Exhibit 10.02

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of the 30th day of
June, 2004 (the “Effective Date”), by and between LAUREATE EDUCATION, INC.
(formerly known as Sylvan Learning Systems, Inc.), a Maryland corporation (the
“Company”), and DOUGLAS L. BECKER (the “Executive”).

 

RECITALS

 

The Executive and the Company are parties to that certain Employment Agreement
dated June 30, 2000 (the “Current Employment Agreement”), pursuant to which the
Executive serves as the Chairman and Chief Executive Officer of the Company and
as a member of the Board of Directors of the Company (the “Company Board”). The
Company and the Executive acknowledge that the Current Employment Agreement
terminates in accordance with its terms on the Effective Date, and desire to
enter into this Agreement, in lieu thereof, as of the Effective Date.

 

The Company considers continued retention of the services of the Executive by
the Company to be in the Company’s best interests, and desires to ensure the
continued availability of the Executive’s services, expertise and knowledge by
entering into a long-term employment agreement.  In addition, the Company
recognizes and expects that the Executive will continue to make substantial
contributions to the continued growth and success of the businesses of the
Company (collectively, the “Company Business”) as an executive employee of the
Company.  The Executive, in turn, desires to continue his employment arrangement
with the Company on the terms provided in this Agreement.

 

Accordingly, in consideration of the foregoing, and the mutual agreements
contained in this Agreement, the parties hereto, intending to be legally bound,
agree as follows:

 

1.                                      Termination of Current Employment
Agreement.  The Company and the Executive hereby acknowledge and agree that the
Current Employment Agreement is hereby terminated as of the Effective Date
without any further action of the parties thereto, and shall be of no further
force or effect.

 

2.                                      Employment of Executive; Duties and
Status.

 

(a)                                  The Company hereby agrees to continue to
engage the Executive as the Chairman and Chief Executive Officer of the Company
during the “Employment Period” (as defined in Section 3 hereof), and the
Executive hereby accepts such employment, all on the terms and conditions set
forth in this Agreement.  During the Employment Period, the Executive shall
(i) have responsibility for the active management of the Company Business and
general supervision and direction of the affairs of the Company, (ii) have

 

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such other authority and perform such other executive duties (including, without
limitation, serving as an officer and/or director of “Affiliates” (as defined in
Section 5.3 hereof) of the Company), upon the direction of the Company Board))
as are commensurate with the authority and duties customarily performed by chief
executive officers of companies of like size and type as the Company, and
(iii) administer such other business affairs of the Company as shall be assigned
to the Executive by the Company Board, provided that such other duties are
commensurate with the Executive’s position with the Company.  The Executive
agrees that, at all times, he shall act in a manner consistent with, and
otherwise comply with, the Company’s Code of Ethics and Business Conduct adopted
by the Company Board on March 9, 2004, as the same may be amended and in effect
from time to time and timely provided to the Executive (collectively, the
“Company’s Code of Ethics”); provided, however, that in the event the Company’s
Code of Ethics imposes a limitation on the Executive with respect to a matter
that has been specifically authorized or specifically addressed by this
Agreement (e.g., ownership of a Sterling Affiliate), the Executive shall not be
deemed to be in violation of the Company’s Code of Ethics to the extent that his
conduct or actions are authorized by, or otherwise consistent with, the specific
terms of this Agreement; provided, further, however, that this clause shall not
be construed as excepting any action or conduct not specifically authorized or
addressed in this Agreement (even if such action or conduct is considered a term
or condition of employment or is of a type that is generally subsumed in an
executive employment agreement).

 

(b)                                 During the Employment Period, (i) the
Company shall not confer upon any other officer or employee power or authority
equal to or superior to that of the Executive, and (ii) the Executive shall
report directly and solely to the Company Board.

 

(c)                                  During the Employment Period, the Executive
shall be a full-time employee of the Company and shall devote all of his
business time and energies to the Company Business, except as provided in the
succeeding two sentences hereto.  The Company acknowledges that the Executive
has certain preexisting commitments to serve on the boards of directors and/or
as an officer of the entities specified on Schedule 2(c) hereof (the
“Pre-authorized Entities”), and the Executive shall be permitted to devote a
reasonable amount of time, subject to Sections 5.1 and 5.2 hereof, to serve as
an officer and/or director (as the case may be) of the Pre-authorized Entities,
and to serve on such other boards of directors or in such other offices as may
be approved in writing (other than non-profit and community activities, with
respect to which such approval shall not be required) from time to time by the
Company Board, which approval shall not be unreasonably withheld or delayed;
provided, however, (i) in no event shall the Executive be permitted to receive
any compensation or other pecuniary gain (including, without limitation,
participation in any deferred compensation, equity plan, or any preferential
treatment with respect to the purchase of any securities, such as any directed
share program, “friends and family” or similar offering) for, or with respect
to, the Executive’s service as any such officer or director of Educate, Inc., a
Delaware corporation, or any of its Affiliates, and (ii) at any time, the
Company Board may require the Executive to resign from any and all such
positions with a Pre-authorized Entity or any other Person if, in the good faith
judgment of the Company Board, (x) the Executive’s service interferes or
conflicts, in any material respect, with the performance by the Executive of his
duties to the Company under this Agreement or the business goals and objectives
of the Company or its Affiliates, and (y) in the case of any Person

 

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approved in writing by the Company Board hereunder and/or any Pre-authorized
Entity, there has been a material change in the facts or circumstances that
existed at the time of the Company Board’s approval (or, in the case of a
Pre-authorized Entity, on the Effective Date).  In addition, the Executive shall
be permitted, subject to Sections 5.1 and 5.2 hereof, to devote a reasonable
amount of time to (i) the management of his personal investments, finances, and
business and legal affairs, and (ii) delivering lectures, fulfilling speaking
engagements and teaching at educational institutions.  The Executive agrees that
(i) in all events, the Executive’s activities otherwise permitted under this
Section 2(c) shall not materially interfere or conflict on an ongoing basis with
the performance by the Executive of his duties to the Company under this
Agreement, and (ii) if reasonably requested by the Company Board, the Executive
shall provide the Company Board with a description of the activities of the
Executive permitted under this Section 2(c).

 

(d)                                 During the Employment Period, the Executive
shall serve as a director on the Company Board.

 

(e)                                  The Company and the Executive acknowledge
and agree that, from and after the Effective Date, the proviso in
Section 2(c)(i) hereof supercedes that certain Representation of Douglas L.
Becker, dated on or about March 10, 2003.

 

3.                                      Term of Employment.  The Executive’s
employment hereunder shall continue until the third anniversary of the Effective
Date, unless such employment is terminated earlier in accordance with the
provisions of this Agreement (the “Employment Period”).

 

4.                                      Compensation and General Benefits.

 

4.1                               Base Salary.

 

(a)                                  The Company agrees to pay to the Executive
an annual base salary of Five Hundred Thousand Dollars ($500,000) (such base
salary, as adjusted from time to time pursuant to Section 4.1(b), is referred to
herein as the “Base Salary”).  The Executive’s Base Salary, less amounts
required to be withheld under applicable law, shall be payable in equal
installments in accordance with the practice of the Company in effect from time
to time for the payment of salaries to officers of the Company, but in no event
less frequently than monthly.

 

(b)                                 The Executive’s Base Salary shall be
reviewed annually for possible upward adjustments by the Company Board or by the
compensation committee or other authorized committee established from time to
time by the Company Board (each, a “Company Board Committee”).

 

4.2                               Bonus.   For the fiscal year of the Company
ending December 31, 2004, the Company Board or Company Board Committee shall
determine the Executive’s base bonus with a target of 100% of his Base Salary,
assuming satisfaction of all criteria set forth on Schedule 4.2 hereof (the
“Base Bonus”).  For each subsequent fiscal year of the Company during the
Employment Period, the Company Board or Company Board Committee shall determine
the

 

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Executive’s annual Base Bonus with a target of 100% of his Base Salary, which
Base Bonus shall be based on criteria (and the weighting of such criteria)
established by the Company Board or Company Board Committee in advance of such
fiscal year.  For all fiscal years of the Company during the Employment Period,
in the event the Base Bonus with respect to such year is payable in full to the
Executive, the Company Board or Company Board Committee may, in its sole
discretion, award the Executive an additional bonus.

