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SCHEDULE 14A (RULE 14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THE SECURITIES
EXCHANGE ACT OFof the Securities Exchange Act of 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)Section 240.14a-11(c) or Rule 14a-12Section 240.14a-12
Strayer Education, Inc.
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(Name of Registrant as Specified inIn Its Charter)
Strayer Education, Inc.
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set0-11:1/
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4) Proposed maximum aggregate value of transaction:
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1/ Set forth the amount on which the filing fee is calculated and state
how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the formForm or scheduleSchedule and the date of its filing.
(1)1) Amount previously paid:
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2) Form, scheduleSchedule or registration statement no.Registration Statement No.:
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3) Filing party:
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(4)Party:
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4) Date filed:
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Notes:
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STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
Dear Stockholder:
You are cordially invited to attend the 19971998 Annual Meeting of
Stockholders of Strayer Education, Inc., a Maryland corporation, to be held at 10:00 a.m. local time on
May 19, 1997,18, 1998, at the Hyatt Regency Crystal City, 2799 Jefferson
Davis Highway,Sheraton National Hotel, Columbia Pike and Washington
Boulevard, in Arlington, Virginia.
The matters to be considered at the meeting are described in the
accompanying Proxy Statement. Regardless of your plans for attending in person,
it is important that your shares be represented at the meeting. On behalf of the
Board of Directors, I urge you to please complete, sign, date and return the
enclosed proxy card in the enclosed stamped envelope. Signing this proxy will
not prevent you from voting in person should you be able to attend the meeting,
but will assure that your vote is counted, if, for any reason, you are unable to
attend. If you wish to give a proxy to someone other than the persons named on
the enclosed proxy form, you may cross out their names and insert the name of
some other person who will be at the meeting. The signed proxy form should be
given to that person for his or her use at the meeting. If your shares are held
in the name of a broker, you should obtain a letter of identification from your
broker and bring it to the meeting. In order to vote personally shares held in
the name of your broker you must also obtain from the broker a proxy issued to
you.
We look forward to seeing you at the 19971998 Annual Meeting of
Stockholders.
Sincerely,
/s/ RON K. BAILEY
Ron K. Bailey
President & Chief Executive Officer
April 11, 19979, 1998
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STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 19971998 Annual Meeting of Stockholders of Strayer Education, Inc.,
will be held at the Hyatt Regency Crystal City, 2799 Jefferson Davis Highway,Sheraton National Hotel, Columbia Pike and Washington
Boulevard, in Arlington, Virginia, on May 19, 1997,18, 1998, at 10:00 a.m. for the
following purposes:
1. To elect nine (9)eight (8) directors to the Board of Directors to
serve for a term of one year and until their respective
successors are elected and qualified.
2. To consider and act upon an amendment toadopt the Corporation's Articles
of Incorporation increasing the authorized number of shares of
common stock from 20,000,000 to 50,000,000.Strayer Education, Inc. Employee Stock
Purchase Plan.
3. To consider and act upon such other business as may
properly come before the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
/s/ GLENDA S. HARDISON
Glenda S. HardisonJENNIE D. SEATON
Jennie D. Seaton
Secretary
Washington, D.C.
April 11, 19979, 1998
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STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 199718, 1998
This Proxy Statement is furnished on or about April 11, 1997,9, 1998, to
stockholders of Strayer Education, Inc. (the "Corporation"), 1025 Fifteenth
Street, N.W., Washington, D.C. 20005, in connection with the solicitation by the
Board of Directors of the Corporation of proxies to be voted at the 19971998 Annual
Meeting of Stockholders (the "Annual Meeting"). The Annual Meeting will be held
at 10:00 a.m. local time on May 19, 1997,18, 1998, at the Hyatt Regency Crystal City,
2799 Jefferson Davis Highway,Sheraton National Hotel,
Columbia Pike and Washington Boulevard, in Arlington, Virginia.
The cost of soliciting proxies will be borne by the Corporation.
Copies of solicitation material may be furnished to brokers, custodians,
nominees and other fiduciaries for forwarding to beneficial owners of shares of
the Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Solicitation of proxies may be made by the Corporation by
mail or by personal interview, telephone and telegraph by officers and other
management employees of the Corporation, who will receive no additional
compensation for their services.
Any stockholdersstockholder giving a proxy pursuant to this solicitation may
revoke it at any time prior to exercise of the proxy by giving notice of such
revocation to the Secretary of the Corporation at its executive offices at 1025
Fifteenth Street, N.W., Washington, D.C. 20005, or by attending the meeting and
voting in person.
At the close of business on April 4, 1997,3, 1998, there were 9,450,00015,558,912
shares of the Common Stock of the Corporation outstanding and entitled to vote
at the meeting. Only stockholders of record on April 4, 1997,3, 1998, will be entitled
to vote at the meeting, and each share will have one vote.
VOTING INFORMATION
At the Annual Meeting votes will be counted by written ballot. A
majority of the shares entitled to vote will constitute a quorum for purposes of
the Annual Meeting. The election of the Board of Directors' nominees for
directors will require the affirmative vote of a plurality of the shares present
in person or represented by proxy and entitled to vote in the election of
directors. Approval of the proposed amendment to the Corporation's Articles of
IncorporationEmployee Stock Purchase Plan and any other business
which may properly come before the Annual Meeting, or any adjournments thereof,
will require the affirmative vote of a majority of the shares present in person
or represented by proxy and entitled to vote thereon. Under Maryland law and the
Corporation's Articles of Incorporation and By-laws, the aggregate number of
votes entitled to be cast by all stockholders present in person or represented
by proxy at the Annual Meeting, whether those stockholders vote "For", "Against"
or abstain from voting, will be counted for purposes of determining the minimum
number of affirmative votes required for approval of such matters, and the total
number of votes cast "For" each of these matters will be counted for purposes of
determining whether sufficient affirmative votes have been cast. An abstention
from voting on a matter by a stockholder present in person or represented by
proxy at the meeting has the same legal effect as a vote "Against" the matter
even though the stockholder or interested parties analyzing the results of the
voting may interpret such a vote differently. Broker non-votes will have the
effect of reducing the number of shares considered present and entitled to vote
on the matter.
A stockholder may, with respect to the election of directors, (i)
vote for the election of all named director nominees, (ii) withhold authority to
vote for all named director nominees or (iii) vote for the election of all named
director nominees other than any nominee with respect to whom the stockholder
withholds authority to vote by so indicating in the appropriate space on the
proxy card.
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Proxies properly executed and received by the Corporation prior to
the meeting and not revoked, will be voted as directed therein on all matters
presented at the meeting. In the absence of specific direction from a
stockholder, proxies will be voted for the election of all named director
nominees.nominees and for the approval of the Employee Stock Purchase Plan. If a proxy
indicates that all or a portion of the shares represented by such proxy are not
being voted with respect to a particular proposal, such non-voted shares will
not be considered present and entitled to vote on such proposal, although such
shares may be considered present and entitled to vote on other proposals and
will count for the purpose of determining the presence of a quorum.
PROPOSAL I
ELECTION OF DIRECTORS
NineEight directors are to be elected. It is intended that the votes
represented by the proxies will be cast for the election as directors (for a
term of one year or until their successors are chosen and qualified) of the
persons listed below. Each of the nominees is currently a director of the
Corporation.
The following table presents information concerning persons nominated
for election as directors of the Corporation, including their current membership
on committees of the Board of Directors, principal occupations or affiliations
during the last five years and certain other directorships held.
NOMINEES FOR DIRECTORS
Ron K. Bailey..............Bailey................... Member --- Executive Committee. Mr. Bailey, age
56,57, is the President and TreasurerChief Executive
Officer of the Corporation. Mr. Bailey has been
the President and a trusteeChairman of the Board of Trustees of
Strayer College,University, Inc. (the "College""University"), a
subsidiary of the Corporation, since 19891997 and
the President and a director of Education Loan
Processing, Inc. ("ELP"), the othera subsidiary of the
Corporation, since its formation in 1994. From
1989 to 1997, Mr. Bailey was the President and
Treasurer of the Board of Trustees of Strayer
University. In addition, from 1980 to 1989, Mr.
Bailey held a variety of administrative
positions with the College,University, including the
position of Vice President of the College.University.
Before assuming his first full-time position
with the CollegeUniversity in 1980, Mr. Bailey was a
part-time faculty member of the CollegeUniversity and
served as Director of Data Processing of the
National Association of Home Builders.
Stanley G. Elmore..........Elmore............... Member --- Executive Committee. Projects and
Programs Manager, Citibank Mid-Atlantic, since
1989. Mr. Elmore, age 55,56, has been a director
and Chairman of the Board of Directors of the
Corporation since July 1996. Mr. Elmore has beenwas the
Chairman of the Board of Trustees of the
College since 1989.University from 1989 to 1997.
Todd A. Milano.............Milano.................. Member --- Compensation Committee. President and
Chief Executive Officer of Central Pennsylvania
Business School since 1989. Mr. Milano, age 44,45,
has been a director of the Corporation since
July 1996 and the Vice Chairman of the Board of
Trustees of the CollegeUniversity since 1992.
