option Plan (the "Plan"); and
WHEREAS, pursuant to the Plan, the Board of Directors of the Company (the
"Board") or a committee of two or more directors of the Company (the
"Committee") appointed by the Board administers the Plan and has the authority
to determine the awards to be granted under the Plan (if the Board has not
appointed a committee to administer the Plan, then the Board shall constitute
the Committee); and
WHEREAS, the Committee has determined that the Optionee is eligible to
receive an award under the Plan in the form of an incentive stock option (the
"Option");
NOW, THEREFORE, the Company hereby grants this Option to the Optionee
under the terms and conditions as follows.
TERMS AND CONDITIONS*
1. GRANT. The Optionee is granted this Option to purchase the number of
Shares specified at the beginning of this Agreement.
2. EXERCISE PRICE. The price to the Optionee of each Share subject to this
Option shall be the exercise price specified at the beginning of this
Agreement (which price shall not be less than the Fair Market Value (as
defined in paragraph 7 of the Plan) as of the date of grant or, if the
Optionee owns or is deemed to own stock possessing more than 10% of the
combined voting power of all classes of stock of the Company, 110% of the
Fair Market Value as of the date of grant).
3. INCENTIVE STOCK OPTION. This Option is intended to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
4. EXERCISE SCHEDULE. This Option shall vest and become exercisable as to the
number of Shares and on the dates specified in the exercise schedule at
the beginning of this Agreement. The exercise schedule shall be
cumulative; thus, to the extent this Option has not already been exercised
and has not expired, terminated or been cancelled, the Optionee or the
person otherwise entitled to exercise this Option as provided herein may
at any time, and from time to time, purchase all or any portion of the
Shares then purchasable under the exercise schedule.
This Option may also be exercised in full (notwithstanding the exercise
schedule) under the circumstances described in Section 8 of this Agreement
if it has not expired prior thereto.
5. EXPIRATION. This Option shall expire at 5:00 p.m. Central Time on the
earliest of:
(a) The expiration date specified at the beginning of this Agreement
(which date shall not be later than ten years after the date of
grant or, if the Optionee owns or is deemed to own stock possessing
more than 10% of the combined voting power of all classes of stock
of the Company, five years after the date of grant);
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* Unless the context indicates otherwise, terms that are not defined in this
Agreement shall have the meaning set forth in the Plan as it currently exists or
as it is amended in the future.
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(b) The last day of the period following the termination of employment
of the Optionee during which this Option can be exercised (as
specified in Section 7(a) or 7(b) of this Agreement, whichever is
applicable); or
(c) The date (if any) fixed for cancellation pursuant to Section 8 of
this Agreement.
In no event may anyone exercise this Option, in whole or in part, after it
has expired, notwithstanding any other provision of this Agreement.
6. PROCEDURE TO EXERCISE OPTION.
Notice of Exercise. This Option may be exercised by delivering written
notice of exercise to the Company at the principal executive office of the
Company, to the attention of the Company's Secretary, in the form attached
to this Agreement. The notice shall state the number of Shares to be
purchased, and shall be signed by the person exercising this Option. If
the person exercising this Option is not the Optionee, he/she also must
submit appropriate proof of his/her right to exercise this Option.
Tender of Payment. Upon giving notice of any exercise hereunder, the
Optionee shall provide for payment of the purchase price of the Shares
being purchased through one or a combination of the following methods:
(a) Cash;
(b) Cancellation of indebtedness;
(c) By delivery to the Company of unencumbered Shares having an
aggregate Fair Market Value (as defined in paragraph 7 of the Plan)
on the date of exercise equal to the purchase price of such Shares;
(d) By a reduction in the number of Shares delivered to the Optionee
upon exercise, such number of Shares having an aggregate Fair Market
Value on the date of exercise equal to the purchase price of such
Shares; or
(e) To the extent permitted by law, a broker-assisted cashless exercise
in which the Optionee irrevocably instructs a broker to deliver
proceeds of a sale of all or a portion of the Shares to be issued
pursuant to the exercise (or a loan secured by such Shares) to the
Company in payment of the purchase price of such Shares.
Notwithstanding the foregoing, the Optionee shall not 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.
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Delivery of Certificates. As soon as practicable after the Company
receives the notice and purchase price provided for above, it shall
deliver to the person exercising this Option, in the name of such person,
a certificate or certificates representing the Shares being purchased. The
Company shall pay any original issue or transfer taxes with respect to the
issue or transfer of the Shares and all fees and expenses incurred by it
in connection therewith. All Shares so issued shall be fully paid and
nonassessable. Notwithstanding anything to the contrary in this Agreement,
the Company shall not be required to issue or deliver any Shares prior to
the completion of such registration or other qualification of such Shares
under any state or federal law, rule or regulation as the Company shall
determine to be necessary or desirable.
