Exhibit 10.1
EMPLOYMENT AGREEMENT
          THIS AGREEMENT is entered into, effective this 7th day of July 2008,
by and between Apollo Group, Inc. (the “Company”), and Charles B. Edelstein (the
“Executive”) (hereinafter collectively referred to as “the parties”).
          WHEREAS, the Company has determined that it is in the best interests
of the Company and its shareholders to employ the Executive as described herein;
          WHEREAS, the Company desires to employ the Executive and to enter into
an agreement embodying the terms of such employment; and
          WHEREAS, the Executive desires to enter into this Agreement and to
accept such employment;
          NOW, THEREFORE, in consideration of the foregoing and the respective
agreements of the parties contained herein, the parties hereby agree as follows:
     1. Term. The initial term of employment under this Agreement will be for
the period commencing on August 26, 2008 (the “Commencement Date”) and ending on
the fourth anniversary of the Commencement Date (the “Initial Term”), unless
sooner terminated in accordance with the provisions of Section 7 of this
Agreement. Should this Agreement continue in effect through the end of the
Initial Term, then this Agreement will be automatically renewed from year to
year thereafter, unless either the Company or the Executive will have given
written notice to the other at least sixty (60) calendar days prior thereto that
the term of this Agreement will not be so renewed (a "Notice of Non-Renewal”).
The Initial Term, together with each one-year renewal thereof (if any), shall
constitute the term (the “Term”) of this Agreement.
     2. Employment.
     (a) Position. The Executive will be employed as, and hold the title of, the
Company’s Chief Executive Officer and shall in such capacity have primary
responsibility for the implementation and execution of the Company’s strategic
business plans and objectives as approved from time to time by the Company’s
Board of Directors (the “Board”). The Executive shall report directly to the
Board and shall have all the authority needed to perform the duties and
undertake the responsibilities of his position. The Executive will be a member
of the Chair’s Cabinet and shall be involved in all the Company’s major
strategic decisions. The Executive will have the authority to hire appropriate
personnel as may be needed to carry out his duties.
     (b) Board Membership. On the Commencement Date, the Executive shall be
appointed to the Board. The Company shall, during the remainder of the Term, use
its best efforts to have the Executive nominated for election and re-election as
a Board member at all meetings of the Company’s Class B shareholders held during
the Term at which Board members are to be elected.
     (c) Obligations. The Executive shall devote his full business time and
attention to the business and affairs of the Company. During the term of this
Agreement, the Executive shall not engage in any other employment, service or
consulting activity without the prior written approval of the Board. The
foregoing, however, shall not preclude the Executive from (i) serving on any
corporate, civic or charitable boards or committees on which the Executive is
serving on the Commencement Date, provided

 

--------------------------------------------------------------------------------

 

those positions are listed in attached Schedule I, or on which he commences
service following the Commencement Date with the prior written approval of the
Board or (ii) managing personal investments, so long as such clause (i) and
(ii) activities do not interfere with the performance of the Executive’s
responsibilities hereunder.
     3. Base Salary and Bonus.
     (a) Base Salary. The Company agrees to pay or cause to be paid to the
Executive an annual base salary at the rate of $600,000, less applicable
withholding. This base salary will be subject to annual review and may be
increased from time to time by the Compensation Committee of the Board of
Directors (the “Compensation Committee”) upon consideration of such factors as
the Executive’s responsibilities, compensation of similar executives within the
Company and in other companies, performance of the Executive and other pertinent
factors. The Executive’s annual rate of base salary, as it may be increased from
time to time, will be hereinafter referred to as the “Base Salary”. Such Base
Salary will be payable in accordance with the Company’s customary practices
applicable to its executives.
     (b) Bonus. For each fiscal year completed during the Term (other than the
fiscal year ending August 31, 2008), the Executive will be eligible to receive
an annual cash bonus (“Annual Bonus”) based upon individual and Company
performance goals that are established in good faith by the Compensation
Committee and that are reasonable in comparison to the individual and Company
performance goals the Compensation Committee sets for the Company’s other
executive officers, provided that the Executive’s target Annual Bonus will be no
less than 100% of his Base Salary (the “Target Bonus”). The Annual Bonus earned
for each fiscal year shall be paid in accordance with the Company’s customary
practices, but in no event more than seventy-five (75) days following the end of
such fiscal year. The Executive shall not be entitled to any Annual Bonus for
the Company’s fiscal year ending August 31, 2008. However, the Executive shall
on the Commencement Date be paid a sign-on bonus in the amount of $200,000 (the
“Sign-On Bonus”), subject to the Company’s collection of applicable federal,
state and local income and employment withholding taxes. Should the Executive’s
employment be terminated by the Company for Cause (as defined below), or should
the Executive voluntarily terminate his employment other than for Good Reason
(as defined below), at any time prior to the first anniversary of the
Commencement Date, then the Executive shall at the time of such termination
repay the Sign-On Bonus to the Company.
     4. Equity Compensation Awards. In addition to the grants below, the
Executive will be eligible during the Term for grants of equity compensation
awards in accordance with the Company’s policies, as in effect from time to
time. The grants below will be issued pursuant and subject to the terms of the
Company’s 2000 Stock Incentive Plan, as amended and restated (the “Incentive
Plan”), and the award agreements evidencing those grants, except that in the
event of any conflict between the terms of the Incentive Plan or the award
agreements and this Agreement, the terms of this Agreement will control:
     (a) Initial Stock Option Grant. At the close of business on the
Commencement Date, the Executive will be granted stock options under the
Incentive Plan for 1,000,000 shares of the Company’s Class A common stock with
an exercise price equal to the closing selling price per share on such grant
date and a maximum term of six (6) years (the “Initial Option Grant”).
     (b) Initial Restricted Stock Unit Award. Should the Executive forfeit all
or a portion of the 99,298 unvested shares of Credit Suisse Group common stock
subject to the outstanding stock-based awards made to him by his former
employer, Credit Suisse Group, in the form of units under the Credit Suisse
Group Performance Incentive Plan and Incentive Share Unit Plan (collectively,
the “CS Equity

2

--------------------------------------------------------------------------------

 