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Dr. Jennie D. Seaton.......Seaton............ Member --- Executive Committee. Dr. Seaton, age
68, is the Secretary of the Corporation. Dr
Seaton is retired and was an Assistant Dean of
Virginia Commonwealth University from 1975 to
1994. Dr. Seaton age 67, has been a director of the
Corporation since July 1996 and has been a
member of the Board of Trustees of the
CollegeUniversity since 1990.
Roland Carey...............Carey.................... Member --- Audit Committee. Instructor, Carl
Sandburg School, for more than five years. Mr.
Carey, age 57,58, has been a director of the
Corporation since July 1996 and a member of the
Board of Trustees of the CollegeUniversity since 1990.
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Donald T. Benson...........Benson................ Member --- Compensation Committee. Vice
President, Human Resources and Administration,
of Coventry Corporation since 1997. From 1992
to 1997, Mr. Benson was Vice President, Human
Resources, of Aetna Life insurance Company
since 1992.Insurance Company.
From 1976 to 1992, Mr. Benson was Senior Vice
resident,President, Human Resources, of Connecticut
General Insurance Corp. (Cigna). Mr. Benson,
age 53,54, has been a director of the Corporation
since July 1996 and has been a member of the
Board of Trustees of the CollegeUniversity since 1992.
G. Thomas Waite, III.......III............ Member --- Audit Committee. Treasurer, Humane
Society of the United States, since 1993. In
1992, Mr. Waite was the Director of Commercial
Management of The National Housing Partnership.
As a result of the insolvency of a real estate
partnership in which Mr. Waite served as a
general partner, Mr. Waite filed for protection
from creditors under Chapter 11 of the Federal
Bankruptcy Code in 1993, which subsequently was
converted to a Chapter 7 filing in 1993. Mr.
Waite, age 45,46, has been a director of the
Corporation since July 1996 and has been a
member of the Board of Trustees of the
CollegeUniversity since 1994.
Dr. Donald Stoddard........Charlotte Beason............ Member --- Audit Committee. Professor,Nurse at the U.S.
Department of English, Anne Arundel Community College,Veterans Affairs/Health Care
Reform Office, since 1990. From 1979 to 1990,1992. Dr. Stoddard was the
Coordinator, Collegiate Institutional Approval, of
the Maryland Higher Education Commission. Dr.
Stoddard,Beason, age 60,50,
has been a director of the Corporation since
July 1996 and has been a member of the Board of
Trustees of the College since 1995.
Dr. Charlotte Beason....... Member -- Compensation Committee. Nurse at the U.S.
Department of Veterans Affairs/Health Care Reform
Office, since 1992. Dr. Beason, age 49, has been a
director of the Corporation since July 1996 and has
been a member of the Board of Trustees of the
CollegeUniversity since 1995.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee, an
Executive Committee and a Compensation Committee and has no nominating
committee. Selection of nominees for the Board is made by the entire Board of
Directors.
The Audit Committee is composed of Dr. Beason and Messrs. Carey and
Waite and Dr.
Stoddard.Waite. The Audit Committee is responsible for reviewing the internal accounting
procedures of the Corporation and the results and scope of the audit and other
services provided by the Corporation's independent auditors, consulting with the
Corporation's independent auditors and recommending the appointment of
independent auditors to the Board of Directors. The Audit Committee met oncefive
times during the year ended December 31, 1996;1997; each member of the Audit
Committee attended this meeting.all of these meetings.
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The Compensation Committee is composed of Messrs. Milano and Benson and Dr.
Beason.Benson.
The Compensation Committee has the authority and performs all of the duties
related to the compensation of management of the Corporation, including
determining policies and practices, changes in compensation and benefits for
management, determination of employee benefits and all other matters relating to
employee compensation, including matters relating to the administration of the
Corporation's 1996 Stock Option Plan (the "Option Plan"). The Compensation
Committee met oncefour times during the year ended December 31, 1996;1997; each member of
the Compensation Committee attended this meeting.all of these meetings.
ATTENDANCE AT MEETINGS
During the year ended December 31, 1996,1997, the Board of Directors held
twofive meetings, which were attended by all of the directors.
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DIRECTORS' FEES
Directors are reimbursed for expenses incurred in connection with
their attendance at Board and Committee meetings, butand they currently receive
no$1,500 in compensation for serving as directors.each meeting attended. It should be noted that Mr.
Bailey donates 100% of his director compensation to the Strayer University
Educational Foundation, a non-profit organization that provides scholarships and
grants to college students, active duty military personnel and high school
students in the greater Washington, D.C. area. Non-employee directors also have also
received options to purchase an aggregate of 39,00058,500 shares of Common Stock under
the Option Plan.
REPORTS OFSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires the Corporation's
directors, executive officers and 10% stockholders to file reports of beneficial
ownership of equity securities of the Corporation and to furnish copies of such
reports to the Corporation. Based on a review of such reports, the Corporation
believes that, during the fiscal year ended December 31, 1996,1997, all such filing
requirements were met, except that Mr. Waite and Dr. Beason each were late in
filing Forms 5 for the year ended December 31, 1996.
4met.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
ownership of Common Stock as of March 15, 1997,1998, by each person known by the
Corporation to be the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock, each director of the Corporation, and all
executive officers and directors as a group. The information presented in the
table is based upon the most recent filings with the Securities and Exchange
Commission by such persons or upon information otherwise provided by such
persons to the Corporation.
SHARES BENEFICIALLY
NAMES OF BENEFICIAL SHARES BENEFICIALLY
OWNERS OWNED(1)OWNED (1) PERCENTAGE OWNED
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Ron K. Bailey and Beverly W. Bailey.......................... 5,900,000 62.4%Bailey (2).................. 8,175,000 52.6%
Putnam Investments, Inc.(2).................................. 975,679 10.3 (3)............................. 1,761,969 11.3
One Post Office Square
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. (4)....................... 864,150 5.6
100 East Pratt Street
Baltimore, Maryland 21202
Harry T. Wilkins......................................... 40,000 *
Stanley G. Elmore............................................ 0Elmore........................................ 3,550 *
Todd A. Milano............................................... 4,540Milano........................................... 9,310 *
Jennie D. Seaton............................................. 0Seaton ....................................... 3,950 *
Roland Carey................................................. 0Carey............................................. 3,500 *
Donald T. Benson............................................. 600Benson......................................... 4,075 *
G. Thomas Waite, III......................................... 0 *
Donald Stoddard.............................................. 300III..................................... 2,572 *
Charlotte Beason............................................. 0Beason......................................... 1,450 *
All directors and executive officers as a group (10(9 persons)................................................... 5,905,440 62.5% (5)..... 8,243,407 53.0%
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* Less*Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission ("SEC") and generally
includes voting or investment power with respect to securities.
Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days are deemed outstanding for
purposes of computing the percentage ownership of the person holding
such option or warrant but are not deemed outstanding for purposes
of computing the percentage ownership of any other person. Except
where indicated otherwise, and subject to community property laws
where applicable, the persons named in the table above have sole
voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
(2) Includes 292,500 shares held by the Bailey Family Foundation.
(3) Based on a Schedule 13G filed with the Securities and Exchange CommissionSEC on January 31, 1997.27, 1998.
These securities are owned by various institutional investors that
are clients of investment adviser subsidiaries of Putnam
Investments, Inc. ("PI"), a wholly-owned subsidiary of Marsh &
McClennan Companies, Inc. ("M&MC"). For purposes of the reporting
requirements of the Securities Exchange Act of 1934 (the "1934
Act"), PI and M&MC are each deemed to be the beneficial owners of
these securities; however, each of PI and M&MC expressly disclaims
beneficial ownership.
5(4) Based on a Schedule 13G filed with the SEC on February 17, 1998.
These securities are owned by various individual and institutional
investors, which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment adviser with power to direct investments and/or
sole power to vote the securities. For purposes of the reporting
requirements of the 1934 Act, Price Associates is deemed to be a
beneficial owner of such securities, however, Price Associates
expressly disclaims that it is, in fact, the beneficial owner of
such securities.
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(5) Includes options to purchase the following shares for each listed
individual: Wilkins (25,000); Elmore (2,500); Milano (2,500); Seaton
(500); Carey (3,500); Benson (2,500); Waite (1,500) and Beason
(1,000).
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for
the fiscal years ended December 31, 1994, 1995, 1996 and 19961997 for services in all
capacities to the Corporation of the Chief Executive Officer. None of the
Corporation's other executive officers received a total annual salary and bonus
in excess of $100,000 during such periods.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------
ANNUAL COMPENSATION------------------- -------------------
SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS/SAR'S COMPENSATION(2)
----------- -------- ---- -------- --------------- ------------- ---------------
Ron K. Bailey......................Bailey
President 1995 $150,000 $6,175,000(1) -- $ 3,181
President$3,181
1996 $150,000 ---- -- $3,138
1997 $127,038 ---- -- $ 3,138$2,679
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(1) The bonus was withheld for payments by Mr. Bailey in respect of income
taxes on undistributed S Corporation income of the College.University. Other
compensation in the form of perquisites and other personal benefits has
been omitted because the aggregate amount of such perquisites and other
personal benefits constituted less than $50,000 or 10% or Mr. Bailey's
total annual salary and bonus.