7. EMPLOYMENT REQUIREMENT. This Option may be exercised only while the
Optionee remains employed with the Company or a parent or subsidiary
thereof, and only if the Optionee has been continuously so employed since
the date of this Agreement; provided that:
(a) This Option may be exercised for three months following the day the
Optionee's employment by the Company ceases if such cessation of
employment is for a reason other than death or disability, but only
to the extent that it was exercisable immediately prior to
termination of employment.
(b) This Option may be exercised within one year after the Optionee's
employment by the Company ceases if such cessation of employment is
because of death or disability.
Notwithstanding the above, this Option may not be exercised after it has
expired.
8. ACCELERATION OF OPTION.
Death or Disability. This Option may be exercised in full, regardless of
whether such exercise occurs prior to a date on which this Option would
otherwise vest, upon the death or disability of the Optionee; provided
that the Optionee shall have been continuously employed by the Company or
a parent or subsidiary thereof between the date of this Agreement and the
date of such death or disability.
Change in Control. If a Change of Control (as defined in section 9 of this
Agreement) of the Company shall occur and within three years of such
Change in Control, (i) Optionee's employment with the Company shall be
terminated other than for Cause (as defined below), or (ii) Optionee shall
voluntarily leave employment with the Company for Good Reason (as defined
below), then, upon the date of such termination or voluntary leaving of
employment for Good Reason, the options subject to this Agreement, if not
already exercised in full or otherwise terminated, expired or cancelled,
shall become immediately exercisable in full and may be exercised within
30 days after such termination or voluntary leaving (subject to any
applicable shorter time
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period for exercise set forth in this section 8). For purposes of this
Agreement, "Good Reason" is defined as the demotion or reduction of the
job responsibilities of Optionee or the reassignment, without Optionee's
consent, of Optionee's place of work to a location more than 50 miles from
the Optionee's place of work immediately prior to the Change in Control.
For purposes of this Agreement, the term "Cause" shall be limited to the
following grounds for termination:
(1) 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.
(2) Conviction of a felony crime, or commission of any act, the
conviction for which would be a felony conviction;
(3) Theft or misappropriation of the Company's property; and
(4) Knowingly making a material false written statement to the
Company's Board of Directors regarding the affairs of the Company;
Merger or Sale. 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, and the successor entity,
or a parent or subsidiary of the successor entity, refuses to assume this
Option or to substitute an equivalent option, then this Option shall
become exercisable in full immediately. The Committee shall notify
Optionee in writing or electronically that the Option shall be fully
vested and exercisable for a period of 15 days from the date of such
notice and that the Option shall terminate upon the expiration of such
period.
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Committee shall notify Optionee as soon as
practicable prior to the effective date of such proposed transaction. The
Committee in its discretion may provide for 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,
but shall not be obligated to, 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.
Discretionary Acceleration. The Committee has the power, in its sole
discretion, to declare at any time that this Option shall be immediately
exercisable.
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9. CHANGE IN CONTROL.