Award”), then the Executive will be granted restricted stock units under the
Incentive Plan covering that number of shares of the Company’s Class A common
stock (rounded to next whole share) determined pursuant to the following
procedure:
     first, the dollar value of the unvested shares of Credit Suisse Group
common stock forfeited under the CS Equity Award will be determined by
multiplying the number of those forfeited shares by the closing selling price
per share of Credit Suisse Group common stock on the Commencement Date; and
     then, the dollar amount so determined will be divided by the closing
selling price per share of the Company’s Class A common stock on the
Commencement Date to determine the number of shares of Class A common stock
subject to this particular award.
          In addition, to the extent the Executive avoids the forfeiture of one
or more of the 99,298 unvested shares of Credit Suisse Group common stock
subject to the CS Equity Award, the Executive will be granted a restricted stock
unit award under the Incentive Plan covering the number of shares of the
Company’s Class A common stock (rounded to next whole share) determined pursuant
to the following procedure:
     first, the dollar value of the unvested shares of Credit Suisse Group
common stock not forfeited under the CS Equity Award will be determined by
multiplying the number of those non-forfeited shares by the closing selling
price per share of Credit Suisse Group common stock on the Commencement Date;
     then, the dollar amount so determined will be divided by the closing
selling price per share of the Company’s Class A common stock on the
Commencement Date; and
     finally, the number of shares of Class A common stock so calculated will be
multiplied by 0.25 to determine the number of shares of Class A common stock
subject to this particular award.
          The restricted stock unit award or awards determined in accordance
with the foregoing provisions of this Section 4(b) shall be collectively
referred to as the “Initial RSU Award” and shall be granted on the third
business day following the public release of the Company’s financial results for
the fiscal year ending August 31, 2008 (the “Public Release Award Date”);
provided, however, that in the event the Commencement Date is after August 31,
2008, the Initial RSU Award shall be granted on the Commencement Date. Each
restricted stock unit will represent the right to receive one share of such
Class A common stock upon the vesting of that unit, subject to the Company’s
collection of all applicable withholding taxes.
     (c) Supplemental Restricted Stock Unit Award. On the Public Release Award
Date or (if the Commencement Date is after August 31, 2008) the Commencement
Date, the Executive shall also be issued a supplemental restricted stock unit
under the Incentive Plan covering an additional 8,000 shares of the Company’s
Class A common stock (the “Supplemental RSU Award”). Each restricted stock unit
will represent the right to receive one share of such Class A common stock upon
the vesting of that unit, subject to the Company’s collection of all applicable
withholding taxes.
     (d) Vesting. The Initial Option Grant will vest and become exercisable in a
series of four successive equal annual installments upon the Executive’s
completion of each year of employment with the Company over the four-year period
measured from the Commencement Date (regardless of the actual

3

--------------------------------------------------------------------------------

 

grant date). The shares of the Company’s Class A common stock underlying the
Supplemental RSU Award will vest and become issuable in a series of annual
installments as follows: (a) forty percent (40%) of the shares subject to the
Supplemental RSU Award will vest and become issuable upon the Executive’s
completion of one year of employment with the Company measured from the
Commencement Date, (b) an additional forty percent (40%) of the award will vest
and become issuable upon the Executive’s completion of two years of employment
with the Company measured from the Commencement Date and (c) the remaining
twenty percent (20%) of the Supplemental RSU Award will vest and become issuable
upon the Executive’s completion of three years of employment with the Company
measured from the Commencement Date. In addition, the Initial Option Grant and
the Supplemental RSU Award will each be subject to the vesting acceleration
provisions set forth in Sections 8 and 11 of this Agreement. The Initial RSU
Award will be subject to the following performance and service vesting
requirements:
          (i) The vesting of the Initial RSU Award will be tied to the Company’s
attainment of net book income, after tax expense, of $250 million for the 2009
fiscal year. Net book income, after tax expense, will be calculated on a
consolidated basis with the Company’s consolidated subsidiaries for financial
reporting purposes and in accordance with generally accepted accounting
principles and shall be determined on the basis of the Company’s audited
financial statements, subject to the following modifications:
          - There shall be excluded: (i) all stock-based compensation accrued
for such fiscal year pursuant to Statement of Financial Accounting Standards
123R and any other GAAP expense for such fiscal year relating to equity
compensation awards, (ii) any extraordinary, nonrecurring items as determined in
accordance with Accounting Principles Board Opinion No. 30, and (iii) all
amounts (including settlement payments, judgment or verdict amounts, legal fees,
costs and other litigation/settlement expenses) expensed during the 2009 fiscal
year in connection with the settlement or disposition of the litigation matters
identified in Item 3 of the Company’s Form 10-K for the fiscal year ending
August 31, 2008.
          (ii) None of the Initial Restricted Stock Unit Award will vest unless
such performance goal is attained. However, if such performance goal is
attained, then the shares of Class A common stock underlying the Initial RSU
Award will vest and become issuable in installments over the Executive’s period
of continued employment with the Company as follows: (a) forty percent (40%) of
the shares subject to the Initial RSU Award will vest upon the Executive’s
completion of one year of employment with the Company measured from the
Commencement Date and will be issued immediately upon the Compensation
Committee’s certification of the attainment of the performance goal, (b) an
additional forty percent (40%) of the award will vest and become issuable upon
the Executive’s completion of two years of employment with the Company measured
from the Commencement Date and (c) the remaining twenty percent (20%) of the
Initial RSU Award will vest and become issuable upon the Executive’s completion
of three years of employment with the Company measured from the Commencement
Date. In addition, the Initial RSU Award will be subject to the vesting
acceleration provisions of Sections 8 and 11 of this Agreement. All issuances
under the Initial RSU Award will be subject to the Company’s collection of the
applicable withholding taxes.
     (e) Shares to Be Registered; Stock Certificates. All shares issued to the
Executive pursuant to his exercise of the Initial Option Grant and the vesting
of the Initial RSU Award and Supplemental RSU Award will be registered under an
appropriate and effective registration statement under the Securities Act of
1933, as amended (the “1933 Act”).

4

--------------------------------------------------------------------------------

 

     (f) The Company represents and warrants that this Agreement, the grants
described in subsections (a), (b) and (c) above and the terms of those grants
have been authorized and approved by the Compensation Committee and that any
requisite amendments to the Incentive Plan will be adopted by the Board and
approved by the Company’s Class B shareholders prior to the applicable grant
date.
     5. Employee Benefits. Provided he otherwise satisfies any applicable
eligibility requirements for participation, the Executive will be entitled to
participate in the welfare, retirement, perquisite, and fringe benefit plans,
practices, and programs maintained by the Company and made available to senior
executives generally, as in effect from time to time. The Executive’s
participation in any such plans, practices and programs for which he satisfies
the applicable eligibility requirements will be on the same basis and terms as
are applicable to senior executives of the Company generally.
     6. Other Benefits.
     (a) Expenses. Subject to applicable Company policies, including (without
limitation) the timely submission of appropriate documentation and expense
reports, the Executive will be entitled to receive prompt reimbursement of all
expenses reasonably incurred by him in connection with the performance of his
duties hereunder or for promoting, pursuing or otherwise furthering the business
or interests of the Company. Accordingly, the Executive shall submit appropriate
evidence of each such expense within sixty (60) days after the later or (i) his
incurrence of that expense or (ii) his receipt of the invoice or billing
statement for such expense, and the Company shall provide the Executive with the
requisite reimbursement within ten (10) business days thereafter; provided,
however, that no expense shall be reimbursed later than the close of the
calendar year following the calendar year in which that expense is incurred.
     (b) Offices and Facilities. The Executive will be provided with appropriate
offices at the Company’s corporate headquarters in Phoenix, Arizona and at the
Company’s office location in Chicago, Illinois and with such secretarial and
other support facilities at such locations as are commensurate with the
Executive’s status with the Company and adequate for the performance of his
duties hereunder. The Executive shall not be required to spend any specific
amount of time at the Company’s corporate headquarters in Phoenix, Arizona
location (or any successor location), but shall be present at such location to
the extent necessary to fulfill his duties and responsibilities as Chief
Executive Officer. Executive shall also be required to travel to other locations
from time to time in the performance of his duties as Chief Executive Officer.
     (c) Vacation. During the Term, the Executive will be eligible for paid
vacation in accordance with the Company’s policies, as may be in effect from
time to time, for its senior executives generally; provided, however, that the
Executive will be eligible for no less than four weeks of paid vacation per year
     (d) Living Expenses. Until such time as the Company makes available
Company-owned or leased housing to the Executive in the geographic location of
the Company’s corporate headquarters in Phoenix, Arizona, the Company shall pay
the Executive a monthly living allowance in the dollar amount of $3,000, less
applicable withholdings, to cover his housing, food and other living costs while
he is in the Phoenix Metropolitan Area. The payment for each month shall be made
on the first regular pay day in that month.
     (e) Commuting Expenses. The Company will reimburse the Executive for
reasonable expenses incurred in commuting to the Company’s corporate
headquarters in Phoenix, Arizona. Accordingly, the Executive shall submit
appropriate evidence of each such commuting expense within sixty (60) days after
the later of (i) his incurrence of that expense or (ii) his receipt of the
invoice or