(2) Reflects (i) $3,043, $3,000 and $3,000$2,541 in matching contributions made by
the CollegeUniversity to the College'sUniversity's 401(k) plan for Mr. Bailey in 1995,
1996 and 1996,1997 respectively, and (ii) $138 in premiums paid by the
CollegeUniversity for life insurance for Mr. Bailey in each of 1995, 1996 and
1996.1997.
OPTION GRANTS
The Option Plan was adopted in July 1996. There were no options granted
to the Chief Executive Officer during the year ended December 31, 1996.
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101997.
PERFORMANCE GRAPH
The following performance graph compares the Corporation's
cumulative stockholder return on its Common Stock since the Corporation's
initial public offering on July 25, 1996 with the S&P 500 Composite Index and a
self-determined peer group consisting of Apollo Group Inc., ITT Educational
Services Inc., Devry Inc. and Whitman Education Group Inc. At present there is
no comparative index for the education industry. Although the Securities and
Exchange Commission ("SEC") requires the Corporation to present such a graph for a
five-year period, the Common Stock has been publicly traded only since July 25,
1996 and, as a result, the following graph commences as of such date. This graph
is not deemed to be "soliciting material" or to be filed with the SEC or subject
to the SEC's proxy rules or to the liabilities of Section 18 of the Securities
Act of 1934, ("1934 Act"), and the graph shall not be deemed to be incorporated by reference
into any prior or subsequent filing by the Corporation under the Securities Act
of 1933 or the 1934 Act.
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Measurement Period Company
(Fiscal Year Covered) Company Index Market Index Peer Index
07/29/25/96 100.000 100.000 100.000
07/31/96 101.163 101.385 104.658
08/30/96 145.349 103.611 102.989
09/30/96 152.326 109.417 104.758
10/31/96 179.753 112.420 109.523
11/29/96 210.101 121.009 97.713
12/31/96 215.354 118.622 117.163118.625 117.179
12/31/97 466.293 158.368 151.447
* Assumes $100 invested on July 25, 1996 in Strayer Education, Inc., the S&P 500
Composite Index and the self-determined peer group.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished
the following report on its policies with respect to the compensation of
executive officers. The report is not deemed to be "soliciting material" or to
be "filed" with the SEC or subject to the SEC's proxy rules or to the
liabilities of Section 18 of the 1934 Act, and the report shall not be deemed to
be incorporated by reference into any prior or subsequent filing by the
Corporation under the Securities Act of 19931933 or the 1934 Act.
The Corporation's Board of Directors established the Compensation
Committee in July 1996, and the Committee will determinedetermined and actacted upon compensation
decisions as described below in 1997 and will continue to do so in future years.
Decisions on compensation of the Corporation's executives officers generally
will be made by the Compensation Committee of the Board of Directors. No member
of the Compensation Committee is an employee of the Corporation. During 1996, theThe Committee
consistedcurrently consists of Messrs. Milano and Benson and Dr. Beason.Benson. All decisions by the
Compensation Committee relating to the compensation of the Corporation's
executive officers will be reviewed by its full Board, except for decisions
concerning grants under the Option Plan, which will be made solely by the
Committee in order for the grants to satisfy certain requirements under the 1934
Act.
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Compensation Policies TowardRegarding Executive Officers
The Compensation Committee believes that the Corporation's executive
compensation policies and programs serve the interests of the Corporation and
its stockholders. The Compensation Committee's executive compensation policies
are intended to provide competitive levels of compensation that reflect the
Corporation's annual and long-term performance goals, reward superior corporate
performance, recognize individual initiative and achievements, and assist the
Corporation in attracting and retaining qualified executives. Compensation
levels are based on a number of factors, including a comparison of compensation
levels with other educational institutions. The Board of Directors and the
Compensation Committee also believe that longer-term incentives are appropriate
to
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motivate and retain key personnel and that stock ownership by management is
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value.
Long-Term Stock Option Incentives. The Option Plan provides for the
grant of options that are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") to
full time employees as well as the grant of non-qualifying options to directors
and employees of the Corporation. The Option Plan authorizes the issuance of up
to 1,000,0001,500,000 shares of Common Stock pursuant to options granted under the Option
Plan (subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The Compensation Committee of the
Board of Directors administers the Option Plan.
The option exercise price for incentive stock options granted underIn addition, the
Option Plan may not be less than 100% of the fair market value of the shares
granted on the date of grant of the option (or 110% in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding shares). The option exercise price for non-incentive stock options
granted under the Plan may not be less than par value of the shares on the date
of grant of the option. The maximum option term is 10 years (or five years in
the case of an incentive stock option granted to an optionee beneficially owning
more than 10% of the outstanding shares). Options may be exercised at any time
after grant, except as otherwise provided in the particular option agreement.
Options covering no more than 500,000 shares may be granted to any officer or
other employee during the term of the Option Plan. There is also a $100,000
limit on the value of shares granted (determined at the time of grant) covered
by incentive stock options that first become exercisable by an optionee in any
calendar year.
Payment for shares of Common Stock purchased under the Option Plan may be
made either in cash or, if permitted by the particular option agreement, by (i)
exchanging Common Stock with a fair market value equal to the total option
exercise price or (ii) by authorizing the Corporation to withhold whole shares
then issuable upon exercise of the option with a fair market value equal to the
total option exercise price, and cash for any difference. Options may, if
permitted by the particular option agreement, be exercised by directing that
certificates for the shares purchased be delivered to a licensed broker as agent
for the optionee, provided that the broker tenders to the Corporation cash or
cash equivalents equal to the option exercise price plus the amount of any taxes
that the Corporation may be required to withhold in connection with the exercise
of the option.
Options granted under the Option Plan are not transferable and may be
exercised only by the optionee during his or her lifetime. If any optionee's
employment with the Corporation terminates by reason of death or permanent and
total disability, the optionee's options, whether or not then exercisable, may
be exercised within one year after such death or disability unless otherwise
provided in the option agreement (but not later than the date the option would
otherwise expire). If the optionee's employment terminates for any reason other
than death or disability, options held by such optionee terminate upon such
termination unless otherwise provided in the option agreement or approved by the
Compensation Committee (but not later than the date the option would otherwise
expire). The Compensation Committee may extend the period during which the
option may be exercised (but not later than the date the option would otherwise
expire) by so providing in the option agreement. The options will terminate
within a specified time after the optionee's termination of employment with the
Corporation.
8
12
Any options forfeited pursuant to the vesting provisions of the Option Plan
(or other limitations on exercise described above) will again be available for
award under the Option Plan.
The Option Plan provides for formula grants of options
to non-employee directors (an "Eligible Director"). At the time of the
Corporation's initial public offering, each Eligible Director was granted an
initial option to purchase a number of shares of Common Stock equal to 1,0001,500
times the number of years the Eligible Director served as a trustee of the
College. Each Eligible
Director will also be granted an additional option to purchase 1,000 shares of
Common Stock immediately after each of the subsequent annual meetings of the
Corporation's stockholders if the Eligible Director continues to be an Eligible
Director.University. Options granted to Eligible Directors under the Option Plan may be
exercised with respect to the shares subject to such option one year after the
option is granted. All options expire five years after the date of grant.
Upon any dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation in which the Corporation is not the
surviving corporation, or upon the sale of all or substantially all of the
assets of the Corporation to another corporation, or upon any transaction
approved by the Board of Directors which results in any person or entity owning
80% or more of the total combined voting power of all classes of stock of the
Corporation, the Option Plan and the options issued thereunder will terminate,
unless provision is made in connection with such transaction for the
continuation of this Option Plan and/or the assumption of the options or for the
substitution for such options of new options covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and the per share exercise price. In the event
of such termination, all outstanding options will be exercisable in full during
such period immediately prior to the occurrence of such termination as the Board
of Directors in its discretion will determine.
The Board of Directors may amend the Option Plan with respect to shares of
Common Stock as to which options have not been granted. However, the
Corporation's stockholders must approve any amendment that would (i) change the
requirements as to eligibility to receive options; (ii) materially increase the
benefits accruing to participants under the Option Plan; or (iii) materially
increase the number of shares of Common Stock that may be sold pursuant to
options granted under the Option Plan (except for adjustments upon changes in
capitalization).
The Board of Directors at any time may terminate or suspend the Plan.
Unless previously terminated, this Plan will terminate automatically on July 24,
2006, the tenth anniversary of the date of adoption of the Option Plan by the
Board of Directors. No termination, suspension or amendment of this Plan may,
without the consent of the optionee to whom an option has been granted,
adversely affect the rights of the holder of the option.