 

4.3                               Expenses.  During the Employment Period, in
addition to any amounts to which the Executive may be entitled pursuant to the
other provisions of this Section 4 or elsewhere herein, the Executive shall be
entitled to cause payment by, or to receive prompt reimbursement from, the
Company for all reasonable and necessary expenses incurred by him in performing
his duties hereunder on behalf of the Company Business, including, without
limitation, (i) reasonable expenses related to the activities of, and arising
from, the Company’s or the Executive’s participation in, or as a member or
officer of, trade associations or other similar organizations reasonably
associated with the Company Business; (ii) reasonable expenses incurred in
connection with business related entertaining and other expenses incurred by the
Executive in carrying on the Company Business at his home; (iii) reasonable
travel expenses incurred by the Executive for Company Business travel,
including, without limitation, first class airfare or use of private aviation,
as may be reasonably necessary, first class lodging, and up to $50,000 per
calendar year for air travel costs for the Executive’s spouse, children and a
caregiver to accompany the Executive on the Executive’s Company Business travel
(in the case of such travel by the Executive’s spouse, children and /or
caregiver in private aviation, the costs thereof to be charged against such
$50,000 amount to be based on the Standard Industry Fare Level formula, as
determined in accordance with Treas. Reg. §1.61-21); and (iv) reasonable
automobile and car phone payments, reimbursements, or allowances incurred by the
Executive for the Company Business.  All payments and reimbursements by the
Company pursuant to this Section 4.3 shall be subject to, and consistent with,
the Company’s policies for expense payment and reimbursement, in effect from
time to time; provided, however, that in the event such Company policies impose
a limitation with respect to a matter that has been specifically authorized or
specifically addressed by this Agreement, the specific terms of this Agreement
shall control.

 

4.4                               Fringe Benefits.

 

(a)                                  Company Plans.  During the Employment
Period, in addition to any amounts to which the Executive may be entitled
pursuant to the other provisions of this Section 4 or elsewhere herein, the
Executive shall be entitled to participate in, and to receive benefits under,
any deferred compensation plan (funded solely by elective deferrals by the
Executive), qualified retirement plan, profit-sharing plan, savings plan, group
life, disability, sickness, accident and health insurance programs, or any other
similar benefit plan or arrangement generally made available by the Company to
its senior executive employees, subject to and on a basis consistent with the
terms, conditions and overall administration of each such plan or arrangement. 
The Executive may also participate in any long term incentive, equity or other
non-qualified deferred compensation plan on such terms and on such conditions as
may be established by the Company Board or Company Board Committee.  The award
of any additional incentive under this Section 4.4(a) shall be separate and
distinct from the right of the Executive

 

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to receive the bonus payment from the Company described in Section 4.2 and the
Performance Shares from the Company described in Section 4.5.

 

(b)                                 Insurance.

 

(i)                                     During the Employment Period, the
Company shall provide, at its cost, term life insurance for the Executive in the
face amount of Two Million Five Hundred Thousand Dollars ($2,500,000), with
proceeds payable at the direction of the Executive, unless the Executive waives
such coverage; provided, however, that in the event the Executive is determined
to be suffering from any condition which would preclude the Company from
obtaining such insurance at a cost substantially equivalent to the cost of
obtaining such insurance for a healthy individual of the Executive’s like age
and gender, the Company shall purchase the amount of insurance that can be
purchased at a cost substantially equivalent to the cost of obtaining such
insurance for a healthy individual of the Executive’s age and gender.

 

(ii)                                  During the Employment Period, the Company
shall (a)  provide directors’ and officers’ liability insurance covering the
Executive, (b) errors and omissions insurance covering the activities of the
Executive (in the case of clause (a) and (b) hereof, in the exercise of the
Executive’s duties in the interest of the Company on terms and in coverages
provided by the Company to its executives generally), and (c) the
indemnification set forth in that certain Indemnification Agreement, dated as of
June 30, 2000, by and between the Company and the Executive.

 

(iii)                               During the Employment Period, the Company
shall provide to the Executive disability insurance at levels provided by the
Company to its executives generally; provided, however, that in the event the
Executive is not insurable at rates substantially equivalent to those payable by
the Company to insure its executives generally, the Company shall purchase the
amount of insurance that can be purchased at a cost substantially equivalent to
the cost of providing such insurance to the Company’s other executives.

 

(c)                                  Vacation.  The Executive shall be entitled
to four (4) weeks’ paid vacation during each full year (pro-rated for each
partial year) of the Employment Period.  In addition, the Executive shall be
entitled to all paid holidays given by the Company to its senior executive
officers.  The extent to which the Executive may accumulate vacation days not
taken in any year or receive payment for unused vacation days at the end of the
Employment Period shall be determined in accordance with the Company’s policies
for its senior executive officers.

 

(d)                                 Office.  During the Employment Period, the
Company shall provide the Executive with an office of a size and with
furnishings and other appointments commensurate with the Executive’s office at
the Company on the Effective Date, and full-time secretarial and administrative
assistance and the support staff necessary in order to perform his duties
hereunder.

 

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(e)                                  Legal and Professional Fees.  The Company
will pay or reimburse the Executive up to $57,000 for the reasonable legal and
accounting fees and expenses he incurs in the preparation and negotiation of
this Agreement and the Grant Agreement referred to in Section 4.5 hereof, upon
presentment by the Executive of a written statement of such fees and expenses. 
In addition, the Company will pay or reimburse the Executive up to $5,000 each
year during the Employment Period for the reasonable accounting fees and
expenses the Executive incurs for advice and preparation of his federal, state
and local income tax returns, upon presentment by the Executive of a written
statement of such fees and expenses.

 

4.5                               Performance Shares.  In accordance with the
Company’s 1998 Stock Incentive Plan (the “Stock Plan”), and as additional
consideration for the services of the Executive hereunder, the Company has
granted to the Executive 166,000 performance shares (collectively, the
“Performance Shares”) pursuant to that certain Performance Shares Grant
Agreement (the “Grant Agreement”), dated as of January 1, 2004, by and between
the Company and the Executive.  The Executive’s Performance Shares shall vest in
the manner set forth in the Grant Agreement.

 

4.6                               Parachute Treatment.

 

(a)                                  Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment, vesting,
distribution, or transfer by the Company or any successor, or any Affiliate of
the foregoing or by any other Person or that any other event occurring with
respect to the Executive and the Company for the Executive’s benefit, whether
paid or payable or distributed or distributable under the terms of this
Agreement or otherwise (including under any employee benefit plan) (a “Payment”)
would be subject to or result in the imposition of the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (and
any regulations issued thereunder, any successor provision, and any similar
provision of state or local income tax law) (collectively, the “Excise Tax”),
then the amount of the Payment shall be reduced by the lesser of (i) the amount
necessary to avoid subjecting such Payment to the Excise Tax or (ii) One Million
Dollars ($1,000,000)(a “Payment Reduction”).  The Executive shall have the
right, in his sole discretion, to designate those payments or benefits, if any,
that shall be reduced or eliminated under the Payment Reduction. 
Notwithstanding the foregoing, the Payment Reduction shall not apply if the
Executive would, on a net after-tax basis (without regard to the payment of any
Gross-Up Payment described below), receive less compensation than if the Payment
were not so reduced.

 

(b)                                 If, after taking into account any and all
Payment Reductions, a Payment is subject to, or results in the imposition of,
the Excise Tax, then the Company shall pay to the Executive (in addition to any
other benefits to which the Executive is entitled under this Agreement) a lump
sum cash bonus (the “Gross-Up Payment”) in an amount sufficient to offset fully,
on an after-tax basis, the Excise Tax imposed with respect to such Payment (as
reduced by the Payment Reduction).  The following provisions shall apply in the
computation and payment of the Gross-Up Payment:

 

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(i)                                     The Gross-Up Payment shall be computed
taking into account all income taxes, employment taxes and Excise Taxes imposed
with respect to the Gross-Up Payment (so that the Executive retains, after the
payment of all applicable taxes on the Gross-Up Payment, an amount equal to the
Excise Tax payable by the Executive with respect to such Payment).