5

--------------------------------------------------------------------------------

 

billing statement for such expense, and the Company shall provide the Executive
with the requisite reimbursement within ten (10) business days thereafter;
provided, however, that the amount of round-trip air travel to be so reimbursed
shall in no event exceed the cost of a first class round-trip ticket between
Phoenix, Arizona and Chicago, Illinois on a commercial airline.
     (f) Conditions to Reimbursement. Any amounts to which the Executive becomes
entitled pursuant to the foregoing provisions of this Section 6 (whether by way
of reimbursement or in-kind benefits) in each calendar year within the Term of
this Agreement shall not reduce the amounts (or in-kind benefits) to which the
Executive may become entitled hereunder in any other calendar year within such
Term. In no event will any expense otherwise reimbursable hereunder be
reimbursed later than the close of the calendar year following the calendar year
in which that expense is incurred. In addition, none of the Executive’s rights
to reimbursement or in-kind benefits hereunder may be liquidated or exchanged
for any other benefit.
     7. Termination. Except for a Notice of Non-Renewal, as described in
Section 1, the Executive’s employment hereunder may only be terminated in
accordance with the following terms and conditions:
     (a) Termination by the Company without Cause. The Company will be entitled
to terminate the Executive’s employment at any time by delivering a Notice of
Termination to the Executive pursuant to Section 7(e); provided, however, that
(i) any termination of the Executive’s employment for Cause shall be governed by
the provisions of Section 7(b) and (ii) the Company shall have no right to
terminate the Executive’s employment without Cause on or before the Commencement
Date.
     (b) Termination by the Company for Cause.
          (i) The Company may terminate the Executive’s employment hereunder for
“Cause” (as defined below) by delivering to him a Notice of Termination. For
purposes of the foregoing, any of the following shall constitute grounds for
terminating the Executive’s employment for Cause: (A) the Executive’s pleading
“guilty” or “no contest” to, or his conviction of, a felony or any crime
involving moral turpitude, (B) his commission of any act of fraud or any act of
personal dishonesty involving the property or assets of the Company intended to
result in substantial financial enrichment to the Executive, (C) a material
breach by the Executive of one or more of his obligations under Section 9 of
this Agreement or his Proprietary Information and Inventions Agreement with the
Company, (D) a material breach by the Executive of any of his other obligations
under this Agreement or any other agreement with the Company, (E) the
Executive’s commission of a material violation of Company policy which would
result in an employment termination if committed by any other employee of the
Company or his gross misconduct, (F) the Executive’s material dereliction of the
major duties, functions and responsibilities of his executive position (other
than a failure resulting from the Executive’s incapacity due to physical or
mental illness), (G) a material breach by the Executive of any of the
Executive’s fiduciary obligations as an officer of the Company or (H) the
Executive’s willful and knowing participation in the preparation or release of
false or materially misleading financial statements relating to the Company’s
operations and financial condition or his willful and knowing submission of any
false or erroneous certification required of him under the Sarbanes-Oxley Act of
2002 or any securities exchange on which shares of the Company’s Class A common
stock are at the time listed for trading. However, prior to any termination of
the Executive’s employment for Cause based on any of the reasons specified in
clauses (C) through (F) and the delivery of a Notice of Termination in
connection therewith, the Company shall give written notice to the Executive of
the actions or omissions deemed to constitute the grounds for such a termination
for Cause, and the Executive shall have a period of not less than sixty
(60) calendar days after the receipt of such notice in which to cure the
specified default in his performance and thereby avoid a Notice of Termination
under this subsection (b)(i).

6

--------------------------------------------------------------------------------

 

          (ii) In the event the Executive is provided with a Notice of
Termination under subsection (b)(i), the Notice of Termination shall specify a
Termination Date that is no earlier than the third business day following the
date of the Notice of Termination, and the Executive will have three
(3) business days following the date of such Notice of Termination to submit a
written request to the Board for a meeting to review the circumstances of his
termination. If the Executive timely submits such a written request to the
Board, the Board or a committee of the Board shall set a meeting whereby the
Executive, together with his counsel, shall be permitted to present any
mitigating circumstances or other information as to why he should not be
terminated for Cause, and the Executive’s Termination Date shall be delayed
until such meeting has occurred. Such meeting will be held, at the Executive’s
option, either on a mutually agreeable date prior to the Termination Date
specified in the Notice of Termination or on a mutually agreeable date within
fifteen (15) calendar days after his timely written notice to the Company
requesting such a meeting. Within five (5) business days after such meeting, the
Board or committee of the Board, as applicable, shall deliver written notice to
the Executive of its final determination and, if the termination decision is
upheld, the final actual Termination Date. During the period following the date
of the Notice of Termination until the Termination Date or other resolution of
the matter, the Company shall have the option to place the Executive on an
unpaid leave of absence. The rights under this subsection will not be deemed to
prejudice the Executive’s other rights and remedies in any way or give rise to
any waiver, estoppel, or other defense or bar. Without limiting the foregoing
sentence and for purposes of clarification, the failure by the Executive to
request a meeting under this subsection, to participate in a meeting that has
been requested, or to present any evidence or argument will not prevent the
Executive from making any claim against the Company, from seeking any legal or
equitable remedy, or from putting forward any evidence or argument at any
judicial or arbitral hearing.
     (c) Termination by the Executive. The Executive may terminate his
employment hereunder for “Good Reason” by delivering to the Company (1) a
Preliminary Notice of Good Reason (as defined below) no later than one hundred
and twenty (120) calendar days following the act or omission which the Executive
sets forth in such notice as grounds for a Good Reason termination, and (2) a
Notice of Termination not earlier than fourteen (14) calendar days after the
delivery of such Preliminary Notice or (if later) the third business day
following the Company’s failure to take appropriate remedial action within the
applicable sixty (60)-day cure period provided below to the Company following
the receipt of such Preliminary Notice, but in no event later than sixty
(60) days after the expiration of such cure period. For purposes of this
Agreement, “Good Reason” means:
          (i) a material reduction in the scope of the Executive’s duties,
responsibilities or authority;
          (ii) the repeated assignment to the Executive of duties materially
inconsistent with the Executive’s positions, duties, authority or
responsibilities, or a materially adverse change in Executive’s reporting
requirements as set forth in Section 2(a) hereof or an adverse change to his
title set forth in Section 2(a) hereof: provided, however, that neither of the
following shall constitute Good Reason: (A) the occasional assignment of duties
that are inconsistent with Section 2(a) hereof or (B) a ten percent (10%) or
less aggregate reduction in the Executive’s Base Salary and Target Bonus if
substantially all of the other executive officers of the Company are subject to
the same aggregate reduction to their base salary and target bonuses;
          (iii) a requirement that the Executive relocate his principal
residence from Chicago, Illinois to the geographic location of the Company’s
principal corporate headquarters in Phoenix, Arizona or any successor location;
provided, however, that travel to the Company’s principal corporate headquarters
in Phoenix, Arizona (or any successor location) or to other locations as
reasonably required to carry out the Executive’s duties and responsibilities
hereunder shall not be a basis for a termination for Good Reason; or