Federal Income Tax Consequences of the Stock Option Plan. The grant of an
option is not a taxable event for the optionee or the Corporation. With respect
to "incentive stock options," an optionee will not recognize taxable income upon
grant or exercise of an incentive option, and any gain realized upon a
disposition of shares received pursuant to the exercise of an incentive option
will be taxed as long-term capital gain if the optionee holds the shares for at
least two years after the date of grant and for one year after the date of
exercise. However, the excess of the fair market value of the shares of Common
Stock subject to an incentive option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum taxable
income in the year of exercise (except that, if the optionee is subject to
certain securities law restrictions, the determination of the amount included in
alternative minimum taxable income may be delayed, unless the optionee elects
within 30 days following exercise to have income determined without regard to
such restrictions) for purposes of the alternative minimum tax. This excess
increases the optionee's basis in the Common Stock for purposes of the
alternative minimum tax but not for purposes of the regular income tax. An
optionee may be entitled to a credit against regular tax liability in future
years for minimum taxes paid with respect to the exercise of incentive options
(e.g., for a year in which the shares are sold at a gain). The Corporation and
its subsidiaries will not be entitled to any business expense deduction with
respect to the grant or exercise of an incentive option, except as discussed
below.
For the exercise of an incentive option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Corporation or a
subsidiary from the date the option is granted through a date
9
13
within three months before the date of exercise. In the case of an optionee who
is disabled, this three-month period is extended to one year. In the case of an
employee who dies, the three-month period and the holding period for Common
Stock received pursuant to the exercise of the option are waived.
If all of the requirements for incentive option treatment are met except
for the special holding period rules set forth above, the optionee will
recognize the ordinary income upon the disposition of the Common Stock in an
amount equal to the excess of the fair market value of the shares at the time
the option was exercised over the option exercise price. However, if the
optionee was subject to certain restrictions under the securities laws at the
time the option was exercised, the measurement date may be delayed, unless the
optionee has made a special tax election within 30 days after the date of
exercise to have taxable income determined without regard to such restrictions.
The balance of the realized gain, if any, will be long- or short-term capital
gain, depending upon whether or not the shares of Common Stock were sold more
than one year after the option was exercised. If the optionee sells the shares
prior to the satisfaction of the holding period rules but at a price below the
fair market value of the Common Stock at the time the option was exercised (or
other applicable measurement date), the amount of ordinary income (and the
amount included in alternative minimum taxable income, if the sale occurs during
the same year as the option was exercised) will be limited to the excess of the
amount realized on the sale over the option exercise price. If the Corporation
complies with applicable reporting (if any) and other requirements, it will be
allowed a business expense deduction to the extent the optionee recognizes
ordinary income.
If, pursuant to an option agreement, an optionee exercises an incentive
option by tendering shares with a fair market value equal to part or all of the
option exercise price, the exchange of shares of Common Stock will be treated as
a nontaxable exchange (except that this treatment would not apply if the
optionee had acquired the shares being transferred pursuant to the exercise of
an incentive option and had not satisfied the special holding period
requirements summarized above). If the exercise is treated as a tax free
exchange, the optionee would have no taxable income from the exchange and
exercise (other than minimum taxable income as discussed above) and the tax
basis of the shares exchanged would be treated as the substituted basis for the
shares received. These rules would not apply if the optionee used shares of
Common Stock received pursuant to the exercise of an incentive option (or
another statutory option) as to which the optionee had not satisfied the
applicable holding period requirement. In that case, the exchange would be
treated as a taxable disqualifying disposition of the exchanged shares, with the
result that the excess of the fair market value of the shares tendered over the
optionee's basis in the shares would be taxable.
Upon exercising a non-qualifying (i.e. non-incentive) option, an optionee
will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise
(except that, if the optionee is subject to certain restrictions imposed by the
securities laws, the measurement date may be delayed, unless the optionee makes
a special tax election within 30 days after exercise to have income determined
without regard to the restrictions). If the Corporation complies with applicable
reporting requirements, it will be entitled to a business expense deduction in
the same amount. Upon a subsequent sale or exchange of shares of Common Stock
acquired pursuant to the exercise of a non-incentive option, the optionee will
have taxable gain or loss, measured by the difference between the amount
realized on the disposition and the tax basis of the shares (generally, the
amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If, pursuant to an option agreement, the optionee surrenders Common Stock
in payment of part or all of the exercise price for non-qualifying options, no
gain or loss will be recognized with respect to the shares surrendered
(regardless of whether the shares were acquired pursuant to the exercise of an
incentive option) and the optionee will be treated as receiving an equivalent
number of shares pursuant to the exercise of the option in a nontaxable
exchange. The basis of the shares surrendered will be treated as the substituted
tax basis for an equivalent number of option shares received and the new shares
will be treated as having been held for the same holding period as had expired
with respect to the transferred shares. However; the fair market value of any
shares of Common Stock received in excess of the number of shares surrendered
(i.e., the difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the exercise of
the option) will be taxed as ordinary income. Under current federal income tax
law, for 1993 and subsequent years, the highest tax rate on ordinary income is
39.6% and long-term
10
14
capital gains are subject to a maximum tax rate of 28%. Gain on a sale of stock
acquired as a consequence of the exercise of an option should qualify as
long-term if the stock has been held for more than one year (after exercise).
Because of certain provisions in the law relating to the "phase out" of personal
exemptions and certain limitations on itemized deductions, the federal income
tax consequences to a particular taxpayer of receiving additional amounts of
ordinary income or capital gain may be greater than would be indicated by
application of the foregoing tax rates to the additional amount of income or
gain.
Other Compensation Plans. The Corporation maintains a retirement plan
(the "401(k) Plan") intended to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code. The 401(k) Plan is a defined contribution plan that
covers all full-time employees of the Corporation of at least 21 years of age,
employed by the Corporation for at least one year. Employees may contribute up
to 10% of their annual wages (subject to an annual limit prescribed by the Code)
as pretax, salary deferral contributions. The Corporation may, in its
discretion, match employee contributions up to a maximum of 15% of annual wages.
Benefits. Benefits offered to key executives are largely those that
are offered to the general employee population, such as group health and life
insurance coverage and participation in the Corporation's 401(k) Plan.
Mr. Bailey's CompensationCompensation.
Mr. Bailey is paid an annual salary of $150,000$102,500 per year pursuant to
the terms of his employment agreement. See "Employment Agreements." It should be
noted that during 1997, Mr. Bailey voluntarily reduced his annual salary to its
current level of $102,500.
Submitted by the Members of the Compensation Committee:
Donald T. Benson
Todd A. Milano
Charlotte Beason
EMPLOYMENT AGREEMENTS
Mr. Bailey and the CollegeCorporation entered into an Employment Agreement
in July 1996, which provides that Mr. Bailey will serve as President and Chief
Executive Officer of the College.Strayer Education, Inc. For his services, Mr. Bailey is
entitled to receive an annual salary of $150,000.$102,500. According to the terms of the
Employment Agreement, Mr. Bailey's salary for successive years may be increased
at the discretion of the College's Board of Trustees.Corporation's Compensation Committee. The CollegeCorporation
does not currently contemplate payment of bonuses to Mr. Bailey. Future bonuses,
if any, paid to Mr. Bailey will be awarded pursuant to guidelines approved by
the Compensation Committee of the Corporation's Board of Directors and will be
at levels commensurate with any bonuses paid to other executive officers. The
agreement contains a covenant restricting Mr. Bailey from competing with the
CollegeCorporation for three years after the termination of employment.
The CollegeCorporation also entered into an employment agreement with Mr.
Harry T. Wilkins, Chief Financial Officer of the Corporation, in July 1996. The
employment agreement contains a covenant restricting Mr. Wilkins from competing
with the CollegeCorporation for three years after the termination of his employment.
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12
CERTAIN TRANSACTIONS WITH MANAGEMENT
Lease of Campus Facilities
TheAs of December 31, 1997, the Corporation hashad long-term noncancelable
operating leases for eight of its various campus locations. The rents on these
leases are subject to an annual increase based on a stipulated price index. Of
the eight campus locations, five of the campuses, including the Washington, D.C.
campuses and three of the Virginia campuses, were leased from corporations which
are wholly-owned by Mr. Bailey, the Corporation's President and majority
stockholder. Rent paid to Mr. Bailey under these five operating leases for the
years ended December 31, 1994,
1995, 1996 and 19961997 was $1,339,000, $1,896,000, $2,279,000 and
$2,279,000,$2,126,000, respectively. Future
11
15 minimum rental commitments for all of the
Corporation's eight leases and the five campuses leased from Mr. Bailey as of
December 31, 19961997 was as follows (in thousands):
AMOUNT PAYABLE TO AN
TOTAL LEASE AFFILIATE OF MR.
TOTAL LEASE BAILEY
COMMITMENTS INCLUDED IN TOTAL
----------- -------------------------------------------
1997..............
1998......... 3,427 2,126
1999......... 3,190 2,126
2000......... 3,061 2,126
2001......... 2,959 2,126
2002......... 2,598 2,126
Thereafter... 8,165 7,264
-------- --------
$ 3,15323,400 $ 2,126
1998.............. 3,024 2,126
1999.............. 2,758 2,126
2000.............. 2,750 2,126
2001.............. 2,648 2,126
2002.............. 2,381 2,126
Thereafter........ 7,894 7,264
------- --------
$24,608 $ 20,020
=======17,894
======== ========
Each of the leases with Mr. Bailey has a 10-year term expiring in May
2006. The Corporation has the option under each lease to purchase at any time
during the term of the lease the related campus facility at its discretion at
the fair market value of such facility as determined by independent appraisers.