(a) Definition. For purposes of this Plan, a "Change in Control" of the
Company shall be deemed to occur if any of the following occur:
(1) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) acquires or becomes a "beneficial owner" (as defined
in Rule 13d-3 or any successor rule under the Exchange Act), directly or
indirectly, of securities of the Company representing the following: (i)
50% or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors
("Voting Securities") at any time prior to the Company selling any of its
shares in a public offering pursuant to a registration statement filed
under the Securities Act of 1933, as amended (the "Securities Act"), or
(ii) 35% or more of the combined voting power of the Company's then
outstanding Voting Securities at any time after the Company sells any of
its shares in a public offering pursuant to a registration statement filed
under the Securities Act. Provided, however, that the following shall not
constitute a Change in Control pursuant to this section 9(a)(1):
(A) any acquisition or beneficial ownership by the Company or a
subsidiary;
(B) any acquisition or beneficial ownership by any employee benefit
plan (or related trust) sponsored or maintained by the Company or
one or more of its subsidiaries;
(C) any acquisition or beneficial ownership by any corporation with
respect to which, immediately following such acquisition, more than
50% of both the combined voting power of the Company's then
outstanding Voting Securities and the Shares of the Company is then
beneficially owned, directly or indirectly, by all or substantially
all of the persons who beneficially owned Voting Securities and
Shares of the Company immediately prior to such acquisition in
substantially the same proportions as their ownership of such Voting
Securities and Shares, as the case may be, immediately prior to such
acquisition;
(2) A majority of the members of the Board of Directors of the
Company shall not be Continuing Directors. "Continuing Directors" shall
mean: (A) individuals who, on the date hereof, are directors of the
Company, (B) individuals elected as directors of the Company subsequent to
the date hereof for whose election proxies shall have been solicited by
the Board of Directors of the Company or (C) any individual elected or
appointed by the Board of Directors of the Company to fill vacancies on
the Board of Directors
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of the Company caused by death or resignation (but not by removal) or to
fill newly-created directorships;
(3) Approval by the stockholders of the Company of a reorganization,
merger or consolidation of the Company or a statutory exchange of
outstanding Voting Securities of the Company, unless, immediately
following such reorganization, merger, consolidation or exchange, all or
substantially all of the persons who were the beneficial owners,
respectively, of Voting Securities and Shares of the Company immediately
prior to such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 50% (subject to the
modification in subsection (b) below) of, respectively, the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors and the then outstanding shares of
common stock, as the case may be, of the corporation resulting from such
reorganization, merger, consolidation or exchange in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or exchange, of the Voting
Securities and Shares of the Company, as the case may be; or
(4) Approval by the stockholders of the Company of (x) a complete
liquidation or dissolution of the Company or (y) the sale or other
disposition of all or substantially all of the assets of the Company (in
one or a series of transactions), other than to a corporation with respect
to which, immediately following such sale or other disposition, more than
50% (subject to the modification in subsection (b) below) of,
respectively, the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and the then outstanding shares of common stock of such
corporation is then beneficially owned, directly or indirectly, by all or
substantially all of the persons who were the beneficial owners,
respectively, of the Voting Securities and Shares of the Company
immediately prior to such sale or other disposition in substantially the
same proportions as their ownership, immediately prior to such sale or
other disposition, of the Voting Securities and Shares of the Company, as
the case may be.
(b) After a Public Offering. At all times after the Company sells any of
its shares in a public offering pursuant to a registration statement filed
under the Securities Act, the references to 50% in subsections (a)(1)(C),
(a)(3) and (a)(4) of this section 9 shall be changed to 65%.
10. LIMITATION ON TRANSFER. While the Optionee is alive, only the Optionee or
his/her guardian or legal representative may exercise this Option. This
Option may not be assigned or transferred other than by will or the laws
of descent and distribution or
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pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules
thereunder.
11. ASSIGNMENT OF THE COMPANY'S OBLIGATIONS. 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, then the
successor entity, or a parent or subsidiary of the successor entity, may
assume this Option or substitute an equivalent option.
12. NO SHAREHOLDER RIGHTS BEFORE EXERCISE. No person shall have any of the
rights of a shareholder of the Company with respect to any Share subject
to this Option until the Share actually is issued to him/her upon exercise
of this Option.
13. DISCRETIONARY ADJUSTMENT. 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 the Optionee, 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 the Plan and, in order to prevent
dilution or enlargement of rights of the Optionee, the number and kind of
securities issuable upon exercise of this Option and the exercise price
hereof.
14. TRANSFER OF SHARES -- TAX EFFECTS. The Optionee hereby acknowledges that
if any Shares received pursuant to the exercise of any portion of this
Option are sold within two years from the date of grant or within one year
from the effective date of exercise of the Option, or if certain other
requirements of the Code are not satisfied, such Shares will be deemed
under the Code not to have been acquired by the Optionee pursuant to an
"incentive stock option" as defined in the Code; and that the Company
shall not be liable to the Optionee in the event the Option for any reason
is deemed not to be an "incentive stock option" within the meaning of the
Code.
15. INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations made
by the Committee with regard to any question arising hereunder or under
the Plan shall be binding and conclusive upon the Company and the
Optionee. If there is any inconsistency between the provisions of this
Agreement and the Plan, the provisions of the Plan shall govern.
16. DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give the Optionee a
right to continued employment with the Company or any parent or subsidiary
of the Company, and the Company or any such parent or subsidiary employing
the Optionee may terminate his/her employment at any time and otherwise
deal with the Optionee without regard to the effect it may have upon
him/her under this Agreement.
