Quick Facts about the 2009 Equity Grant and Performance Shares 1. Performance Shares (PS) comprise approximately 25% of your target award grant value for 2009, with the other 75% consisting of restricted stock awards. 2. Your restricted stock awards will vest over the next 4 years on the anniversary date of grant in increments of 25%. 3. Your Performance Shares will vest according to the following sample illustration. In this illustration, 100% of PS allocated to the first measurement period vest on the first Settlement Date in the fall of 2010, 75% of the second allocation vest in the fall of 2011 and 150% of the third allocation vest in the fall of 2012. Actual results may vary significantly. Sample Measurement Period % of Period Target Dollar Per Share Fair Target Performance Shares TPS Payout Vested Shares/Shares 10/1/09-9/30/10 33.333% $20,000 17.88 1,119 100% 1119 10/1/09-9/30/11 33.333% $20,000 19.83 1,009 75% 757 10/1/09-9/30/12 33.334% $20,000 21.22 943 150% 1415 Totals $60,000 3,071 3,291 4. Approximately 1/3 rd of the value of your PS will be eligible to vest on the Settlement Date following the end of each Measurement Period based on meeting the following performance index. The performance index measures UTI s Total Shareholder Return on a stacked-ranking against other members of the Russell 2000 Index. The percentile rank of our TSR drives the total payout percentage. TSR Index Percentile Rank Performance Shares Payout 0-20th 21st-30th 31st-40th 41st-50th 51st-60th 61st-70th 71st-80th 81st-90th 91st-100th 0% 25% 50% 75% 100% 125% 150% 175% 200% 5. Total Shareholder Return (TSR) is a market measurement that is defined as the return on company s stock to the shareholder. TSR looks at the change in stock price between the beginning and end of the Measurement Period and includes any dividend or capital gains. For UTI, the TSR will be the change in our stock price since we do not issue dividends. For more detailed information on Performance Shares, please read the attached FAQ.
Definitions PS Performance Shares: Equity instrument where earned awards are based on attainment of a performance measurement. TPS Target Performance Shares: Target award used to calculate actual earned shares TSR Total Shareholder Return: the return on a company s stock to the shareholder based on the change in price (+ dividends & capital gains if any) between the beginning and end of a set measurement period. Performance Period: Total length of time during which the grant is subject to performance criteria. For the 2009 grant, the Performance Period is three years. Measurement Period: Length of time over which the vesting portion of the grant s performance criteria is actually being measured. For this grant, there are three measurement periods within the performance period. Russell 2000: Market index made up of 2,000 small cap companies including UTI. Small Cap Market capitalization is between $200 Million and $2 billion.
Frequently Asked Questions about Universal Technical Institute s Performance Shares Why are we issuing Performance Shares (PS)? Historically, stock options have been an important part of UTI s Long Term Incentive Plan and have been issued since 2003. We introduced restricted stock awards in 2006 and have been increasing their use over the past few years and limiting the use of a market sensitive instrument such as stock options. With changes in legislation and increased pressure for companies by their shareholders to have more performance based or market sensitive compensation; many companies, including UTI, have started to shift to using more types of instruments that provide a performance element. This year, in lieu of stock options, UTI has chosen another equity instrument that will encompass some performance or market sensitivity while offering employees a potential opportunity for value. Is our entire award made up of PS? No. only about 25% of your target grant award value is made up of PS. The other 75% of your target award value consist of Restricted Stock Awards. Restricted Stock Awards are grants of UTI stock subject to time-based restrictions. You vest in these awards at the rate of 25% each year on the anniversary of the grant date for the next four years. How are PS different from other types of awards I have received in the past? In previous years, you may have received both stock options and restricted stock awards. The performance shares are different from a restricted stock award in that the vesting of any shares are determined by how UTI s Total Shareholder Return compares to the Russell 2000 index of companies during the Measurement Period. Restricted stock awards, on the other hand, vest in equal amounts over a set period of time. When do my PS vest? This first grant of PS will consist of a three-year Performance Period with three separate Measurement Periods: Measurement Period Estimated Vesting/Settlement Date October 1, 2009 September 30, 2010 November 15, 2010 October 1, 2009 September 30, 2011 November 15, 2011 October 1, 2009 September 30, 2012 November 15, 2012 The date that any Shares vest for each measurement period will be the Settlement Date which will be no later than 2 ½ months after the end of each Measurement Period. What is my Target Performance Shares (TPS) award and how is it calculated? You are being issued a target award of PS that are based on a target grant dollar value. The target number of PS allocated to each Measurement Period is based on the PS s