 

(ii)                                  The Executive shall be deemed to pay
federal income tax at the highest marginal rate applicable to individuals in the
calendar year in which the Gross-Up Payment is made and to pay state and local
income taxes at the highest effective rate in the state or locality in which
such Gross-Up Payment is taxable.

 

(iii)                               The Gross-Up Payment shall be net of the
maximum reduction in federal income taxes that can be obtained from the
deduction of state and local taxes with respect to the Gross-Up Payment, taking
into account any applicable phase out or limitation with respect to such
deduction under the provisions of the Code applicable to individuals in the
calendar year in which the Gross-Up Payment is made.

 

(iv)                              Any Gross-Up Payment shall be made at least
ten (10) business days prior to the date the Excise Tax payable by the Executive
becomes due.

 

Notwithstanding extension of the Employment Period beyond the third anniversary
of the Effective Date, absent mutual written agreement to the contrary, the
provisions of this Section 4.6(b) shall not apply with respect to any Payment or
the imposition of any Excise Tax with respect to a change in ownership of the
Company (within the meaning of Section 280G of the Code) that occurs after the
third anniversary of the Effective Date.

 

(c)                                  Subject to the provisions of
Section 4.6(d), all determinations required to be made under this Section 4.6,
including whether and when a Payment is subject to Section 4999 and the
assumptions to be utilized in arriving at such determination and in determining
an appropriate Payment Reduction and Gross-Up Payment, shall be made by the
Company’s outside auditors at the time of such determination (the “Accounting
Firm”), which Accounting Firm shall provide detailed supporting calculations to
the Executive and the Company within fifteen (15) business days of the receipt
of notice from the Company or the Executive that there will be, or has been, a
Payment that the person giving notice believes may be subject to the Excise
Tax.  All fees and expenses of the Accounting Firm shall be borne by the
Company.  If the Accounting Firm shall determine that no Excise Tax is payable
by the Executive, it shall furnish to the Executive written advice that failure
to report the Excise Tax on his applicable federal income tax return would not
be reasonably likely to result in the imposition of a penalty for fraud,
negligence, or disregard of rules or regulations.  Except as provided in
Section 4.6(d), any determination by the Accounting Firm shall be binding upon
the Company and the Executive in determining whether a Payment Reduction or
Gross-Up Payment is required and the amount thereof (subject to Sections 4.6(d)
and (e)), in the absence of material mathematical or legal error.

 

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(d)                                 As a result of uncertainty in the
application of Sections 280G and 4999 of the Code that may exist at the time of
a determination by the Accounting Firm, it may be possible that in making the
calculations required to be made hereunder, the Accounting Firm shall determine
that a Payment Reduction not be made that should have been made, or a larger
Payment Reduction should have been made, or that a Gross-Up Payment be made that
should not have been made, or a smaller Gross-Up Payment should have been made
(an “Overpayment”), or that a Payment Reduction be made that should not have
been made, or a smaller Payment Reduction should have been made, or that a
Gross-Up Payment not be made that should have been made, or a larger Gross-Up
Payment should have been made (an “Underpayment”).  If the Accounting Firm, the
Internal Revenue Service or other applicable taxing authority shall determine
that an Overpayment was made, any such Overpayment shall be repaid by the
Executive with interest at the applicable Federal rate provided for in
Section 1274(d) of the Code; provided, however, that, subject to applicable law,
the amount to be repaid by the Executive to the Company shall be reduced to the
extent that any portion of the Overpayment to be repaid will not be offset by a
corresponding reduction in tax by reason of such repayment of the Overpayment;
provided, further, that to the extent the Overpayment relates to a Gross-Up
Payment, the Executive shall be obligated to repay such amount only at such time
and to such extent as the Executive receives a refund of the Overpayment from
the Internal Revenue Service or applicable taxing authority.  If the Accounting
Firm, the Internal Revenue Service or other applicable taxing authority shall
determine that an Underpayment was made, any such Underpayment (together with
any interest and penalties imposed thereon) shall be due and payable by the
Company to the Executive within thirty-five (35) days after the Company receives
notice of such Underpayment, but in no event later than the date the Executive
must pay such amounts to the Internal Revenue Service or other applicable taxing
authority.  To the extent that an Underpayment relates to a Payment Reduction,
the Company shall include interest on the portion of the Underpayment consisting
of the Payment Reduction at the applicable Federal rate provided for in
Section 1274(d) of the Code.

 

(e)                                  The Executive shall give written notice to
the Company of any claim by the Internal Revenue Service or other applicable
taxing authority that, if successful, would require the payment by the Executive
of an Excise Tax, such notice to be provided within a reasonable period of time
after the Executive shall have received written notice of such claim.  The
Executive shall cooperate with the Company in determining whether to contest or
pay such claim and shall not pay such claim without the written consent of the
Company, unless such consent is unreasonably withheld, conditioned or delayed. 
The Company shall have the right to direct the contest of such claim with
counsel of the Company’s choosing, and the Company shall have the power to
settle or compromise such claim subject to the consent of the Executive (which
consent may not be unreasonably withheld). The Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.  If the Company directs the
Executive to pay a claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis (subject to
applicable law), and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest

 

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or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance.  The Executive shall
(subject to the Company’s complying with the foregoing requirements) promptly
pay to the Company, up to the amount of the advance from the Company, the amount
of any refund received by the Executive (together with any interest paid or
credited thereon after taxes applicable thereto).

 

(f)                                    Subject to the last sentence of
Section 4.6(b), this Section 4.6 shall remain in full force and effect following
the termination of the Executive’s employment for any reason until the
expiration of the statute of limitations on the assessment of taxes applicable
to the Executive for all periods in which the Executive may incur a liability
for taxes (including Excise Taxes), interest or penalties arising out of the
operation of this Agreement.

 

5.                                      Confidentiality and Non-Competition.

 

5.1                               Confidentiality; Intellectual Property.

 

(a)                                  The Executive recognizes and acknowledges
that  (i) his employment with the Company has provided (and in the future, will
provide) him with access to “Trade Secrets” or “Confidential or Proprietary
Information” (each, as defined in Section 5.3 hereof), and (ii) the Company’s
business interests require a confidential relationship between the Company and
the Executive and the fullest practical protection and confidential treatment of
all Trade Secrets and Confidential or Proprietary Information.  Accordingly, the
Executive agrees that, except (A) as required by law, Governmental Authority or
court order, or (B) in the good faith furtherance of the Company Business, the
Executive will keep confidential and will not publish, make use of, or disclose
to anyone (or aid others in publishing, making use of, or disclosing to anyone),
in each case, other than the Company or any Persons designated by the Company,
or otherwise “Misappropriate” (as defined in Section 5.3 hereof) any Trade
Secrets or Confidential or Proprietary Information at any time.  The Executive’s
obligations hereunder shall continue during the Employment Period and thereafter
for so long as such Trade Secrets or Confidential or Proprietary Information
remain Trade Secrets or Confidential or Proprietary Information.

 

(b)                                 The Executive acknowledges and agrees that:

 

(i)                                     all Trade Secrets and Confidential or
Proprietary Information shall be “Trade Secrets” (as defined under the Maryland
Uniform Trade Secrets Act) of the Company and/or its Affiliates, as the case may
be;

 

(ii)                                  the Executive occupies a unique position
within the Company, and he is and will be intimately involved in the development
and/or implementation of Trade Secrets and Confidential or Proprietary
Information;

 

(iii)                               in the event the Executive breaches
Section 5.1 hereof with respect to any Trade Secrets or Confidential or
Proprietary Information, such breach

 

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shall be deemed to be a Misappropriation of such Trade Secrets or Confidential
or Proprietary Information; and

 

(iv)                              any Misappropriation of Trade Secrets or
Confidential or Proprietary Information will result in immediate and irreparable
harm to the Company.

 

(c)                                  The Executive recognizes that the Company
has received, and in the future will receive, “Information” (as defined in
Section 5.3(f) hereof) from Persons subject to a duty on the Company’s part to
maintain the confidentiality of such Information and to use it only for certain
limited purposes.  Without limiting anything in Section 5.1(a) hereof, the
Executive agrees that he owes the Company and such Persons, during the
Employment Period and thereafter, a duty to hold all such Information in the
strictest confidence and, except with the prior written authorization of the
Company, or as required by law, Governmental Authority or court order, not to
disclose such Information to any Person (except as necessary in carrying out the
Executive’s duties for the Company consistent with the Company’s agreement with
such Person) or to use it for the benefit of anyone other than for the Company
or such Person (consistent with the Company’s agreement with such Person).