The Corporation may lease additional campus facilities from entities
owned or controlled by Mr. Bailey. Any such leases will have market terms as
determined by an independent appraiser and be subject to the approval by a
majority of independent directors.
Transactions with PRK Investments, Inc.
The College retained PRK Investments, Inc. ("PRK") to provide it with a
variety of services, including services related to computer equipment purchasing
and the College's compliance with the HEA and Department of Education
regulations applicable to Title IV Programs. Two-thirds of the PRK common stock
is owned by children of Ron K. Bailey, President and a director of the
Corporation. The College paid PRK approximately $257,000 for computer equipment
purchasing and related services in 1996. In addition, pursuant to a contract
with PRK, the College made monthly payments of $20,000 to PRK for Title IV
services from January 1, 1996 through May 15, 1996. Beginning May 16, 1996, the
computer equipment purchasing and related services performed by PRK for the
College, as well as the services related to Title IV Programs, are performed by
employees of the Corporation. The College provided PRK office space on a
rent-free basis in 1996 through May 15, 1996.
Transactions with Career Training Institute, Inc.
College faculty and other employees have received computer-related
instruction and training in other occupational skills from Career Training
Institute, Inc. ("CTI"). Prior to December 31, 1996, eighty percent of the CTI
common stock was owned by children of Ron K. Bailey, President and a director of
the Corporation. The College paid CTI approximately $199,000 for its services in
1996. Management believes that CTI provided such services to the College on
terms at least as favorable to the College as the College could obtain from
unaffiliated parties. The Corporation believes that the instruction provided by
CTI is not competitive with the current programs of the College.
Reorganization Transactions
On July 30, 1996, the Corporation completed an initial public
offering of its common stock. The Corporation sold 3,450,0005,175,000 shares in the
offering at a price of $10$6.67 per share. Net proceeds to the Corporation were
$31,313,000. Prior to the closing of the offering, the Corporation exchanged
5,999,0008,998,500 shares of its common stock for 100% of the outstanding common stock of
the College,University, which was held jointly by Mr. and Mrs. Ron K. Bailey.
Approximately $19,838,000 of the net proceeds of the offering were paid to the
Baileys as a distribution of earnings on which they had previously paid income
taxes during the period the CollegeUniversity was an S Corporation.
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16
Contemporaneously with the closing of the initial public offering,
the Corporation acquired ELP at a purchase price of $1,060,000, ELP's net book
value. ELP was wholly owned by Mr. Ron K. Bailey, the Corporation's President
and a director of the Corporation.
PROPOSAL II
AMENDADOPTION OF THE COMPANY'S ARTICLES OF INCORPORATIONEMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board of Directors has approved and is proposing for stockholder
approval the Strayer Education, Inc. Employee Stock Purchase Plan (the "Employee
Purchase Plan"). The purpose of the Employee Purchase Plan is to enable eligible
employees of the Corporation has approved, declares it
advisable and in the best interestsor any of the Corporation and its stockholders, and
recommends that Article Fifth of the Corporation's Articles of Incorporation be
amended to increase the authorized shares of Common Stock from 20,000,000 to
50,000,000. The text of the Amendment is as follows:
FIFTH: The total number of shares of stock of all classes the
Corporation shall have authority to issue is Fifty-Five Million
(55,000,000) shares, having an aggregate par value of Five Hundred
and Fifty Thousand Dollars ($550,000) of which Fifty Million
(50,000,000) shares, par value of $.01 per share, amounting in
aggregate par value of Five Hundred Thousand Dollars ($500,000),
shall be Common Stock, and Five Million (5,000,000) shares, par
value $.01 per share, amounting in aggregate par value of Fifty
Thousand Dollars ($50,000), shall be Preferred Stock.
As of March 18, 1997, there were 9,450,000 shares of Common Stock
outstanding. In addition, as of March 18, 1997, optionssubsidiaries, through payroll
deductions, to purchase 646,674
shares were outstanding under the 1996 Stock Option Plan. Thus, at March 18,
1997, the Corporation had outstanding or reserved for issuance 10,096,674 shares
of Common Stock.
The authorization of an additional 30,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
Corporation's stockholders, to issue such shares of Common Stock from time to
time as the Board deems necessary or advisable. The Board believes that having
the additional shares authorized and available for issuance will allow the
Corporation to have greater flexibility in considering potential future actions
involving the issuance of stock which may be desirable or necessary to
accommodate the Corporation's business plan, including capital raising
transactions. In addition, the Board believes it is necessary to have the
ability to issue such additional shares for general corporate purposes. Such
general corporate uses of the additional authorized shares of Common Stock may
include acquisition transactions, stock dividends, splits or distributions, and
distributions in connection with future issuance of Preferred Stock of the
Corporation, stock options or warrants. In any case, the additional shares of
Common Stock would be available for issuance by the Board without future action
by the stockholders, unless such action were specifically required by applicable
law or rules of any stock exchange on which the Corporation's securities may be
traded.
Although the proposed increase in the authorized capital stock of the
Corporation could be construed as having anti-takeover effects, neither the
Board nor management of the Corporation views this proposal in that perspective.
Nevertheless, the Corporation could use the additional shares to frustrate
persons seeking to effect a takeover or otherwise gain control of the
Corporation by, for example, privately placing shares to purchasers who might
side with the Board in opposing a hostile takeover bid. The Corporation is not
aware of any such hostile takeover bid at this time. Such uses of the Common
Stock could render more difficult or discourage an attempt to acquire control of
the Corporation, if such transactions were opposed by the Board. Further, an
issuance of additional shares by the Corporation could have the effect on the
potential realizable value of a stockholder's investment in the Corporation. In
the absence of a proportionate increase in the Corporation's earnings and book
value, an increase in the aggregate number of outstanding shares of Common Stock
would dilute the earnings per share and book value per share of all outstanding
shares of the Corporation's Common Stock. The foregoing factors, if reflected in
the price per share of Common Stock, could adversely affect the realizable value
of a stockholder's investment in the Corporation.
The affirmative vote of a majority of all shares of the Corporation's Common Stock outstandingand thus to
encourage stock ownership by employees, officers and
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directors of the Corporation and to encourage the continued employment of
employees, directors and officers of the Corporation.
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Purchase Plan, 2,500,000 shares of Common Stock
are available for purchase by eligible employees of the Corporation or any of
its subsidiaries. The Employee Purchase Plan permits eligible employees to elect
to have a portion of their pay deducted by the Corporation to purchase shares of
Common Stock of the Corporation in the open market. In the event there is any
increase or decrease in Common Stock without receipt of consideration by the
Corporation (for instance, by a recapitalization or stock split), there may be a
proportionate adjustment to the number and kinds of shares that may be purchased
under the Employee Purchase Plan. Generally, payroll deductions and other
payments will be accumulated during a one-month period or such other period as
is set by the Corporation ("Payroll Deduction Period"). It is anticipated that
the first Payroll Deduction Period will begin on the Record Datefirst day of the first
payroll period commencing in July 1998.
The Employee Purchase Plan is requiredadministered by the Compensation
Committee. The Compensation Committee has the authority to interpret the
Employee Purchase Plan, to prescribe, amend and rescind rules relating to it,
and to make all other determinations necessary or advisable in administering the
Employee Purchase Plan, all of which determinations will be final and binding.
Any employee of the Corporation or a parent or subsidiary may
participate in the Employee Purchase Plan, except the following, who are
ineligible to participate: (a) an employee who has been employed by the
Corporation or a parent or subsidiary for less than 60 days as of the beginning
of a Payroll Deduction Period; (b) an employee whose customary employment is for
less than five months in any calendar year; (c) an employee whose customary
employment is 20 hours or less per week; and (d) an employee who, after
exercising his or her rights to purchase stock under the Employee Purchase Plan,
would own stock (including stock that may be acquired under any outstanding
options) representing five percent or more of the total combined voting power of
all classes of stock of the Corporation. An employee must be employed on the
last day of the Payroll Deduction Period in order to acquire stock under the
Employee Stock Plan unless the employee has retired, died or become disabled, or
was involuntarily terminated other than for cause.
An eligible employee may become a participant in the Employee
Purchase Plan by completing an election to participate in the Employee Purchase
Plan authorizing the Corporation to have deductions made from pay on each pay
day following enrollment in the Employee Purchase Plan. The deductions or
contributions will be credited to the employee's account under the Employee
Purchase Plan. An employee may not during any Payroll Deduction Period change
his or her percentage of payroll deduction or contribution for that Payroll
Deduction Period, nor may an employee withdraw any contributed funds other than
by terminating participation in the Employee Stock Plan (as described below). A
participating employee may terminate payroll deductions or contributions for the
remainder of a Payroll Deduction Period.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Payroll Deduction
Period. The purchase price for each share (the "Purchase Price") will be set by
the Committee. The Purchase Price for the initial Payroll Deduction Period will
be 90% of the fair market value of the Common Stock on the last trading day of
such Payroll Deduction Period.