calculated fair value on the date of grant. Each Measurement Period s fair value is calculated separately based on UTI s stock price at date of grant and the likelihood of achievement of the performance target over the projected period of time. How does the number of Shares I am issued at grant compare to the number of Shares that vest after the end of the Measurement Period? The ultimate number of shares that become earned and vested will depend on how well UTI s Total Shareholder Return (TSR) compares to the market. We are using the Russell 2000 Index as our market peer group index. The performance index illustrated below shows the percentage of value earned relative to UTI s TSR. Based on the performance index, each of the actual shares that are earned and vest will be converted to one share of UTI stock on the Settlement Date. What is Total Shareholder Return (TSR)? Total Shareholder Return (TSR) is a market measurement that is defined as the return on company s stock to the shareholder. TSR looks at the change in stock price between the beginning and end of the Measurement Period and includes any dividend or capital gains. For UTI, the TSR will be the change in our stock price since we do not issue dividends. UTI s TSR will be compared to our peer group or index to determine how our TSR has performed relative to the other companies in the index during the Measurement Period. UTI has chosen the Russell 2000 index as our peer group index. What is the Russell 2000 Index? The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. UTI is one of the companies that currently comprise the Russell 2000. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. When will I know how many shares I will get? At the end of each Measurement Period, the Compensation Committee will determine how UTI s TSR performance for the period ranks relative to the other companies in the Russell 2000 index. The percentile ranking will determine the percentage payout of your initial target award. For example, if UTI s TSR comes in at the 67 th percentile, the payout percentage is 125% of target; which means you will multiply the Target Performance Shares by 125% to get the actual earned shares. How do I impact UTI s relative TSR? The Performance Share plan rewards UTI Executives for making UTI a better investing than the other investment alternatives available within the Russell 2000 Index. Your actions to increase revenue and limit expenses in order to increase our margin affect our stock price and Total Shareholder Return.
What happens to my shares after a Performance Shares vesting? After a performance shares vesting, any earned and vested shares are converted to shares of UTI stock and become available to you. These shares will be placed in an account already set up at Fidelity. You can view both your unvested and vested shares on the Fidelity s website by going to www.netbenefits.com Do I have to pay taxes on my awards? Yes, you are taxed when your performance shares vest and are converted to shares. Ordinary income is earned at the time of a share vesting and ordinary income taxes are due. With a performance shares vesting, shares are withheld to cover the tax liability. How do I view my award? You can view your awards through our vendor Fidelity at www.netbenefits.com or call Fidelity's toll free number at 1-800-544-9354. Where do I get a PIN? If you are logging into the Fidelity site for the first time, choose New User Registration. What if I forgot my PIN? If you reset your PIN and have forgotten it, you will need to contact Fidelity at 1-800- 544-9354. What happens to the award if I leave the Company? If your employment is terminated, all unvested and unearned shares will be forfeited. In the event of your death or disability, the target shares will vest on the Settlement Date following your death or disability and prorated shares will be based on service within the Measurement Period. Performance Index: The number of shares earned over the Measurement Period will be based on the Company s relative ranking with regard to TSR, as illustrated in the table below, as compared to the TSR for companies that comprise the Russell 2000 Index on the last day of the applicable Measurement Period. TSR Index Percentile Rank Performance Shares Payout 0-20th 21st-30th 31st-40th 41st-50th 51st-60th 61st-70th 71st-80th 81st-90th 91st-100th 0% 25% 50% 75% 100% 125% 150% 175% 200% Calculation Example In the example below, the total target grant value is $60,000, divided equally into thirds for each Measurement Period. The target dollar value for measurement period is then divided by the fair value for the Performance Share for that period to calculate the Target Performance Shares for each period.
At the end of each Measurement Period, using the performance index above, the target award will be based on the actual TSR index percentile rank and the corresponding Target Performance Shares payout percentage. In this example, the sample employee earns and receives more shares over the three-year period than were initially granted because the performance targets are exceeded in measurement period 3. There is also the possibility, however, that the actual vesting amount of shares could be zero or some number less than the Target Performance Shares awarded at the beginning of the period if UTI s TSR relative to the companies in the Russell 2000 Index is ranked less than the 51 st percentile. Measurement Period % of Period Target Dollar Sample Fair Target Performance Shares TPS Payout Vested Shares/Shares 10/1/09-9/30/10 33.333% $20,000 17.88 1,119 100% 1119 10/1/09-9/30/11 33.333% $20,000 19.83 1,009 75% 757 10/1/09-9/30/12 33.334% $20,000 21.22 943 150% 1415 Totals $60,000 3,071 3,291