 

(d)                                 All drawings, memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including but
not limited to, such items stored in computer memories, on microfiche,
electronically, or by any other means, made or compiled by or on behalf of the
Executive, or made available to the Executive or in the Executive’s possession
concerning or in any way relating to the conduct of the Company Business or the
business of any of the Company’s Affiliates, are and shall be the property of
the Company or such Affiliate and shall be delivered to the Company promptly
upon the Company’s request following the termination of the Executive’s
employment with the Company or at any other time on request.

 

(e)                                  “Work Product” (as defined in Section 5.3
hereof) relating to any work performed by or assigned to the Executive during,
and in connection with, his employment with the Company, shall belong solely and
exclusively to the Company.

 

(f)                                    From time to time, at the reasonable
request of the Company, the Executive agrees to disclose promptly to the Company
all Work Product and relevant records, which records will remain the sole
property of the Company; provided that the Executive shall not have an
obligation to disclose Work Product or records hereunder to the extent the
Company already has actual knowledge of such Work Product and originals or
copies of such records.

 

(g)                                 The Executive hereby assigns to the Company,
without further consideration, his entire right, title, and interest (throughout
the United States and in all foreign countries) in and to all Work Product
subject to Section 5.1(e), whether or not patentable.  Should the Company be
unable to secure the Executive’s signature on any document necessary to apply
for, prosecute, obtain, or enforce any patent, copyright, or other

 

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right or protection relating to any Work Product, whether due to the Executive’s
mental or physical incapacity, or the Executive’s unavailability for a
reasonable period under the circumstances, the Executive hereby irrevocably
designates and appoints the Company and each of its duly authorized officers and
agents as his agent and attorney-in-fact (such designation and appointment being
coupled with an interest), solely for the specific instance in which the Company
is unable to secure such signature, to act for and in his behalf and stead, to
execute and file any such document, and to do all other lawfully permitted acts
to further the prosecution, issuance, and enforcement of patents, copyrights, or
other rights or protections with the same force and effect as if executed and
delivered by the Executive.

 

(h)                                 There is no Information which the Executive
wishes to exclude from the operation of this Section 5.1.  To the best of the
Executive’s knowledge, there is no existing contract in conflict with this
Agreement or any other contract to assign Information that is now in existence
between the Executive and any other Person.

 

(i)                                     To the extent that any Work Product
described in Section 5.1(e) incorporates pre-existing material to which the
Executive possesses copyright, trade secret, patent, trademark or other
proprietary rights, and such rights are not otherwise assigned to the Company
herein, the Executive hereby grants to the Company a royalty-free, irrevocable,
worldwide, exclusive, perpetual license to make, have made, sell, use and
disclose, reproduce, modify, transmit, prepare Derivative Works based on,
distribute, perform and display (publicly or otherwise), such material, with
full right to authorize others to do so.

 

5.2                               Noncompetition and Nonsolicitation.

 

(a)                                  Subject to the provisions of Section 5.2(b)
and (c) hereof, during the Employment Period and thereafter during the one year
period ending on the first anniversary date of the termination of the Employment
Period (collectively, the “Restricted Period”), the Executive agrees that the
Executive will not, directly or indirectly, on the Executive’s own behalf or as
a partner, owner, officer, director, stockholder, member, employee, agent or
consultant of any other Person (including, without limitation any “Sterling
Affiliate,” as defined herein), within the United States of America or in any
other country or territory in which the Company Business is conducted:

 

(i)                                     own, manage, operate, control, be
employed by, provide services as a consultant to, or participate in the
ownership, management, operation, or control of, any Person engaged in any
activity competitive with the Company or any of its Affiliates; or

 

(ii)                                  solicit, hire, or otherwise attempt to
establish for any Person, any employment, agency, consulting or other business
relationship with any Person who is or was an employee or consultant of the
Company or any of its Affiliates, provided that (x) the prohibition in this
Section 5.2(a)(ii) shall not bar the Executive from soliciting or hiring
(I)  any former employee or former consultant who at the time of such
solicitation or hire had not been employed or engaged by the Company or any of
its Affiliates for a period of at least one

 

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year, and (II) any other provider of services to the Company or any of its
Affiliates (including, without limitation, Javier Arrechea, Carl Loo and their
respective Affiliates), as long as such Person’s engagement by the Executive
does not interfere or conflict with the provision of services to the Company or
an Affiliate by such Person, and (y) the prohibition in this Section 5.2(a)(ii)
does not bar the Executive from soliciting or hiring the Executive’s personal
assistant following the Executive’s termination of employment.

 

(b)                                 The parties hereto acknowledge and agree
that, notwithstanding anything in Section 5.2(a)(i) or 5.2(c)hereof:

 

(i)                                     the Executive may own or hold, solely as
passive investments, securities of Persons engaged in any business that would
otherwise be included in Section 5.2(a)(i) or 5.2(c), as long as with respect to
each such investment, the securities held by the Executive do not exceed five
percent (5%) of the outstanding securities of such Person and such securities
are publicly traded and registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”); provided, that in the case of
investments otherwise permitted under this clause (i), the Executive shall not
be permitted to, directly or indirectly, participate in, or attempt to
influence, the management, direction or policies of (other than through the
exercise of any voting rights held by the Executive in connection with such
securities), or lend his name to, any such Person;

 

(ii)                                  the Executive shall not be deemed to
violate Section 5.2(a)(i) or 5.2(c) hereof solely by virtue of the Executive’s
direct or indirect ownership of the outstanding securities of any Sterling
Affiliate (or of any Person through a Sterling Affiliate) that would otherwise
be included in Section 5.2(a)(i) or 5.2(c) hereof (a “Competitive Entity”),
provided that the Executive’s direct or indirect ownership of such Competitive
Entity does not exceed 5% of the outstanding securities of such Competitive
Entity; provided, that, in all cases, (w) the Executive shall refrain from any
activity, with respect to any Sterling Affiliate, that is competitive with the
Company or its Affiliates or which would reasonably be expected to result in a
misappropriation of a business opportunity of the Company or its Affiliates; (x)
the Executive shall provide written notice of the direct or indirect ownership
by the Executive of any Competitive Entity and/or any decision, that would
reasonably be expected to cause any Sterling Affiliate (or Person in which the
Executive has an ownership interest through a Sterling Affiliate) that is not a
Competitive Entity to become a Competitive Entity (including, in each case, the
material terms and conditions thereof, to the extent known by the Executive) to
the Conflicts Committee of the Company Board as soon as practicable (and in all
events within 30 days) after the Executive knows of such ownership or such
competitive activity or such decision, as the case may be; (y) the Executive
shall not be permitted to, directly or indirectly, participate in, or attempt to
influence, the management, direction or policies of (other than through the
exercise of any voting rights held by the Executive in connection with such
securities), any such Competitive Entity; and (z) on a quarterly basis, the
Executive shall provide a report to the Conflicts Committee of the Company Board
setting forth, in reasonable detail (to the extent known by the Executive and
not a violation of the Executive’s fiduciary duties and duties of
confidentiality), a general description of the business activities and plans of
such Competitive Entity, and any and all other information relating to the
Executive’s activities with respect thereto reasonably

 

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requested by the Company Board; provided that (I) the Conflicts Committee of the
Company Board may waive (in writing or by resolution) any noncompetition
provisions described in this Section 5.2(b)(ii) in its discretion; and (II) the
Executive shall not be deemed to have violated the foregoing provisions solely
by virtue of the listing of his membership on the Board of Managers (or similar
body) of any Sterling Affiliate in connection with an offering of securities;
and

 

(iii)                               the Executive may serve on the board of
directors (or other comparable position) or as an officer of any entity at the
request of the Company Board.