No employee may purchase Common Stock in any calendar year under the
Employee Stock Plan and all other "employee stock purchase plans" of the
Corporation and any parent or subsidiary having an aggregate fair market value
in excess of $25,000, determined as of the first trading date of the Payroll
Deduction Period.
On the last trading day of the Payroll Deduction Period, a
participating employee will be credited with the number of whole shares of
Common Stock purchased under the Employee Stock Plan during such period. Common
Stock purchased under the Employee Stock Plan will be held in the custody of an
agent designated by the Corporation (the "Agent"). The Agent may hold the Common
Stock purchased under the Employee Stock Plan in stock certificates in nominee
names and may commingle shares held in its custody in a single account or stock
certificate, without identification as to individual employees. An employee may,
however, instruct the Agent to have
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all or part of such shares reissued in the employee's own name and have the
stock certificate delivered to the employee. An employee may not make such a
request, however, for six months following each purchase of Common Stock
pursuant to the Employee Stock Plan.
A participating employee will be refunded all monies in his or her
account, and his or her participation in the Employee Purchase Plan will be
terminated, if: (a) the employee elects to terminate participation by delivering
a written notice to that effect to the Corporation; (b) the employee ceases to
be employed by the Corporation or a participating affiliate except on account of
death, disability, retirement or involuntary termination of employment other
than for cause; (c) the Board elects to terminate the Employee Purchase Plan; or
(d) the employee ceases to be eligible to participate in the Employee Purchase
Plan. If a participating employee terminates employment with the Company, the
amount in the employee's account will be distributed and the employee's option
to purchase shares under the Employee Stock Purchase Plan will terminate.
No participating employee may assign his or her rights to purchase
shares of Common Stock under the Employee Purchase Plan, whether voluntarily, by
operation of law or otherwise.
The Board of Directors may, at any time, amend the Employee Purchase
Plan in any respect; provided, however, that without approval of the
Amendment.
13stockholders of the Corporation no amendment shall be made (a) increasing the
number of shares that may be made available for purchase under the Employee
Purchase Plan, (b) changing the eligibility requirements for participating in
the Employee Purchase Plan or (c) impairing the vested rights of participating
employees.
The Board of Directors may terminate the Employee Purchase Plan at
any time and for any reason or for no reason, provided that such termination
shall not impair any rights of participants that have vested at the time of
termination. In any event, the Employee Purchase Plan shall without further
action of the Board of Directors, terminate at the earlier of (i) ten years
after adoption of the Employee Purchase Plan by the Board of Directors and (ii)
such time as all shares of Common Stock that may be made available for purchase
under the Employee Purchase Plan have been issued.
FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEE STOCK PURCHASE PLAN
If a participant acquires Common Stock under the Plan, no income will
result to such participant, and the Corporation will be allowed no deduction as
a result to such purchase, if certain conditions are met. The principal
condition which must be satisfied is that the participant does not dispose of
the Common Stock within two years after the first day of the applicable Payroll
Deduction Period. If the employee disposes of the Common Stock acquired pursuant
the Plan after the statutory holding period has expired, gain on the sale is
capital gain except to the extent the discount in the Purchase Price determined
at the commencement of the Payroll Deduction Period. If the employee disposes of
the Common Stock before the expiration of the statutory holding period, the
employee must recognize as ordinary compensation income the difference between
the Common Stock's fair market value and the Purchase Price.
The employee must include in ordinary (compensation) income at the
time of sale or other taxable disposition, or upon the employee's death while
still holding the Common Stock, the lesser of:
(1) the Purchase Price discount from the fair market value of the
Common Stock at the beginning of the Payroll Deduction Period; or
(2) the amount, if any, by which the Common Stock's fair market
value at the time of such disposition or death exceed the Purchase
Price paid.
The basis of the stock will be increased by the amount of the compensation
income recognized.
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1715
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE EMPLOYEE PURCHASE PLAN IS
IN THE BEST INTERESTS OF ALL STOCKHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE
"FOR" THEFOR PROPOSAL TO AMEND THE
CORPORATION'S AMENDED AND RESTATED ARTICLES OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000 SHARES TO 50,000,000
SHARES.2. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Coopers & Lybrand L.L.P. has acted as the
Corporation's independent public accountants for the fiscal year ended December
31, 1996.1997. Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the stockholders' meeting and will have an opportunity to make a statement if
they desire and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
All stockholder proposals intended to be presented at the 19981999 Annual
Meeting of Stockholders must be received by the Corporation no later than
December 30, 1997January 9, 1999 and must otherwise comply with rules of the Securities and
Exchange Commission for inclusion in the Corporation's proxy statement and form
of proxy relating to the meeting.
OTHER MATTERS
The Corporation knows of no other matters to be presented for action
at the Annual Meeting other than those mentioned above. However, if any other
matters should properly come before the meeting, it is intended that the persons
named in the accompanying proxy card will vote on such matters in accordance
with their best judgment.
14-12-
1816
REVOCABLE PROXY
STRAYER EDUCATION, INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 19, 199718, 1998
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder hereby appoints Ron K. Bailey, Harry T.
Wilkins and Glenda S. Hardison,Jennie D. Seaton, or any of them, attorneys and proxies of the
undersigned, with full power of substitution and with authority in each of them
to act in the absence of the other, to vote and act for the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held on Monday, May 19,
199718, 1998, at
10:00 a.m. (Eastern time) at the Hyatt Regency Crystal City, 2799
Jefferson Davis Highway,Sheraton National Hotel, Columbia Pike and
Washington Boulevard, in Arlington, Virginia, and at any adjournments thereof,
in respect of all shares of the Common Stock of the Corporation which the
undersigned may be entitled to vote, on the following matters:
1. ELECTION OF NINEEIGHT DIRECTORS BY ALL STOCKHOLDERS: -- Nominees:
Ron K. Bailey, Stanley G. Elmore, Todd A. Milano, Dr. Jennie
D. Seaton, Roland Carey, Donald T. Benson, G. Thomas Waite,
III, Dr. Donald Stoddard and Dr. Charlotte Beason
[ ] FOR
[ ] AGAINST
[ ] FOR ALL (except nominees written below)
--------------------------------------------------------------[ ] AGAINST
-------------------------------------------------------------
2. AMENDMENTADOPTION OF CHARTER:EMPLOYEE STOCK PURCHASE PLAN: Approval of
an amendment to the
Corporation's Amended and Restated Articles of Incorporation
increasing the authorized number of shares of CommonStrayer Education, Inc.'s Employee Stock from 20,000,000 to 50,000,000:Purchase Plan:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. The proxies are authorized to vote in their discretion on any
other matters which may properly come before the Annual
Meeting to the extent set forth in the proxy statement.
(Continued and to be dated and signed on reverse side.)
1917
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE PROPOSED AMENDMENT TOAPPROVAL OF THE CORPORATION'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED NUMBER OF SHARES OF COMMONEMPLOYEE STOCK FROM 20,000,000 TO
50,000,000,PURCHASE PLAN, AND IN THE BEST DISCRETION OF THE PROXY HOLDERS AS
TO ANY OTHER MATTERS.
The undersigned hereby acknowledges prior receipt of a copy of the
Notice of Annual Meeting of Stockholders and proxy statement dated April 11,
1997,9,
1998, and hereby revokes any proxy or proxies heretofore given. This Proxy may
be revoked at any time before it is voted by delivering to the Secretary of the
Corporation either a written revocation of proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
[ ] I PLAN TO ATTEND THE MAY 19, 199718, 1998 ANNUAL STOCKHOLDERS MEETING
Date: _________________________ , 1997.
____________________________________1998.
-------------------------
------------------------------------
Signature of Stockholder or Authorized
Representative
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her
full title. In the case of stock
ownership in the name of two or more
persons, both persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE CORPORATION TO ADDITIONAL EXPENSE.
2
18
STRAYER EDUCATION, INC.