7

--------------------------------------------------------------------------------

 

          (iv) a material breach by the Company of any of its obligations under
this Agreement.
     In no event will any acts or omissions of the Company which are not the
result of bad faith and which are cured within sixty (60) days after receipt of
written notice from the Executive identifying in reasonable detail the acts or
omissions constituting “Good Reason” (a “Preliminary Notice of Good Reason”) be
deemed to constitute grounds for a Good Reason resignation. A Preliminary Notice
of Good Reason will not, by itself, constitute a Notice of Termination.
     (d) Termination due to the Executive’s Death or Disability. This Agreement
will terminate upon the death of the Executive. The Company may terminate the
Executive’s employment hereunder if he is unable to perform, with or without
reasonable accommodation, the principal duties and responsibilities of his
position with the Company for a period of six (6) consecutive months or more by
reason of any physical or mental injury or impairment; provided, however, that
in the event the Executive is at the time covered under any long-term disability
benefit program in effect for the Company’s executive officers or employees,
such termination of the Executive’s employment shall not occur prior to the date
he first becomes eligible to receive benefits under such program. The
termination of the Executive’s employment under such circumstances shall, for
purposes of this Agreement, constitute a termination for “Disability.”
     (e) Notice of Termination. Any purported termination for Cause by the
Company or for Good Reason by the Executive will be communicated by a written
Notice of Termination to the other at least three (3) business days prior to the
Termination Date (as defined below). For purposes of this Agreement, a “Notice
of Termination” will mean a notice which indicates the specific termination
provision in this Agreement relied upon and will, with respect to a termination
for Cause or Good Reason, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination of the Executive’s
employment under the provision so indicated. Any termination by the Company
under this Section 7 other than for Cause or by the Executive without Good
Reason will be communicated by a written Notice of Termination to the other
party fourteen (14) calendar days prior to the Termination Date. However, the
Company may elect to pay the Executive in lieu of fourteen (14) calendar days’
written notice. For purposes of this Agreement, no such purported termination of
employment pursuant to this Section 7 will be effective without such Notice of
Termination.
     (f) Termination Date. “Termination Date” will mean in the case of the
Executive’s death, the date of death; in the case of non-renewal of the
Agreement pursuant to Section 1, the date the Term of the Agreement expires; and
in all other cases, the date specified in the Notice of Termination.
     8. Compensation Upon Termination.
     (a) If the Executive’s employment is terminated by the Company for Cause or
by reason of the Executive’s death or Disability, or if the Executive provides a
Notice of Non-Renewal or gives a written notice of resignation without Good
Reason, the Company’s sole obligations hereunder will be to pay the Executive or
his estate the following amounts earned hereunder but not paid as of the
Termination Date: (i) Base Salary, (ii) reimbursement for any and all monies
advanced or expenses incurred pursuant to Section 6(a) through the Termination
Date, provided the Executive has submitted timely and appropriate documentation
for such expenses, and (iii) the amount of the Executive’s accrued but unpaid
vacation time (together, these amounts will be referred to as the “Accrued
Obligations”). In addition to the Accrued Obligations, in the event the
Executive’s employment terminates by reason of death or Disability, the
Executive or his estate will be paid at that time a special separation payment
in a dollar amount determined by multiplying (x) the average of his actual
Annual Bonuses for the three fiscal years (or fewer number of fiscal years of
employment with the Company) immediately preceding the fiscal year in which such
termination of employment occurs (or, solely with respect to a triggering event
occurring

8

--------------------------------------------------------------------------------

 

during the Company’s 2009 fiscal year, the Executive’s target bonus for such
year) by (y) a fraction, the numerator of which is the number of months (rounded
to the next whole month) during which the Executive is employed by the Company
in the fiscal year in which such termination of employment occurs and the
denominator of which is twelve (12). Furthermore, if the Executive’s employment
terminates as a result of his death, then any unvested stock options, restricted
stock, restricted stock units, or other equity granted to the Executive that
would otherwise vest solely on the basis of his continued service with the
Company will immediately vest as to the number of shares in which the Executive
would have otherwise been vested on the date of his death had the service
vesting schedule for each of those grants been in the form of successive equal
monthly installments over the applicable service vesting period. Should any such
unvested equity awards also have a performance-vesting component at the time of
the Executive’s death, then upon the attainment of the applicable performance
goals, the service vesting component of each such award shall be applied as if
that service vesting component had been in the form of successive equal monthly
installments over the applicable service vesting period. The Executive’s
entitlement to any other benefits will be determined in accordance with the
Company’s employee benefit plans then in effect.
     (b) If the Executive’s employment is terminated by the Company for any
reason other than for Cause, death or Disability or by the Executive for Good
Reason, or if the Company provides a Notice of Non-Renewal, the Executive will,
in addition to the Accrued Obligations, be entitled to the following
compensation and benefits from the Company, provided and only if (i) the
Executive executes and delivers to the Company a general release substantially
in the form of attached Exhibit A (the “Required Release”) within twenty-one
(21) days (or forty-five (45) days if such longer period is required under
applicable law) after the date of such termination of employment, (ii) the
Required Release becomes effective and enforceable in accordance with applicable
law after the expiration of any applicable revocation period and (iii) the
Executive complies with the restrictive covenants set forth in Section 10:
     (i) an amount equal to (A) two times the Executive’s Base Salary and
(B) two times the average of his actual Annual Bonuses for the three fiscal
years (or fewer number of fiscal years of employment with the Company)
immediately preceding the fiscal year in which such termination of employment
occurs (or, solely with respect to a triggering event occurring during the
Company’s 2009 fiscal year, the Executive’s target bonus for such year), with
such payment to be made in successive equal increments, in accordance with the
Company’s normal payroll practices, over the one-year period measured from the
date of the Executive’s Separation from Service, beginning with the first pay
day within the ninety (90)-day period following the date of such Separation from
Service on which the Required Release is effective following the expiration of
any applicable revocation period, but in no event later than the end of such
ninety (90)-day period on which the Required Release is so effective;
     (ii) one hundred percent vesting of the Initial RSU Award and the
Supplemental RSU Award and accelerated vesting of the Initial Option Grant to
the extent of the greater of (A) fifty percent of the then unvested portion of
such grant or (B) the portion of such grant which would have vested had the
Executive completed an additional twelve (12) months of employment with the
Company prior to the Termination Date. In the event the Initial RSU Award and
Supplemental RSU Award have not been made prior to the Termination Date, then in
lieu of the foregoing accelerated vesting of those awards, the Company shall,
concurrently with the initial payment made under Section 8(b)(i), pay the
Executive a cash amount equal to the closing selling price on the Termination
Date of the shares of the Company’s Class A common stock that would have