 

(c)                                  Notwithstanding anything herein to the
contrary, the parties agree that Section 5.2(a)(i) shall not apply after
termination of the Employment Period if the Executive is terminated without
“Good Cause” or resigns for “Good Reason” (each, as defined herein), or the
Executive resigns following a Change of Control, except that, for one year after
termination of employment by the Company without Good Cause, resignation by the
Executive for Good Reason or after a Change of Control, the Executive agrees
that the Executive will not, directly or indirectly, on the Executive’s own
behalf or as a partner, owner, officer, director, stockholder, member, employee,
agent or consultant of any other Person (including, without limitation any
Sterling Affiliate), within the United States of America or in any other country
or territory in which the Company Business is conducted, own, manage, operate,
control, be employed by, provide services as a consultant to, or participate in
the ownership, management, operation, or control of, any “Restricted Business.”
For purposes hereof, “Restricted Businesses” include those portions of the
Company Business which the Company Board determines, in good faith, are the
strategic focus of the Company as of the effective time of termination of the
Employment Period; provided, that the Company notifies the Executive of such
determination by the Company Board within thirty (30) days after the effective
time of such termination.

 

(d)                                 Without limiting anything in Sections 5.2(a)
or 5.2(c) hereof, during the Restricted Period, the Executive shall not cause or
knowingly permit any assets, properties, personnel or other resources of the
Company or its Affiliates to be used by, or for the benefit of, any Sterling
Affiliate or any other Person.

 

5.3                               Definitions.  For purposes of this Agreement,
the following terms shall have the following meanings:

 

(a)                                  An Affiliate of any Person means any other
Person, whether now or hereafter existing, directly or indirectly controlling or
controlled by, or under direct or indirect common control with, such specified
Person.  For purposes hereof, “control” or any other form thereof, when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.

 

(b)                                 Misappropriation, or any form thereof,
means:

 

(i)                                     the acquisition of any Trade Secret or
Confidential or Proprietary Information by a Person who knows or has reason to
know that the Trade Secret or

 

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Confidential or Proprietary Information was acquired by theft, bribery,
misrepresentation, breach or inducement of a breach of a duty to maintain
secrecy, or espionage through electronic or other means (each, an “Improper
Means”); or

 

(ii)                                  the disclosure or use of any Trade Secret
or Confidential or Proprietary Information without the express consent of the
Company by a Person who (x) used Improper Means to acquire knowledge of the
Trade Secret or Confidential or Proprietary Information; or (y) at the time of
disclosure or use, knew or had reason to know that his or her knowledge of the
Trade Secret or Confidential or Proprietary Information was (i) derived from or
through a Person who had utilized Improper Means to acquire it, (ii) acquired
under circumstances giving rise to a duty to maintain its secrecy or limit its
use, or (iii) derived from or through a Person who owed a duty to the Company
and/or any of its Affiliates to maintain its secrecy or limit its use; or
(z) before a material change of his or her position, knew or had reason to know
that it was a Trade Secret or Confidential or Proprietary Information and that
knowledge of it had been acquired by accident or mistake.

 

(c)                                  Person means any individual, corporation,
partnership, limited liability company, joint venture, association, business
trust, joint-stock company, estate, trust, unincorporated organization, or
government or other agency or political subdivision thereof, or any other legal
or commercial entity.

 

(d)                                 Sterling Affiliate means each of Sterling
Capital Partners, LLC, a Delaware limited liability company, Sterling Capital
Partners, L.P., a Delaware limited partnership, Sterling Capital Partners II,
LLC, a Delaware limited liability company, Sterling Venture Partners II, LLC, a
Delaware limited liability company, and any Affiliates of any of the foregoing.

 

(e)                                  Trade Secrets means all information of the
Company or any of the Company’s Affiliates that would be deemed to be “trade
secrets” within the meaning of the Uniform Trade Secrets Act (as promulgated by
the United States National Conference of Commissioners on Uniform State Laws) or
such other or similar statute of any jurisdiction which is found to be
applicable to this Agreement, its enforcement or its interpretation.

 

(f)                                    Confidential or Proprietary Information
means:

 

(i) any and all information and ideas in whatever form (including, without
limitation, written or verbal form, and including information or data recorded
or retrieved by any means, tangible or intangible), whether disclosed to or
learned or developed by the Executive, pertaining in any manner to the Company
Business or any of the Company’s Affiliates (collectively, “Information”) that
(a) derives independent economic value, actual or potential, from not being
generally known to the public or to other Persons who can obtain economic value
from its disclosure or use, and (b) is the subject of efforts by the Company
and/or its Affiliates that are reasonable under the circumstances to maintain
its secrecy; and

 

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(ii) any and all other Information unique to the Company and/or or its
Affiliates which has a significant business purpose and is not known or
generally available from sources outside of such Persons or typical of industry
practice.

 

For purposes of this Agreement, the term “Information” includes, without
limitation, any and all (1) information regarding business strategy and
operations including, without limitation, business or strategic plans, plans
regarding business acquisitions, mergers, sales or divestures, marketing and
sales information, lists of customers, suppliers, distributors or contractors;
(2) information regarding products and services including, without limitation,
manufacturing, production, distribution, design, development, techniques,
processes, software (including, without limitation, designs, programs and
codes), and know how; (3) information regarding concepts, research, experiments,
formulae, inventions, techniques, and other work product (of the Executive or
any other employee of the Company or an Affiliate); (4) financial information
including, without limitation, budget and expense information, pricing, revenue,
or profit information and/or analysis, economic models and forecasts, operating
and other financial reports and/or analysis; and (5) human resource information
such as compensation policies and schedules, employee recruiting and retention
plans, organization charts and personnel data.

 

(g)                                 Work Product means any and all ideas,
inventions, combinations, machines, methods, formulae, techniques, processes,
software designs, computer programs, strategies, know-how, data, original works
of authorship, trademarks, and all improvements, rights, and claims related to
the foregoing that are conceived, developed, or reduced to practice by the
Executive alone or with others during the Employment Period (and prior thereto,
during the time the Executive served as Chief Executive Officer or Co-Chief
Executive Officer of the Company).

 

(h)                                 Derivative Work means any translation, part,
modification, correction, addition, extension, upgrade, improvement,
compilation, abridgement or other form in which the material may be recast,
transformed or adapted, including but not limited to all forms in which such
Derivative Work would infringe any of the copyrights, including audiovisual
copyrights, in the material.

 

(i)                                     Sarbanes-Oxley Requirements means any
and all requirements, obligations or liabilities imposed upon the Executive
and/or the Company pursuant to the Sarbanes-Oxley Act of 2002, as amended and in
effect from time to time, and any and all regulations promulgated thereunder.

 

(j)                                     SEC means the United States Securities
and Exchange Commission, or any successor thereto.

 

(k)                                  Governmental Authority means any federal,
state, local or other governmental, regulatory or administrative agency,
commission, department, board, or other governmental subdivision, court,
tribunal, arbitral body or other governmental authority.

 

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5.4                               Remedies.  The Executive acknowledges and
agrees that if the Executive breaches any of the provisions of Section 5 or 6.9
hereof, the Company will suffer immediate and irreparable harm for which
monetary damages alone will not be a sufficient remedy, and that, in addition to
all other remedies that the Company may have, the Company shall be entitled to
seek injunctive relief, specific performance or any other form of equitable
relief to remedy a breach or threatened breach of this Agreement (including,
without limitation, any actual or threatened Misappropriation) by the Executive
and to enforce the provisions of this Agreement.  The existence of this right
shall not preclude or otherwise limit the applicability or exercise of any other
rights and remedies which the Company and/or the Executive may have at law or in
equity.  The Company acknowledges and agrees that if it breaches Section 6.9
hereof, the Executive may suffer immediate and irreparable harm for which
monetary damages alone will not be a sufficient remedy, and that, in addition to
all other remedies that the Executive may have, the Executive shall be entitled
to seek injunctive relief, specific performance or any other form of equitable
relief to remedy a breach or threatened breach of this Agreement by the Company
and to enforce the provisions of this Agreement.  The parties hereby waive any
and all defenses each may have on the grounds of lack of jurisdiction or
competence of a court to grant the injunctions or other equitable relief
provided above and to the enforceability of this Agreement.