EMPLOYEE STOCK PURCHASE PLAN
19
TABLE OF CONTENTS
PAGE
----
1. SHARES SUBJECT TO THE PLAN..............................................1
2. ADMINISTRATION..........................................................1
3. INTERPRETATION..........................................................1
4. ELIGIBLE EMPLOYEES......................................................1
5. PARTICIPATION IN THE PLAN...............................................2
6. PAYROLL DEDUCTIONS......................................................2
7. STOCK PURCHASE PERIODS..................................................2
8. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.........................3
9. TIMING OF PURCHASE; PURCHASE LIMITATION.................................3
10. ISSUANCE OF STOCK CERTIFICATES..........................................4
11. WITHHOLDING OF TAXES....................................................4
12. ACCOUNT STATEMENTS......................................................4
13. PARTICIPATION ADJUSTMENT................................................4
14. CHANGES IN ELECTIONS TO PURCHASE........................................5
15. TERMINATION OF EMPLOYMENT...............................................5
16. LAY-OFF, AUTHORIZED LEAVE OF ABSENCE, DISABILITY........................5
17. TERMINATION OF PARTICIPATION............................................7
18. ASSIGNMENT..............................................................7
19. APPLICATION OF FUNDS....................................................7
20. NO RIGHT TO CONTINUED EMPLOYMENT........................................7
21. AMENDMENT OF PLAN.......................................................7
22. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN........................8
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20
23. EFFECT OF CHANGES IN CAPITALIZATION.....................................8
(a) Changes in Stock...................................................8
(b) Reorganization in Which the Company Is the Surviving
Corporation......................................................9
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets or Stock...........................9
(d) Adjustments.......................................................10
(e) No Limitations on Company.........................................10
24. GOVERNMENTAL REGULATION................................................10
25. STOCKHOLDER RIGHTS.....................................................10
26. RULE 16b-3.............................................................10
27. PAYMENT OF PLAN EXPENSES...............................................11
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21
STRAYER EDUCATION, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Strayer Education, Inc. (the "Company")
has adopted this Employee Stock Purchase Plan (the "Plan") to enable eligible
employees of the Company and its participating Affiliates (as defined below),
through payroll deductions, to purchase shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"). The Plan is for the benefit of
the employees of Strayer Education, Inc. and any participating Affiliates. The
Plan is intended to benefit the Company by increasing the employees' interest in
the Company's growth and success and encouraging employees to remain in the
employ of the Company or its participating Affiliates. The provisions of the
Plan are set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 25 below, the aggregate
number of shares of Common Stock that may be made available for purchase by
participating employees under the Plan is 2,500,000. The shares issuable under
the Plan will be shares purchased in the open market.
2. ADMINISTRATION.
The Plan shall be administered under the direction of the
Compensation Committee of the Board (the "Committee"). No member of the Board or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986 (the "Code"), and it is to be so applied and interpreted. Subject to the
express provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules relating to it, and to make all
other determinations necessary or advisable in administering the Plan, all of
which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES.
Any employee of the Company or any of its participating Affiliates
may participate in the Plan, except the following, who are ineligible to
participate: (a) an employee who has been employed by the Company or any of its
participating Affiliates for less than 60 days as of the beginning of a Stock
Purchase Period (as
22
defined in Section 7 below); (b) an employee whose customary employment is for
less than five months in any calendar year; (c) an employee whose customary
employment is 20 hours or less per week; and (d) an employee who, after
exercising his or her rights to purchase shares under the Plan, would own shares
of Common Stock (including shares that may be acquired under any outstanding
options) representing five percent or more of the total combined voting power of
all classes of stock of the Company. The term "participating Affiliate" means
any company or other trade or business that is a subsidiary of the Company
(determined in accordance with the principles of Sections 424(e) and (f) of the
Code and the regulations thereunder). The Board may at any time in its sole
discretion, if it deems it advisable to do so, terminate the participation of
the employees of a particular participating Affiliate.
5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan
by completing an election to participate in the Plan on a form provided by the
Company and submitting that form to the Payroll Department of the Company. The
form will authorize payroll deductions (as provided in Section 6 below) and
authorize the purchase of shares of Common Stock for the employee's account in
accordance with the terms of the Plan. Enrollment will become effective upon the
first day of the first Stock Purchase Period.
6. PAYROLL DEDUCTIONS.
At the time an eligible employee submits his or her election to
participate in the Plan (as provided in Section 5 above), the employee shall
elect to have deductions made from his or her pay, in any whole percentage up to
a maximum of 10 percent, on each pay day following his or her enrollment in the
Plan, and for as long as he or she shall participate in the Plan. The deductions
will be credited to the participating employee's account under the Plan. An
employee may not during any Stock Purchase Period change his or her percentage
of payroll deduction for that Stock Purchase Period, nor may an employee
withdraw any contributed funds, other than in accordance with Sections 14
through 19 below.
7. STOCK PURCHASE PERIODS.
The initial Stock Purchase Period shall commence on July 1, 1998 and
end on July 31, 1998. Subsequent Stock Purchase Periods shall be one month
periods commencing on the following August 1 and end on the following August 31
or shall commence on such dates and for such periods as shall be determined by
the Committee.
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23
The Company will purchase stock for the accounts of participating
employees at the conclusion of every Stock Purchase Period, beginning at the end
of the first Stock Purchase Period on July 31, 1998.
8. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Stock Purchase
Period. The purchase price of each share of Common Stock (the "Purchase Price")
shall be 90 percent of the fair market value of the Common Stock on the last
trading day of the Stock Purchase Period, at the end of which, the Company will
purchase Common Stock for the accounts of participating employees; or such
higher price as determined by the Committee; provided, further, that in no event
shall the Purchase Price be less than the par value of the Common Stock. For
purposes of the Plan, "fair market value" means the value of each share of
Common Stock subject to the Plan on a given date determined as follows: if on
such date the shares of Common Stock are listed on an established national or
regional stock exchange, are admitted to quotation on The Nasdaq Stock Market,
or are publicly traded on an established securities market, the fair market
value of the shares of Common Stock shall be the closing price of the shares of
Common Stock on such exchange or in such market (the highest such closing price
if there is more than one such exchange or market) on such date or, if such date
is not a trading day, on the trading day immediately preceding such 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 the shares of Common Stock is
reported for such trading day, on the next preceding day on which any sale shall
have been reported. If the shares of Common Stock are not listed on such an
exchange, quoted on such System or traded on such a market, fair market value
shall be determined by the Board in good faith.
9. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice
terminating such employee's participation in the Plan, or the employee's
participation in the Plan has otherwise been terminated as provided in Sections
15 through 17 below, such employee will be deemed to have exercised
automatically his or her right to purchase Common Stock on the last trading day
of the Stock Purchase Period (except as provided in Section 14 below) for the
number of shares of Common Stock which the accumulated funds in the employee's
account at that time will purchase at the Purchase Price, subject to the
participation adjustment provided for in Section 13 below and subject to
adjustment under Section 23 below.
Notwithstanding any other provision of the Plan, no employee may
purchase in any one calendar year under the Plan and all other "employee stock
purchase
-3-
24
plans" of the Company and its participating Affiliates, shares of Common Stock
having an aggregate fair market value in excess of $25,000, determined as of the
first trading date of the Stock Purchase Period as to shares purchased during
such period. Effective upon the last trading day of the Stock Purchase Period, a
participating employee will become a stockholder with respect to the shares
purchased during such period, and will thereupon have all dividend, voting and
other ownership rights incident thereto. Notwithstanding the foregoing, no
shares shall be sold pursuant to the Plan unless the Plan is approved by the
Company's stockholders in accordance with Section 22 below.
10. ISSUANCE OF STOCK CERTIFICATES.
On the last trading day of the Stock Purchase Period, a
participating employee will be credited with the number of shares of Common
Stock purchased for his or her account under the Plan during such Stock Purchase
Period. Shares purchased under the Plan will be held in the custody of an agent
(the "Agent") appointed by the Board of Directors. The Agent may hold the shares
purchased under the Plan in stock certificates in nominee names and may
commingle shares held in its custody in a single account or stock certificate
without identification as to individual participating employees. A participating
employee may, six months following the last trading day of a Stock Purchase
Period in which the Company purchased shares of Common Stock for the account, by
written notice instruct the Agent to have all or part of such shares reissued in
the participating employee's own name and have the stock certificate delivered
to the employee.
11. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income
in connection with a sale or other transfer of any shares of Common Stock
purchased under the Plan, the Company may withhold amounts needed to cover such
taxes from any payments otherwise due and owing to the participating employee or
from shares that would otherwise be issued to the participating employee
hereunder. Any participating employee who sells or otherwise transfers shares
purchased under the Plan within two years after the beginning of the Stock
Purchase Period in which the shares were purchased must within 30 days of such
transfer notify the Payroll Department of the Company in writing of such
transfer.
12. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating
employee a statement for each Stock Purchase Period during which the employee
purchases Common Stock under the Plan, reflecting the amount of payroll
deductions during the Stock Purchase Period, the number of shares purchased for
the employee's account, the price per share of the shares purchased for the
employee's account and
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25
the number of shares held for the employee's account at the end of the Stock
Purchase Period.
13. PARTICIPATION ADJUSTMENT.
If in any Stock Purchase Period the number of unsold shares that may
be made available for purchase under the Plan pursuant to Section 1 above is
insufficient to permit exercise of all rights deemed exercised by all
participating employees pursuant to Section 9 above, a participation adjustment
will be made, and the number of shares purchasable by all participating
employees will be reduced proportionately. Any funds then remaining in a
participating employee's account after such exercise will be refunded to the
employee.
14. CHANGES IN ELECTIONS TO PURCHASE.
(a) A participating employee may, at any time prior to the last
trading day of the Stock Purchase Period, by written notice to the Company,
direct the Company to cease payroll deductions (or, if the payment for shares is
being made through periodic cash payments, notify the Company that such payments
will be terminated), in accordance with the following alternatives:
(i) The employee's option to purchase shall be reduced to the
number of shares which may be purchased, as of the last day of the Stock
Purchase Period, with the amount then credited to the employee's account; or
(ii) Withdraw the amount in such employee's account and
terminate such employee's option to purchase.