9

--------------------------------------------------------------------------------

 

been subject to the Initial RSU Award and Supplemental RSU Award on such
Termination Date pursuant to the applicable provisions of Section 4 had those
awards in fact been made prior to the Termination Date. Such cash payment shall
be subject to the Company’s collection of all applicable federal, state and
local income and employment withholding taxes;
     (iii) provided the Executive and/or his dependents are eligible and timely
elect to continue their healthcare coverage under the Company’s group health
plan pursuant to their rights under COBRA, the Company will reimburse the
Executive for the costs he incurs to obtain such continued coverage for himself
and his eligible dependents (collectively, the “Coverage Costs”) until the
earliest of (A) the end of the eighteen (18)-month period measured from the
Termination Date, (B) the date that the Executive and/or his eligible dependents
are no longer eligible for COBRA coverage and (C) the date that the Executive
becomes eligible for such coverage under the health plan of any new employer
(the Executive agrees to provide the Company with written notice of such
eligibility within ten calendar days). In order to obtain reimbursement for such
Coverage Costs, Executive must submit appropriate evidence to the Company of
each periodic payment within sixty (60) days after the payment date, and the
Company shall within thirty (30) days after such submission reimburse the
Executive for that payment. During the period such medical care coverage remains
in effect hereunder, the following provisions shall govern the arrangement:
(a) the amount of Coverage Costs eligible for reimbursement in any one calendar
year of such coverage shall not affect the amount of Coverage Costs eligible for
reimbursement in any other calendar year for which such reimbursement is to be
provided hereunder; (ii) no Coverage Costs shall be reimbursed after the close
of the calendar year following the calendar year in which those Coverage Costs
were incurred; and (iii) the Executive’s right to the reimbursement of such
Coverage Costs cannot be liquidated or exchanged for any other benefit. To the
extent the reimbursed Coverage Costs constitute taxable income to the Executive,
the Company shall report the reimbursement as taxable W-2 wages and collect the
applicable withholding taxes, and any remaining tax liability shall be the
Executive’s sole responsibility; and
     (iv) the Executive’s entitlement to any other benefits will be determined
in accordance with the Company’s employee benefit plans then in effect.
     (c) The Executive shall have the right to resign, for any reason or no
reason, at any time within the thirty (30) day period beginning six (6) months
after the closing of a Change in Control (as defined in Section 11) and to
receive, in connection with such resignation, the same severance benefits to
which he would be entitled under Section 8(b) above had such resignation been
for Good Reason; provided, however, that the Executive’s entitlement to
severance benefits under this Section 8(c) shall be conditioned upon the
satisfaction of each of the following: (i) the Executive executes and delivers
to the Company the Required Release, within twenty-one (21) days (or forty-five
(45) days if such longer period is required under applicable law) after the date
of such resignation, (ii) the Required Release becomes effective and enforceable
in accordance with applicable law after the expiration of any applicable
revocation period and (iii) the Executive complies with the restrictive
covenants set forth in Section 10 of this Agreement.
     (d) All payments and benefits under this Section 8 (other than the
reimbursement of Coverage Costs during the applicable period of COBRA coverage)
shall be subject to the applicable holdback provisions of Section 14(b).

10

--------------------------------------------------------------------------------

 

     (e) The Executive will not be required to mitigate the amount of any
payment provided for in this Section 8 by seeking other employment or otherwise,
and no such payment or benefit will be eliminated, offset or reduced by the
amount of any compensation provided to the Executive in any subsequent
employment.
     9. Confidentiality.
     (a) The Executive hereby acknowledges that the Company may, from time to
time during the Term, disclose to the Executive confidential information
pertaining to the Company’s business, strategic plans, technology or financial
affairs. All information, data and know-how, whether or not in writing, of a
private or confidential nature concerning the Company’s trade secrets,
processes, systems, marketing strategies and future marketing plans, student
enrollment lists, prospective course offerings, finances and financial reports,
employee and faculty member information and other organizational information
(collectively, “Proprietary Information”) is and shall remain the sole and
exclusive property of the Company and shall not be used or disclosed by the
Executive except to the extent necessary to perform his duties and
responsibilities under this Agreement. All tangible manifestations of such
Proprietary Information (whether written, printed or otherwise reproduced) shall
be returned by the Executive upon the termination of his employment hereunder,
and the Executive shall not retain any copies or excerpts of the returned items.
The foregoing restrictions on the use, disclosure and disposition of the
Company’s Proprietary Information shall also apply to the Executive’s use,
disclosure and disposition of any confidential information relating to the
business or affairs of the Company’s faculty, students and employees.
     (b) The Executive shall on the Commencement Date execute and deliver to the
Company the standard form Proprietary Information and Inventions Agreement, as
attached as Exhibit B to this Agreement. The Executive shall, throughout the
term of this Agreement and thereafter, remain subject to the terms and
conditions of such Proprietary Information and Inventions Agreement.
     (c) The Executive shall not, in connection with his duties and
responsibilities hereunder, improperly use or disclose any trade secrets or
proprietary and confidential information of any former employer or other person
or entity.
     10. Restrictive Covenants. At all times during the Executive’s employment
with the Company, and for a period of one (1) year after the termination of his
employment with the Company (the “Restriction Period”), regardless of the reason
or cause for such termination, the Executive shall comply with the following
restrictions:
     (a) The Executive shall not directly or indirectly encourage or solicit any
employee, faculty member, consultant or independent contractor to leave the
employment or service of the Company (or any affiliated company) for any reason
or interfere in any other manner with any employment or service relationships at
the time existing between the Company (or any affiliated company) and its
employees, faculty members, consultants and independent contractors.
     (b) The Executive shall not directly or indirectly solicit any vendor,
supplier, licensor, licensee or other business affiliate of the Company (or any
affiliated company) or directly or indirectly induce any such person to
terminate its existing business relationship with the Company (or affiliated
company) or interfere in any other manner with any existing business
relationship between the Company (or any affiliated company) and any such
vendor, supplier, licensor, licensee or other business affiliate.
     (c) The Executive shall not, on his own or as an employee, agent, promoter,
consultant, advisor, independent contractor, general partner, officer, director,
investor, lender or guarantor or in any other capacity, directly or indirectly:

11

--------------------------------------------------------------------------------

 