 

5.5                               Interpretation; Severability.

 

(a)                                  The Executive has carefully considered the
possible effects on the Executive of the covenants not to compete, the
confidentiality provisions, and the other obligations contained in this
Agreement, and the Executive recognizes that the Company has made every effort
to limit the restrictions placed upon the Executive to those that are reasonable
and necessary to protect the Company’s legitimate business interests.

 

(b)                                 The Executive acknowledges and agrees that
the restrictive covenants set forth in this Agreement are reasonable and
necessary in order to protect the Company’s valid business interests.  It is the
intention of the parties hereto that the covenants, provisions and agreements
contained herein shall be enforceable to the fullest extent allowed by law.  If
any covenant, provision, or agreement contained herein is found by a court
having jurisdiction to be unreasonable in duration, scope or character of
restrictions, or otherwise to be unenforceable, such covenant, provision or
agreement shall not be rendered unenforceable thereby, but rather the duration,
scope or character of restrictions of such covenant, provision or agreement
shall be deemed reduced or modified with retroactive effect to render such
covenant, provision or agreement reasonable or otherwise enforceable (as the
case may be), and such covenant, provision or agreement shall be enforced as
modified.  If the court having jurisdiction will not review the covenant,
provision or agreement, the parties hereto shall mutually agree to a revision
having an effect as close as permitted by applicable law to the provision
declared unenforceable.  The parties hereto agree that if a court having
jurisdiction determines, despite the express intent of the parties hereto, that
any portion of the covenants, provisions or agreements contained herein are not
enforceable, the remaining covenants, provisions and agreements herein shall be
valid and enforceable.  Moreover, to the extent that any provision is declared
unenforceable, the Company shall have any and all rights under applicable
statutes or common

 

16

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law to enforce its rights with respect to any and all Trade Secrets or
Confidential or Proprietary Information or unfair competition by the Executive.

 

6.                                      Termination.

 

6.1                               General.  The employment of the Executive
hereunder (and the Employment Period) shall terminate as provided in Section 3,
unless earlier terminated in accordance with the provisions of this Section 6.

 

6.2                               Termination Upon Mutual Agreement.  The
Company and the Executive may, by mutual written agreement, terminate this
Agreement and/or the employment of the Executive (and the Employment Period) at
any time.

 

6.3                               Death or Disability of the Executive.

 

(a)                                  The employment of the Executive hereunder
(and the Employment Period) shall terminate upon (i) the death of the Executive,
and (ii) at the option of the Company, upon not less than thirty (30) days prior
written notice to the Executive or his personal representative or guardian, if
the Executive suffers a “Total Disability” (as defined in Section 6.3(b)
below).  Upon termination for death or Total Disability, the Company shall pay
to the Executive’s guardian or personal representative, as the case may be, in
addition to any insurance or disability benefits to which he may be entitled
hereunder, the “Accrued Rights” (as defined in Section 6.8 hereof), other
amounts set forth in Section 6.8(a)(iv) and Section 6.8(a)(v) hereof, and a pro
rata portion of any bonus pursuant to Section 4.2 hereof for the portion of the
year during which death or Total Disability occurred.

 

(b)                                 For purposes of this Agreement, “Total
Disability” shall mean (i) if the Executive is subject to a legal decree of
incompetency (the date of such decree being deemed the date on which such
disability occurred), (ii) the written determination by a physician selected by
the Company that, because of a medically determinable disease, injury or other
physical or mental disability, the Executive is unable substantially to perform
each of the material duties of the Executive required hereby, and that such
disability has lasted for the immediately preceding ninety (90) days and is, as
of the date of determination, reasonably expected to last an additional six (6)
months or longer after the date of determination, in each case based upon
medically available reliable information, or (iii) Executive’s qualifying for
benefits under the Company’s long-term disability coverage, if any.

 

(c)                                  The date of any legal decree of
incompetency or written opinion which is conclusive as to the Total Disability
of the Executive shall be deemed the date on which such Total Disability
occurred.  Any leave on account of illness or temporary disability which is
short of Total Disability shall not constitute a breach of this Agreement by the
Executive, and in no event shall any party be entitled to terminate this
Agreement for Good Cause due to any such leave.  All physicians selected
hereunder shall be board certified in the specialty most closely related to the
nature of the disability alleged to exist.  In conjunction with determining
mental and/or physical disability for purposes of this Agreement, the Executive

 

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consents to any such examinations which are relevant to a determination of
whether he is mentally and/or physically disabled, and which is required by the
aforesaid Company physician, and to furnish such medical information as may be
reasonably requested, and to waive any applicable physician patient privilege
that may arise because of such examination.

 

6.4                               Termination For Good Cause.

 

(a)                                  The Company may, upon action of the Company
Board in accordance with Section 6.4(c) hereof, terminate the employment of the
Executive (and the Employment Period) at any time for “Good Cause” (as defined
below).

 

(b)                                 For purposes of this Agreement, “Good Cause”
means:

 

(i)                                     a material failure by the Executive to
comply with any material obligation imposed by this Agreement (including,
without limitation, any violation of Sections 5.1 or 5.2 hereof);

 

(ii)                                  gross negligence or willful malfeasance by
the Executive in connection with the performance of his duties under this
Agreement, or a material violation by the Executive of any Sarbanes-Oxley
Requirement (other than in the event the Executive had a reasonable good faith
belief that the act, omission or failure to act in question was not a violation
of law), in each case, that would be reasonably likely to have a material
adverse impact on the Company Business;

 

(iii)                               the Executive’s being convicted of, or
pleading guilty or nolo contendere to (or, subject to Section 6.4(d) hereof,
being indicted for) a felony involving theft, embezzlement, fraud, dishonesty,
or any similar offense that would be reasonably likely to have a material
adverse impact on the Company Business;

 

(iv)                              theft, embezzlement or fraud by the Executive
in connection with the performance of his duties hereunder;

 

(v)                                 the abuse by the Executive of drugs or
alcohol, or conduct by the Executive involving moral turpitude, that would be
reasonably likely to have a material adverse impact on the Company Business;

 

(vi)                              subject to Section 6.4(d) hereof, the
misappropriation by the Executive of any material business opportunity of the
Company, provided, however, that solely for purposes of this Section 6.4(b), the
Executive shall not be deemed to have misappropriated a material business
opportunity of the Company and/or its Affiliates by virtue of any action taken
by a Sterling Affiliate, unless the Executive knows of such action before the
date it occurs (or, if earlier, before the date of a binding commitment to
complete such action) and the Executive fails to disclose such action to the
Company Board; or

 

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(vii)                           the Executive being barred or prohibited by the
SEC or any other Governmental Authority from holding the position of Chief
Executive Officer of the Company.

 

(c)                                  Before the Company may terminate the
Executive for Good Cause pursuant to Section 6.4(a) above, the Company Board
shall deliver to the Executive a written notice of the Company’s intent to
terminate the Executive for Good Cause, including the reasons for such
termination, the giving of which shall have been authorized by a vote of not
less than 75% of all members of the Company Board then in office other than the
Executive (rounded down to the next whole number); and the Executive shall have
been given a reasonable opportunity to cure any such acts or omissions (which
are susceptible of cure) within thirty (30) days after the Executive’s receipt
of such notice.  “Good Cause” shall be based only on material matters and not on
matters of minor importance.  The Company Board’s delay in providing such notice
shall not be deemed to be a waiver of any such Good Cause unless and until the
Company Board fails to provide such notice within thirty (30) days after the
occurrence of the event triggering such Good Cause nor does the failure to
terminate for one Good Cause prevent any later Good Cause termination for a
similar or different reason.

 

(d)                                 With respect to the Executive’s being
indicted for a crime under Section 6.4(b)(iii) or being accused of
misappropriation under Section 6.4(b)(vi), in addition to satisfying the
requirements of Section 6.4(c), the Company must treat the Executive under
Section 6.8(a) (other than clause “(iv)” thereof) as though he has been
terminated without Good Cause unless and until, with respect to the indictment,
he is convicted or pleads guilty or nolo contendere to a crime described in
Section 6.4(b)(iii) or, with respect to misappropriation, a final determination
is made by an arbitrator that the Company did have Good Cause under
Section 6.4(b)(vi) to terminate the Executive.  If the final determination is
that the Company had Good Cause for termination under the referenced sections,
the Executive shall return the difference between any payments made under
Section 6.8(a) and the amounts otherwise payable under Section 6.8(b). If the
final determination is that the Company did not have Good Cause for termination
under the referenced sections, the Company shall immediately provide the
Executive with the benefits under Section 6.8(a)(iv).