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17. OPTION SUBJECT TO PLAN, CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Optionee acknowledges that this Option and the exercise thereof is subject
to the Plan, the Certificate of Incorporation, as amended from time to
time, and the By-Laws, as amended from time to time, of the Company, and
any applicable federal or state laws, rules or regulations.
18. OBLIGATION TO RESERVE SUFFICIENT SHARES. The Company shall at all times
during the term of this Option reserve and keep available a sufficient
number of Shares to satisfy this Agreement.
19. BINDING EFFECT. This Agreement shall be binding in all respects on the
heirs, representatives, successors and assigns of the Optionee.
20. CHOICE OF LAW. This Agreement is entered into under the laws of the State
of Minnesota and shall be construed and interpreted thereunder (without
regard to its conflict of law principles).
IN WITNESS WHEREOF, the Optionee and the Company have executed this
Agreement as of the ____ day of ________, 20__.
OPTIONEE
_________________________________________
CAPELLA EDUCATION COMPANY
By ______________________________________
Its ____________________________________
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__________________, 20___
CAPELLA EDUCATION COMPANY
20th Floor, 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Secretary
Ladies and Gentlemen:
I hereby exercise the following option (the "Option") granted to me under
the Capella Education Company 1999 Stock Option Plan (the "Plan") with respect
to the number of shares of Common Stock ("Shares") of Capella Education Company
(the "Company"), indicated below:
NAME: _________________________________
DATE OF GRANT OF OPTION: _________________________________
EXERCISE PRICE PER SHARE:
NUMBER OF SHARES WITH RESPECT TO
WHICH THE OPTION IS HEREBY
EXERCISED: _________________________________
TOTAL EXERCISE PRICE: _________________________________
[ ] Enclosed with this letter is a check, bank draft or money order in
the amount of the Total Exercise Price.
[ ] Enclosed with this letter is a promissory note.
[ ] I hereby agree to pay the Total Exercise Price by cancellation of a
debt owed to me by the Company.
[ ] I hereby agree to pay the Total Exercise Price within five business
days of the date hereof and, as stated in the attached Broker's
Letter, I have delivered irrevocable instructions to
_________________________________________ to promptly deliver to the
Company the amount of sale or loan proceeds from the Shares to be
issued pursuant to this exercise necessary to satisfy my obligation
hereunder to pay the Total Exercise Price.
[ ] Enclosed with this letter is a certificate evidencing unencumbered
Shares (duly endorsed in blank) having an aggregate Fair Market
Value (as defined in the Plan) equal to or in excess of the Total
Exercise Price.
[ ] I elect to pay the Total Exercise Price through a reduction in the
number of Shares delivered to me upon this exercise of the Option as
provided in paragraph 8 of the Plan.
If I am enclosing Shares with this letter, I hereby represent and warrant
that I am the owner of such Shares free and clear of all liens, security
interests and other restrictions or encumbrances. I agree that I will pay any
required withholding taxes in connection with this exercise as provided in
paragraph 9 of the Plan.
Please issue a certificate (the "Certificate") for the number of Shares
with respect to which the Option is being exercised in the name of the person
indicated below and deliver the Certificate to the address indicated below:
NAME IN WHICH TO ISSUE CERTIFICATE: _____________________________
ADDRESS TO WHICH CERTIFICATE _____________________________
SHOULD BE DELIVERED: _____________________________
_____________________________
_____________________________
_____________________________
_____________________________
PRINCIPAL MAILING ADDRESS FOR
HOLDER OF THE CERTIFICATE (IF _____________________________
DIFFERENT FROM ABOVE): _____________________________
_____________________________
_____________________________
_____________________________
Very truly yours,
__________________________________
Signature
__________________________________
Name, please print
__________________________________
Social Security Number
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__________________, 20___
CAPELLA EDUCATION COMPANY
20th Floor, 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Secretary
Ladies and Gentlemen:
NAME OF OPTIONEE: ______________________________
DATE OF GRANT OF OPTION: ______________________________
EXERCISE PRICE PER SHARE: ______________________________
NUMBER OF SHARES WITH RESPECT TO
WHICH THE OPTION IS TO BE EXERCISED: ______________________________
TOTAL EXERCISE PRICE: ______________________________
The above Optionee has requested that we finance the exercise of the above
Option to purchase Shares of common stock of Capella Education Company (the
"Company") and has given us irrevocable instructions to promptly deliver to the
Company the amount of sale or loan proceeds from the Shares to be issued
pursuant to such exercise to satisfy the Optionee's obligation to pay the Total
Exercise Price.
Very truly yours,
_________________________________________
Broker Name
By________________________________