          (i) conduct, engage in, be connected with, have any interest in, or
assist any person or entity engaged in, any business, whether in the United
States, any possession of the United States or any foreign country or territory,
that competes with any of the businesses or programs conducted by the Company in
the education industry during the period of his employment with the Company
(hereafter collectively referred to as the “Businesses”); or
          (ii) permit his name to be used in connection with a business which is
competitive or substantially similar to the Businesses.
     Notwithstanding the foregoing: (i) the Executive may own, directly or
indirectly, solely as an investment, up to one percent (1%) of any class of
publicly traded securities of any business that is competitive or substantially
similar to the Business, (ii) the restrictions of this Section 10(c) shall not
apply to any securities in which the Executive may now or hereafter have an
indirect ownership interest as a result of his holdings, as measured as of the
Commencement Date, of interests in investment funds or limited partnerships
formed or established by Credit Suisse Group (“CS”) or its affiliates that may
invest in one or more such Businesses, and (iii) the Executive’s employment with
any investment banking firm, private equity fund, hedge fund or similar
investment fund following the termination of his employment with the Company
shall not be deemed a breach of his restrictive covenant under this
Section 10(c), even though the Executive may be engaged in investment decisions
pertaining to the education industry.
     11. Change in Control. For purposes of this Agreement, “Change in Control”
shall have the same meaning assigned to such term under the Incentive Plan, and
upon the occurrence of such Change in Control, any unvested stock options,
restricted stock, restricted stock units, or other equity granted to the
Executive and outstanding at that time shall vest on an accelerated basis to the
same extent as all other outstanding awards under the Incentive Plan held by
individuals who are executive officers of the Company at that time.
     12. Gross-Up Payment. The provisions of this Section 12 shall only be in
force and effect if a Change in Control Event (as defined below) is effected
within the twenty-four (24)-month period measured from the Commencement Date and
shall automatically become null and void should such a Change in Control Event
not be effected prior to the expiration of that twenty-four (24)-month period:
     (a) In the event it is determined that any payment or distribution of any
type to or for the benefit of the Executive, by the Company, any of its
affiliates, any Person who acquires ownership or effective control of the
Company or ownership of a substantial portion of the Company’s assets (within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations thereunder—a “Change in Control Event”) or any
affiliate of such Person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the “Total
Payments”), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the “Excise Tax”), then the Executive will be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Payments.
     (b) All determinations as to whether any of the Total Payments are
“parachute payments” (within the meaning of Section 280G of the Code), whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment, and any
amounts relevant to the last sentence of the paragraph above, will be made by an
independent registered public accounting firm selected by the Company from among
the largest four accounting firms in the United States (the “Accounting Firm”).
The Accounting Firm will

12

--------------------------------------------------------------------------------

 

provide all applicable determinations with respect to any of the Total Payments
that become due and payable at the time of the Change in Control Event (the
“Change in Control Determination”), together with detailed supporting
calculations regarding the amount of the Excise Tax, any required Gross-Up
Payment and any other relevant matter, both to the Company and the Executive
within ten (10) business days after the effective date of the Change in Control
Event or such earlier time as is requested by the Company or the Executive (if
the Executive reasonably believes that any of the Total Payments may be subject
to the Excise Tax). In addition, the Accounting Firm will provide all applicable
determinations with respect to any of the Total Payments that become due and
payable at the time of the Executive’s Separation from Service (the “Separation
from Service Determination”), together with detailed supporting calculations
regarding the amount of the Excise Tax, any required Gross-Up Payment and any
other relevant matter, both to the Company and the Executive within ten
(10) business days after the date of the Executive’s Separation from Service.
The Change in Control and Separation from Service Determinations made by the
Accounting Firm will be binding upon the Company and the Executive. The Gross-Up
Payment (if any) determined on the basis of the Change in Control Determination
shall be paid to or on behalf of Executive within five (5) business days after
the completion of such Determination or (if later) at the time the related
Excise Tax is remitted to the appropriate tax authorities. The Gross-Up Payment
(if any) determined on the basis of the Separation from Service Determination
shall be paid to or on behalf of Executive within five (5) business days after
the completion of such Determination or (if later) at the time the related
Excise Tax is remitted to the appropriate tax authorities.
     (c) In the event that the Executive’s actual Excise Tax liability is
determined by a Final Determination to be greater than the Excise Tax liability
taken into account for purposes of any Gross-Up Payment or Payments initially
made to the Executive pursuant to the provisions of Section 12(b), then within
forty-five (45) days following that Final Determination, the Executive shall
notify the Company of such determination, and the Accounting Firm shall, within
thirty (30) days thereafter, make a new Excise Tax calculation based upon that
Final Determination and provide the Company and the Executive with the
supporting calculations for any supplemental Gross-Up Payment attributable to
that excess Excise Tax liability. The Company shall make the supplemental
Gross-Up payment to the Executive within five (5) business days following the
completion of the applicable calculations or (if later) at the time such excess
tax liability is remitted to the appropriate tax authorities. In the event that
the Executive’s actual Excise Tax liability is determined by a Final
Determination to be less than the Excise Tax liability taken into account for
purposes of any Gross-Up Payment or Payments initially made to the Executive
pursuant to the provisions of Section 12(b), then the Executive shall refund to
the Company, promptly upon receipt, any federal or state tax refund attributable
to the Excise Tax overpayment. For purposes of this Section 12(c), a “Final
Determination” means an audit adjustment by the Internal Revenue Service that is
either (i) agreed to by both the Executive and the Company (such agreement by
the Company to be not unreasonably withheld) or (ii) sustained by a court of
competent jurisdiction in a decision with which the Executive and the Company
concur or with respect to which the period within which an appeal may be filed
has lapsed without a notice of appeal being filed.
     (d) Should the Accounting Firm determine that any Gross-Up Payment made to
the Executive was in fact more than the amount actually required to be paid to
him in accordance with the provisions of Section 12(b) or 12(c), then the
Executive will, at the direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of returns and claims for
refund), follow reasonable instructions from, and procedures established by, the
Company, and otherwise reasonably cooperate with the Company to correct such
overpayment. Furthermore, should the Company decide to contest any assessment by
the Internal Revenue Service of an Excise Tax on one or more items comprising
the Total Payments, the Executive will comply with all reasonable actions
requested by the Company in connection with such proceedings, but shall not be
required to incur any out-of-pocket costs in so doing.