 

6.5                               Termination For Good Reason.

 

(a)                                  The Executive may resign, and thereby
terminate his employment (and the Employment Period), at any time for “Good
Reason” (as defined below), upon not less than thirty (30) days’ prior written
notice (reduced to five days’ notice for failure to pay Base Salary) to the
Company specifying in reasonable detail the reason therefor; provided, however,
that the Company shall have been given a reasonable opportunity to cure any such
Good Reason (which are susceptible of cure) within thirty (30) days after the
Company’s receipt of such notice.  The Executive’s delay in providing such
notice shall not be deemed to be a waiver of any such Good Reason unless and
until the Executive fails to provide such notice within thirty (30) days after
the occurrence of the event triggering such Good Reason, nor does the failure to
resign for one Good Reason prevent any later Good Reason resignation for a
similar or different reason.

 

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(b)                                 For purposes of this Agreement, “Good
Reason” means:

 

(i)                                     a material failure by the Company to
comply with any material obligation imposed by this Agreement;

 

(ii)                                  the Executive is demoted from the position
of Chief Executive Officer of the Company, or the Executive’s duties and
responsibilities are materially and substantially diminished as a whole;

 

(iii)                               any reduction in the Executive’s Base
Salary;

 

(iv)                              the removal or failure to re-elect the
Executive as a member of the Company Board other than as a result of the
Executive’s voluntary resignation or choice not to stand for reelection or
reappointment or as required by applicable law;

 

(v)                                 the Company’s requiring the Executive to be
based (excluding travel responsibilities in the ordinary course of business) at
any office or location more than 25 miles from the office of the Company at 1001
Fleet Street, Baltimore, Maryland 21202;

 

(vi)                              the failure by any successor to the Company to
expressly assume all obligations of the Company under this Agreement; or

 

(vii)                           after a Change of Control of the Company, the
Executive’s duties are inconsistent in any material respect with his position
(including, without limitation, his status, office, title, or reporting
relationship), authority, control, duties, or responsibilities immediately prior
to the Change of Control.

 

Notwithstanding anything herein to the contrary, in no event shall any action
otherwise meeting the definition of Good Reason under clauses (i) through (vii)
above taken by the Company for Good Cause, constitute, or be deemed to
constitute, grounds for Good Reason termination hereunder.

 

6.6                               Resignation other than for Good Reason.  The
Executive may resign and thereby terminate his employment (and the Employment
Period) under this Agreement at any time upon not less than thirty (30) days’
prior written notice.

 

6.7                               Termination without Good Cause.  The Company
may, for any or no reason, terminate the employment of the Executive (and the
Employment Period) under this Agreement at any time upon not less than thirty
(30) days’ prior written notice.

 

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6.8                               Payments Upon Termination.

 

(a)                                  In the event the Executive’s employment is
terminated (x) prior to the third anniversary of the Effective Date (i) by the
Company without “Good Cause,” or (ii) by the Executive for “Good Reason,” or (y)
on the third anniversary of the Effective Date in the event the Employment
Period is not extended due to the failure of the Company and the Executive to
reach mutual agreement, then, in each such case, the following provisions shall
apply:

 

(i)                                     The Company shall continue to pay the
Executive the Base Salary to which the Executive would have been entitled
pursuant to Section 4.1 hereof (at the Base Salary rate in effect as of
termination, without regard to any reduction thereof) had the Executive remained
in the employ of the Company for a period of eighteen (18) months (or, solely in
the case of clause “(y)” above, for a period of twelve (12) months) after the
date of termination (the “Termination Payment Period”) with all such amounts
payable in accordance with the Company’s payroll system in the same manner and
at the same time as though the Executive remained employed by the Company.

 

(ii)                                  Unless prohibited by law or, with respect
to any insured benefit, the terms of the applicable insurance contract, the
Executive shall continue to participate in, and be covered under, the Company’s
group life, disability, sickness, accident and health insurance programs on the
same basis as other executives of the Company through the end of the Termination
Payment Period.  In addition, the Company shall continue to provide Executive
with the insurance described in Section 4.4(b) of this Agreement during such
period.  If prohibited by law or contract, the Company shall pay to the
Executive the cost of obtaining individual coverage for the programs described
in this clause (ii).

 

(iii)                               The Company shall pay the Executive, in lieu
of the bonus described in Section 4.2 hereof, an amount equal to the “Assumed
Bonus” (as defined below), with all such amounts payable in the same manner and
at the same time as the Company normally pays annual bonuses to its senior
executives as though the Executive remained employed by the Company.  The
Company shall pay the Assumed Bonus for the fiscal year of termination and for
each subsequent fiscal year (or part thereof) during the Termination Payment
Period.  The “Assumed Bonus” (i) for a termination in 2004 is the target Base
Bonus (under Section 4.2 hereof) for 2004 as though all criteria for such Base
Bonus had been fully and completely met, (ii) for a termination in 2005 is the
actual Base Bonus (under Section 4.2 hereof) for 2004, and (iii) for a
termination after 2005 is the average of the actual Base Bonuses paid by the
Company to the Executive (pursuant to Section 4.2 hereof) with respect to the
two years immediately preceding such termination.  In the event the last day of
the Termination Payment Period is any date other than December 31, the Assumed
Bonus for the partial fiscal year in which such last day occurs shall be
prorated, and the amount payable shall be the Assumed Bonus otherwise payable
for such fiscal year multiplied by a fraction, (x) the numerator of which is the
number of days in such fiscal year included in the Termination Payment Period,
(y) and the denominator of which is 365.

 

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(iv)                              The Executive shall become vested in (and
entitled to receive) the Performance Shares (and other equity-based awards) to
the extent provided in the Grant Agreement (or other applicable grant agreement,
as the case may be).

 

(v)                                 The Company shall pay to the Executive
promptly following such termination of employment compensation deferred by the
Executive on or prior to the date of such termination.

 

(vi)                              The Company shall pay to the Executive,
without duplication, (w) the Base Salary through the date of termination, (x)
any bonus (Base Bonus or otherwise) earned (in accordance with Section 4.2
hereof) but unpaid as of the date of termination for any fiscal year prior to
the year in which such termination occurs; (y) reimbursement for any
unreimbursed business expenses properly incurred by the Executive prior to the
date of termination (in accordance with Section 4.3 hereof); and (z) such
employee benefits, if any, to which the Executive is entitled under the employee
benefit plans and arrangements of the Company (in accordance with Section 4.4(a)
hereof) (the amounts described in clauses (w) through (z) hereof being referred
to as the “Accrued Rights”).

 

(vii)                           Notwithstanding anything to the contrary, no
amount of payable to the Executive (whether pursuant to this Section 6.8(a) or
otherwise) with respect to any nonqualified deferred compensation plan (within
the meaning of Section 409A of the Code) shall be paid earlier than the earliest
date permitted under Section 409A of the Code.

 

(b)                                 In the event the Executive’s employment is
terminated (i) by the Company for Good Cause, or (ii) by the Executive without
Good Reason, then the Company shall have no duty to make any payments or provide
any benefits to the Executive pursuant to this Agreement other than the Accrued
Rights and other amounts set forth in Section 6.8(a)(v) hereof.

 

(c)                                  In the event the Executive’s employment is
terminated (i) by the Company without Good Cause, or (ii) by the Executive for
any reason, then the Company waives, releases and remises (x) any obligation or
duty under applicable law on the part of the Executive to seek or obtain other
engagements or employment or to otherwise mitigate any damages to which the
Executive may be entitled to by reason of any termination of this Agreement; and
(y) any right in or claim to any remuneration or compensation received by the
Executive pursuant to any engagements or employment subsequent to the
termination of this Agreement.