(b) Any participating employee may increase or decrease his or her
payroll deduction or periodic cash payments, to take effect on the first day of
the next Stock Purchase Period, by delivering to the Company a new form
regarding election to participate in the Plan under Section 5 above.
15. TERMINATION OF EMPLOYMENT.
In the event a participating employee terminates employment, whether
voluntarily or involuntary, due to death, disability or retirement, or
discharged for cause, prior to the last day of the Stock Purchase Period, the
amount in the employee's account will be distributed and the employee's option
to purchase will terminate.
16. LAY-OFF, AUTHORIZED LEAVE OF ABSENCE, DISABILITY.
Payroll deductions for shares for which a participating employee has
an option to purchase may be suspended during any period of absence of the
employee
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26
from work due to lay-off, authorized leave of absence or disability or, if the
employee so elects, periodic payments for such shares may continue to be made in
cash.
If such employee returns to active service prior to the last day of
the Stock Purchase Period, the employee's payroll deductions will be resumed and
if said employee did not make periodic cash payments during the employee's
period of absence, the employee shall, by written notice to the Company's
Payroll Department within 10 days after the employee's return to active service,
but not later than the last day of the Stock Purchase Period, elect:
(a) To make up any deficiency in the employee's account resulting
from a suspension of payroll deductions by an immediate cash payment;
(b) Not to make up such deficiency, in which event the number of
shares to be purchased by the employee shall be reduced to the number of whole
shares which may be purchased with the amount, if any, then credited to the
employee's account plus the aggregate amount, if any, of all payroll deductions
to be made thereafter; or
(c) Withdraw the amount in the employee's account and terminate the
employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Stock Purchase Period shall deliver written
notice to his or her employer on or before the last day of the Stock Purchase
Period, electing one of the alternatives provided in the foregoing clauses (a),
(b) and (c) of this Section 16. If any employee fails to deliver such written
notice within 10 days after the employee's return to active service or by the
last day of the Stock Purchase Period, whichever is earlier, the employee shall
be deemed to have elected subsection 16(c) above.
If the period of a participating employee's lay-off, authorized
leave of absence or disability shall terminate on or before the last day of the
Stock Purchase Period, and the employee shall not resume active employment with
the Company or a participating Affiliate, the employee shall receive a
distribution in accordance with the provisions of Section 15 of this Plan.
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27
17. TERMINATION OF PARTICIPATION
A participating employee will be refunded all moneys in his or her
account, and his or her participation in the Plan will be terminated if either
(a) the Board elects to terminate the Plan as provided in Section 22 below, or
(b) the employee ceases to be eligible to participate in the Plan under Section
4 above. As soon as practicable following termination of an employee's
participation in the Plan, the Company will deliver to the employee a check
representing the amount in the employee's account and a stock certificate
representing the number of whole shares held in the employee's account. Once
terminated, participation may not be reinstated for the then current Stock
Purchase Period, but, if otherwise eligible, the employee may elect to
participate in any subsequent Stock Purchase Period.
18. ASSIGNMENT.
No participating employee may assign his or her rights to purchase
shares of Common Stock under the Plan, whether voluntarily, by operation of law
or otherwise. Any payment of cash or issuance of shares of Common Stock under
the Plan may be made only to the participating employee (or, in the event of the
employee's death, to the employee's estate). Once a stock certificate has been
issued to the employee or for his or her account, such certificate may be
assigned the same as any other stock certificate.
19. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan may be used
for any corporate purpose until applied to the purchase of Common Stock and/or
refunded to participating employees. Participating employees' accounts will not
be segregated.
20. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan nor any right to purchase Common Stock under the
Plan confers upon any employee any right to continued employment with the
Company or any of its participating Affiliates, nor will an employee's
participation in the Plan restrict or interfere in any way with the right of the
Company or any of its participating Affiliates to terminate the employee's
employment at any time.
21. AMENDMENT OF PLAN.
The Board may, at any time, amend the Plan in any respect (including
an increase in the percentage specified in Section 8 above used in calculating
the Purchase Price); provided, however, that without approval of the
stockholders of the Company no amendment shall be made (a) increasing the number
of shares specified in Section 1 above that may be made available for purchase
under the Plan
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(except as provided in Section 22 below), (b) changing the eligibility
requirements for participating in the Plan, or (c) impairing the vested rights
of participating employees.
22. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
The Plan shall be effective as of the date of adoption by the Board,
which date is set forth below, subject to approval of the Plan by a majority of
the votes present and entitled to vote at a duly held meeting of the
shareholders of the Company at which a quorum representing a majority of all
outstanding voting stock is present, either in person or by proxy; provided,
however, that upon approval of the Plan by the shareholders of the Company as
set forth above, all rights to purchase shares granted under the Plan on or
after the effective date shall be fully effective as if the shareholders of the
Company had approved the Plan on the effective date. If the shareholders fail to
approve the Plan on or before one year after the effective date, the Plan shall
terminate, any rights to purchase shares granted hereunder shall be null and
void and of no effect, and all contributed funds shall be refunded to
participating employees. The Board may terminate the Plan at any time and for
any reason or for no reason, provided that such termination shall not impair any
rights of participating employees that have vested at the time of termination.
In any event, the Plan shall, without further action of the Board, terminate ten
(10) years after the date of adoption of the Plan by the Board or, if earlier,
at such time as all shares of Common Stock that may be made available for
purchase under the Plan pursuant to Section 1 above have been issued.
23. EFFECT OF CHANGES IN CAPITALIZATION.
(a) CHANGES IN STOCK.
If the number of outstanding shares of Common Stock is increased or
decreased or the shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend, or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the effective
date of the Plan, the number and kinds of shares that may be purchased under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which rights are outstanding shall
be similarly adjusted so that the proportionate interest of a participating
employee immediately following such event shall, to the extent practicable, be
the same as immediately prior to such event. Any such adjustment in outstanding
rights shall not change the aggregate Purchase Price payable by a participating
employee with respect to shares subject
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29
to such rights, but shall include a corresponding proportionate adjustment in
the Purchase Price per share.
(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING
CORPORATION.
Subject to Subsection (c) of this Section 23, if the Company shall
be the surviving corporation in any reorganization, merger or consolidation of
the Company with one or more other corporations, all outstanding rights under
the Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such rights would have been entitled
immediately following such reorganization, merger or consolidation, with a
corresponding proportionate adjustment of the Purchase Price per share so that
the aggregate Purchase Price thereafter shall be the same as the aggregate
Purchase Price of the shares subject to such rights immediately prior to such
reorganization, merger or consolidation.
(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING
CORPORATION OR SALE OF ASSETS OR STOCK.
Upon any dissolution or liquidation of the Company, or upon a
merger, consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board that results in any person or entity owning more than 80 percent of
the combined voting power of all classes of stock of the Company, the Plan and
all rights outstanding hereunder shall terminate, except to the extent provision
is made in writing in connection with such transaction for the continuation of
the Plan and/or the assumption of the rights theretofore granted, or for the
substitution for such rights of new rights covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and exercise prices, in which event the Plan
and rights theretofore granted shall continue in the manner and under the terms
so provided. In the event of any such termination of the Plan, the Stock
Purchase Period shall be deemed to have ended on the last trading day prior to
such termination, and in accordance with Section 10 above the rights of each
participating employee then outstanding shall be deemed to be automatically
exercised on such last trading day. The Board shall send written notice of an
event that will result in such a termination to all participating employees not
later than the time at which the Company gives notice thereof to its
stockholders.
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30
(d) ADJUSTMENTS.
Adjustments under this Section 23 related to stock or securities of
the Company shall be made by the Committee, whose determination in that respect
shall be final, binding, and conclusive.
(e) NO LIMITATIONS ON COMPANY.
The grant of a right 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.
24. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common
Stock pursuant to the Plan is subject to such approval of any governmental
authority and any national securities exchange or other market quotation system
as may be required in connection with the authorization, issuance or sale of
such shares.
25. STOCKHOLDER RIGHTS.
Any dividends paid on shares held by the Company for a participating
employee's account will be transmitted to the employee. The Company will deliver
to each participating employee who purchases shares of Common Stock under the
Plan, as promptly as practicable by mail or otherwise, all notices of meetings,
proxy statements, proxies and other materials distributed by the Company to its
stockholders. Any shares of Common Stock held by the Agent for an employee's
account will be voted in accordance with the employee's duly delivered and
signed proxy instructions. There will be no charge to participating employees in
connection with such notices, proxies and other materials.
26. RULE 16b-3.
Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or any successor provision under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act"). If any
provision of the Plan or action by the Board fails to so comply, it shall be
deemed null and void to the extent permitted by law and deemed advisable by the
Board. Moreover, in the event the Plan does not include a provision required by
Rule 16b-3 to be stated herein, such provision (other than one relating to
eligibility requirements, or the price and amount of awards) shall be deemed
automatically to be incorporated by reference into the Plan.
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31
27. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out
the Plan.
* * *
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