13

--------------------------------------------------------------------------------

 

     (e) Notwithstanding anything to the contrary in the foregoing, any Gross-Up
Payments due the Executive under this Section 12 shall be subject to the
hold-back provisions of Section 14(b), to the extent those payments relate to
any amounts and benefits provided to the Executive that constitute parachute
payments attributable to his Separation from Service. In addition, no Gross-Up
Payment shall be made later than the end of the calendar year following the
calendar year in which the related taxes are remitted to the appropriate tax
authorities or such other specified time or schedule that may be permitted under
Section 409A of the Code. To the extent the Executive may become entitled to any
reimbursement of expenses incurred by him at the direction of the Company in
connection with any tax audit or litigation addressing the existence or amount
of the Excise Tax, such reimbursement shall be paid to the Executive no later
than the later of (i) the close of the calendar year in which the Excise Tax
that is the subject of such audit or litigation is paid by or on behalf of the
Executive or (ii) the end of the sixty (60)-day period measured from such
payment date. If no Excise Tax liability is found to be due as a result of such
audit or litigation, the reimbursement shall be paid to the Executive no later
than the later of (i) the close of the calendar year in which the audit is
completed or there is a final and non-appealable settlement or other resolution
of the litigation or (ii) the end of the sixty (60)-day period measured from the
date the audit is completed or the date the litigation is so settled or
resolved.
     13. Benefit Limitation. The provisions of this Section 13 shall
automatically come into force and effect if a Change in Control Event is not
effected prior to the expiration of the twenty-four (24)-month period measured
from the Commencement Date:
     (a) In the event it is determined that the Total Payments would otherwise
exceed the amount that could be received by the Executive without the imposition
of an excise tax under Section 4999 of the Code (the “Safe Harbor Amount”), then
the Total Payments shall be reduced to the extent, and only to the extent,
necessary to assure that their aggregate present value, as determined in
accordance the applicable provisions of Code Section 280G and the regulations
thereunder, does not exceed the greater of the following dollar amounts (the
“Benefit Limit”):
(A) The Safe Harbor Amount, or
(B) the greatest after-tax amount payable to the Executive after taking into
account any excise tax imposed under Code Section 4999 on the Total Payments.
     (b) All determinations under this Section 13 shall be made by the
Accounting Firm. However, in determining whether such Benefit Limit is exceeded,
the Accounting Firm shall make a reasonable determination of the value to be
assigned to the restrictive covenants in effect for the Executive pursuant to
Section 10 of the Agreement, and the amount of his potential parachute payment
under Code Section 280G shall reduced by the value of those restrictive
covenants to the extent consistent with Code Section 280G and the regulations
thereunder.
     (c) To the extent a reduction to the Total Payments is required to be made
in accordance with this Section 13, the Total Payments attributable to any cash
severance payments otherwise due the Executive under Section 8 of this Agreement
shall be reduced first, with such reduction to be effected pro-rata as to each
such payment, then the accelerated vesting of his Initial RSU Award shall be
reduced, then the accelerated vesting of his Supplemental RSU Award and any
other restricted stock unit awards made to him by the Company shall be reduced,
and finally the accelerated vesting of the Executive’s stock options shall be
reduced, with such reduction to occur in the same chronological order in which
those options were granted. The amount of the reduction to each restricted stock
unit award and stock option shall be based on the amount of the parachute
payment calculated for each such award or option in accordance with the Treasury
Regulations under Code Section 280G,

14

--------------------------------------------------------------------------------

 

     14. Section 409A. Certain payments contemplated by this Agreement may be
“deferred compensation” for purposes of Section 409A of the Code. Accordingly,
the following provisions shall be in effect for purposes of avoiding or
mitigating any adverse tax consequences to the Executive under Code
Section 409A.
     (a) It is the intent of the parties that the provisions of this Agreement
comply with all applicable requirements of Code Section 409A. Accordingly, to
the extent there is any ambiguity as to whether any provisions of this Agreement
would otherwise contravene one or more requirements or limitations of Code
Section 409A, then such provisions shall be interpreted and applied in a manner
that does not result in a violation of the applicable requirements or
limitations of Code Section 409A and the applicable Treasury Regulations
thereunder. In addition, should any provisions of this Agreement otherwise
contravene one or more requirements or limitations of Code Section 409A, then
the Company and the Executive shall, within the remedial amendment period
provided under the regulations issued under Code Section 409A, effect through
mutual agreement the appropriate amendments to those provisions which are
necessary in order to bring the provisions of this Agreement into compliance
with Section 409A: provided such amendments shall not reduce the dollar amount
of any such item of deferred compensation or adversely affect the vesting
provisions applicable to such item or otherwise reduce the present value of that
item. If any federal legislation is enacted during the term of this Agreement
which imposes a dollar limit on deferred compensation, then the Executive will
co-operate with the Company in restructuring any items of compensation under
this Agreement that are deemed to be deferred compensation subject to such
limitation; provided such restructuring shall not reduce the dollar amount of
any such item or adversely affect the vesting provisions applicable to such item
or otherwise reduce the present value of that item.
     (b) Notwithstanding any provision to the contrary in this Agreement, no
payments or benefits to which the Executive becomes entitled under this
Agreement in connection with the termination of his employment with the Company
(other than the reimbursement of Coverage Costs during the applicable period of
COBRA coverage) shall be made or paid to the Executive prior to the earlier of
(i) the first day of the seventh (7th) month following the date of his
Separation from Service due to such termination of employment or (ii) the date
of his death, if the Executive is deemed, pursuant to the procedures established
by the Compensation Committee in accordance with the applicable standards of
Code Section 409A and the Treasury Regulations thereunder and applied on a
consistent basis for all for all non-qualified deferred compensation plans of
the Employer Group subject to Code Section 409A, to be a “specified employee” at
the time of such Separation from Service and such delayed commencement is
otherwise required in order to avoid a prohibited distribution under Code
Section 409A(a)(2). Upon the expiration of the applicable Code Section
409A(a)(2) deferral period, all payments deferred pursuant to this subsection
14(b) shall be paid in a lump sum to the Executive, and any remaining payments
due under this Agreement shall be paid in accordance with the normal payment
dates specified for them herein. The specified employees subject to such a
delayed commencement date shall be identified on December 31 of each calendar
year. If the Executive is so identified on any such December 31, he shall have
specified employee status for the twelve (12)-month period beginning on April 1
of the following calendar year. For purposes of this Agreement, including
(without limitation) this Section 14(b), the following definitions shall be in
effect:
          (i) “Separation from Service” shall mean the date on which the level
of the Executive’s bona fide services as an Employee (or non-employee
consultant) permanently decreases to a level that is not more than twenty
percent (20%) of the average level of services the Executive rendered as an
Employee during the immediately preceding thirty-six (36) months (or any shorter
period of such Employee service). Any such determination, however, shall be made
in accordance with the applicable standards of the Treasury Regulations issued
under Code Section 409A. In addition to the

15

--------------------------------------------------------------------------------

 