 

(d)                                 The Executive agrees to release the Company
and its Affiliates, officers, directors, stockholders, employees, agents,
representatives, and successors from and against any and all claims that the
Executive may have against any such Person relating to the Executive’s
employment by the Company and the termination thereof, such release to be in
form and substance reasonably satisfactory to the Company; provided, however,
that (i) in lieu of accepting any payments or other benefits in Section 6.8, the
Executive may decline to sign the release and preserve any rights to sue, and
(ii) the release does not cover any claims the

 

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Executive may have to or about equity interests or with respect to his equity
ownership (including, without limitation, the Performance Shares).  The parties
further agree that the failure of the Company and/or its Affiliates to make any
and all payments due under Section 6.8(a)(i) through (vi) or (b), as the case
may be, after notice from the Executive of the failure to pay and the failure by
the Company and/or its Affiliates to cure the default within 15 days of the
notice, will void the release described in this subsection.

 

6.9                               No Disparaging Comments.  During the
Employment Period and at all times thereafter, (i) the Company, its Affiliates
and their respective executive officers and directors, and employees and
consultants authorized by an executive officer to speak to the media on behalf
of the Company or to provide references, shall refrain from making any
disparaging remarks about the Executive, and (ii) the Executive shall refrain
from making any disparaging remarks about the businesses, services, products,
members, managers, officers, directors, employees or other personnel of the
Company and/or its Affiliates.

 

6.10                        Change of Control.  “Change of Control” means the
occurrence of any one or more of the following events:

 

(a)                                  any merger or consolidation involving the
Company with or into any Person in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), the
stockholders of the Company immediately prior to such transaction(s)
beneficially own less than 50% of the total voting power in the aggregate
normally entitled to vote in the election of directors, managers, or trustees,
as applicable, of the transferee(s) or surviving entity or entities;

 

(b)                                 any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company on a consolidated basis, in one transaction or a series of related
transactions;

 

(c)                                  any “person” or “group” (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, regardless of
whether applicable), becomes the “beneficial owner,” directly or indirectly, of
more than 50% of the total voting power in the aggregate of the equity interests
of the Company then outstanding normally entitled to vote in elections of
members of the Company Board;

 

(d)                                 during any period of 12 consecutive months
after the date hereof, individuals who at the beginning of any such 12 month
period constituted the Company Board (together with any new directors whose
election by such board or whose nomination for election by the equity owners of
the Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the merger,
consolidation or sale, transfer or other conveyance, of all or substantially all
of the assets of the Company, if such agreement was approved by a vote of such
majority of directors) cease for any reason to constitute a majority of the
respective board then in office; or

 

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(e)                                  approval by the Company of a plan of
dissolution or liquidation of the Company.

 

7.                                      Miscellaneous.

 

7.1                               ARBITRATION.  SUBJECT TO THE RIGHTS UNDER
SECTION 5.4 TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF AS SPECIFIED IN THIS
AGREEMENT, ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO
THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE
OF THE EXECUTIVE’S TERMINATION OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT
OR BENEFIT DUE) SHALL BE RESOLVED IN ACCORDANCE WITH THE PROCEDURES OF THE
AMERICAN ARBITRATION ASSOCIATION.  ANY RESULTING HEARING SHALL BE HELD IN THE
BALTIMORE, MARYLAND AREA.  THE RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH
ARBITRATION SHALL BE BINDING AND ENFORCEABLE BY A COURT OF COMPETENT
JURISDICTION.  COSTS AND FEES INCURRED IN CONNECTION WITH SUCH ARBITRATION SHALL
BE BORNE BY THE PARTIES AS DETERMINED BY THE ARBITRATION.

 

7.2                               Entire Agreement; Waiver.  This Agreement and
the agreements, schedules and exhibits incorporated herein by reference contain
the entire agreement between the Executive and the Company with respect to the
subject matter hereof, and supersede any and all prior understandings or
agreements, whether written or oral, including, without limitation, the Current
Employment Agreement and any other agreement between the Company and the
Executive in effect on the Effective Date; provided, however, that nothing
herein shall be deemed to supersede that certain Non-Compete Agreement dated
March 3, 2000 for the benefit of Prometric Acquisition Corporation, a
wholly-owned subsidiary of The Thomson Corporation.  No modification or addition
hereto or waiver or cancellation of any provision hereof shall be valid except
by a writing signed by the party to be charged therewith.  No delay on the part
of any party to this Agreement in exercising any right or privilege provided
hereunder or by law shall impair, prejudice or constitute a waiver of such right
or privilege.

 

7.3                               Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Maryland,
without regard to principles of conflict of laws.

 

7.4                               Successors and Assigns; Binding Agreement. 
The rights and obligations of the parties under this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs, personal
representatives, successors and permitted assigns.  This Agreement is a personal
contract, and, except as specifically set forth herein, the rights and interests
of the Executive herein may not be sold, transferred, assigned, pledged or
hypothecated by any party without the prior written consent of the others.  As
used herein, the term “successor” as it relates to the Company, shall include,
but not be limited to, any successor by way of merger,

 

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consolidation, sale of all or substantially all of such Person’s assets or
equity interests.  The Company may only assign this Agreement with the
Executive’s consent.

 

7.5                               Representation by Counsel.  Each of the
parties hereto acknowledges that (i) it or he has read this Agreement in its
entirety and understands all of its terms and conditions, (ii) it or he has had
the opportunity to consult with any individuals of its or his choice regarding
its or his agreement to the provisions contained herein, including legal counsel
of its or his choice, and any decision not to was his or its alone, and (iii) it
or he is entering into this Agreement of its or his own free will, without
coercion from any source.

 

7.6                               Interpretation.  The parties and their
respective legal counsel actively participated in the negotiation and drafting
of this Agreement, and in the event of any ambiguity or mistake herein, or any
dispute among the parties with respect to the provisions hereto, no provision of
this Agreement shall be construed unfavorably against any of the parties on the
ground that he, it, or his or its counsel was the drafter thereof.

 

7.7                               Survival.  The provisions of Sections 4.6, 5,
6.8, 6.9 and 7 hereof shall survive the termination of this Agreement.  Solely
in the event the Executive terminates his employment hereunder without Good
Reason prior to March 10, 2006, the provisions of the proviso in Section 2(c)(i)
hereof shall survive such termination until March 10, 2006.

 

7.8                               Notices.  All notices and communications
hereunder shall be in writing and shall be deemed properly given and effective
when received, if sent by facsimile or telecopy, or by postage prepaid by
registered or certified mail, return receipt requested, or by other delivery
service which provides evidence of delivery, as follows:

 

If to the Company, to:

 

Laureate Education, Inc.

1001 Fleet Street

Baltimore, Maryland 21202

Attn: Robert W. Zentz, Esquire

 

If to the Executive, to:

 

Douglas L. Becker

c/o Laureate Education, Inc.

1001 Fleet Street

Baltimore, Maryland  21202

 

or to such other address as one party may provide in writing to the other party
from time to time.

 

7.9                               Counterparts.  This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.

 

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7.10                        Captions.  Paragraph headings are for convenience
only and shall not be considered a part of this Agreement.

 

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it
as a document under seal, as of the date first above written.

 

 

WITNESS/

 

 

 

ATTEST:

 

LAUREATE EDUCATION, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Robert W. Zentz

(SEAL)

 

 

 

Name:

Robert W. Zentz

 

 

 

 

Title:

Secretary

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

/s/ Douglas L. Becker

(SEAL)

 

 

Douglas L. Becker

 

 

[Signature Page to Employment Agreement]

 

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EMPLOYMENT AGREEMENT

 

Schedule 2(c)

 

Pre-authorized Entities

 

•                  Educate, Inc.

•                  Constellation Energy Group, Inc.

•                  Sterling International Schools (Director and Chairman of
Executive Committee)

•                  Sterling Educational Real Estate

•                  Sterling Venture Partners I, LLC, Sterling Venture Partners
II, LLC and

•                  Sterling Capital Partners II, LLC (Founding Member)

•                  Sterling Capital Partners, LLC

•                  Sterling Capital Partners L.P. (Limited Partner Committee)

 

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SCHEDULE 4.2

 

YEAR 2004 BONUS CRITERIA FOR BASE BONUS

 

After giving effect to the compensation expense caused by the additional vesting
of Performance Shares provided in Section 4(b)(i)(1) of the Grant Agreement, the
Company meets its “2004 Earnings Per Share Target,” as defined in the Grant
Agreement.

 

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