foregoing, a Separation from Service will not be deemed to have occurred while
the Executive is on a sick leave or other bona fide leave of absence if the
period of such leave does not exceed six (6) months or any longer period for
which the Executive’s right to reemployment with the Company is provided by
either statute or contract; provided, however, that in the event of a leave of
absence due to any medically determinable physical or mental impairment that can
be expected to result in death or to last for a continuous period of not less
than six (6) months and that causes the Executive to be unable to perform his
duties as an Employee, no Separation from Service shall be deemed to occur
during the first twenty-nine (29) months of such leave. If the period of the
leave exceeds six (6) months (or twenty-nine (29) months in the event of
disability as indicated above) and the Executive is not provided with a right to
reemployment by either statute or contract, then the Executive will be deemed to
have Separated from Service on the first day immediately following the
expiration of the applicable six (6)-month or twenty-nine (29)-month period.
          (ii) The Executive shall be deemed to remain an “Employee” for so long
he remains in the employ of at least one member of the Employer Group, subject
to the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance.
          (iii) “Employer Group” shall mean the Company and each member of the
group of commonly controlled corporations or other businesses that include the
Company, as determined in accordance with Sections 414(b) and (c) of the Code
and the Treasury Regulations thereunder, except that in applying
Sections 1563(1), (2) and (3) for purposes of determining the controlled group
of corporations under Section 414(b), the phrase “at least 50 percent” shall be
used instead of “at least 80 percent” each place the latter phrase appears in
such sections, and in applying Section 1.414(c)-2 of the Treasury Regulations
for purposes of determining trades or businesses that are under common control
for purposes of Section 414(c), the phrase “at least 50 percent” shall be used
instead of “at least 80 percent” each place the latter phrase appears in
Section 1.414(c)-2 of the Treasury Regulations.
     (c) Should the Executive comply with the provisions of subsections 14(a)
and 14(b) above but nevertheless incur the 20% penalty tax imposed under
Section 409A (the “Section 409A Penalty Tax”) with respect to one or more
payments or benefits provided to him under this Agreement, then the Executive
will be entitled to receive an additional payment (the “409A Gross-Up Payment”)
in an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including any tax
imposed upon the 409A Gross-Up Payment, the Executive retains an amount of the
409A Gross-Up Payment equal to the Section 409A Penalty Tax imposed upon the
Executive’s deferred compensation. The amount of the 409A Gross-Up Payment shall
be calculated, by an Accounting Firm mutually agreeable to the Company and the
Executive, within ten (10) business days after it is first determined that the
Executive is subject to the Section 409A Penalty Tax, and the 409A Gross-Up
Payment so calculated shall be paid to or on behalf of the Executive within five
(5) business days after the completion of such determination or (if later) at
the time the related Section 409A Penalty Tax is remitted to the appropriate tax
authorities. In the event that the Executive’s actual Section 409A Penalty Tax
liability is determined by a Final Determination to be greater than the
Section 409A Penalty Tax liability taken into account for purposes of the 409A
Gross-Up Payment initially made to the Executive pursuant to the provisions of
this Section 14(c), then within forty-five (45) days following that Final
Determination, the Executive shall notify the Company of such determination, and
the Accounting Firm shall, within thirty (30) days thereafter, make a new
calculation of the 409A Gross-Up Payment

16

--------------------------------------------------------------------------------

 

based upon that Final Determination and provide the Company and the Executive
with the supporting calculations for any supplemental 409A Gross-Up Payment
attributable to that excess Section 409A Penalty Tax liability. The Company
shall make the supplemental 409A Gross-Up payment to the Executive within five
(5) business days following the completion of the applicable calculations or (if
later) at the time such excess Section 409A Penalty Tax liability is remitted to
the appropriate tax authorities. In the event that the Executive’s actual
Section 409A Penalty Tax liability is determined by a Final Determination to be
less than the Section 409A Penalty Tax liability taken into account for purposes
of the 409A Gross-Up Payment initially made to the Executive pursuant to the
provisions of this Section 14(c), then the Executive shall refund to the
Company, promptly upon receipt, any federal or state tax refund attributable to
the overpayment of his Section 409A Penalty Tax.
     15. Legal Fees. Within fourteen (14) calendar days after the date this
Agreement becomes effective, the Company will reimburse the Executive for his
legal fees incurred in connection with the Agreement’s preparation and
negotiation, up to a maximum dollar amount of $40,000.00.
     16. Indemnification. The Executive shall be covered by any policy of
liability insurance which the Company maintains during the Term for its officers
and directors (“D&O Insurance”), to the maximum extent of such coverage provided
any other executive officer of the Company. The Company agrees to provide the
Executive with information about all D&O Insurance maintained during the Term,
including proof that such insurance is in place and the terms of coverage, upon
the Executive’s reasonable request. In addition to any rights the Executive may
have under such D&O Insurance, applicable law, or the articles of incorporation
and bylaws of the Company and except as may be prohibited by applicable law, the
Company agrees to indemnify, defend, and hold the Executive harmless from and
against any and all claims and/or liability arising from, as a result of, or in
connection with the Executive’s employment by the Company or any outside
appointments and offices held at the Company’s request, except to the extent
such claims or liability are fully and finally adjudged by a court, after the
expiration or exhaustion of permitted appeals, to be attributable to the
Executive’s gross negligence or willful misconduct.
     17. Injunctive Relief. The Executive expressly agrees that the covenants
set forth in Sections 9 and 10 of this Agreement are reasonable and necessary to
protect the Company and its legitimate business interests, and to prevent the
unauthorized dissemination of Proprietary Information to competitors of the
Company. The Executive also agrees that the Company will be irreparably harmed
and that damages alone cannot adequately compensate the Company if there is a
violation of Section 9 or 10 of this Agreement by the Executive, and that
injunctive relief against the Executive is essential for the protection of the
Company. Therefore, in the event of any such breach, it is agreed that, in
addition to any other remedies available, the Company shall be entitled as a
matter of right to injunctive relief in any court of competent jurisdiction,
plus attorneys’ fees actually incurred for the securing of such relief.
     18. Survival of Certain Provisions. The provisions of Sections 8, 9, 10,
12, 13, 14, 16, 17, 19, 21, 22, 25 and 26 will survive any termination of this
Agreement.
     19. Withholdings. Any compensation and/or benefits provided to the
Executive by the Company shall be subject to the Company’s collection of all
applicable payroll deductions and applicable withholding and payroll taxes.
     20. Successors and Assigns. This Agreement will be binding upon and will
inure to the benefit of the Company, its successors and assigns, and the Company
will require any successor or assign to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession or assignment had taken place.
The

17

--------------------------------------------------------------------------------

 

term “the Company” as used herein will include any such successors and assigns
to the Company’s business and/or assets. The term “successors and assigns” as
used herein will mean a corporation or other entity acquiring or otherwise
succeeding to, directly or indirectly, all or substantially all the assets and
business of the Company (including this Agreement) whether by operation of law
or otherwise. This Agreement will inure to the benefit of and be enforceable by
the Executive’s legal personal representative.
     21. Arbitration. Except as otherwise provided in Section 17, any
controversy or claim between the Company or any of its affiliates and the
Executive arising out of or relating to this Agreement or its termination or any
other dispute between the parties, whether arising in tort, contract, or
pursuant to a statute, regulation, or ordinance now in existence or which may in
the future be enacted or recognized will be settled and determined by a single
arbitrator whose award will be accepted as final and binding upon the parties.
The arbitration shall be conducted in Chicago, Illinois and in accordance with
the American Arbitration Association (“AAA”) Employment Arbitration Rules in
effect at the time such arbitration is properly initiated. To the extent that
any of the AAA rules or anything in the Agreement conflicts with any arbitration
procedures required by applicable law, the arbitration procedures required by
applicable law shall govern. The costs of the arbitration, including
administrative fees and fees charged by the arbitrator, will be borne by the
Company. Each party will bear its or his own travel expenses and attorneys’
fees: provided, however that the arbitrator (i) shall award attorneys’ fees to
the Executive with respect to any claim for breach of this Agreement on which he
is the prevailing party and may award attorneys’ fees to the Executive as
otherwise allowed by law and (ii) shall award attorneys’ fees to the Company
with respect to any claim brought under Section 17 on which it is the prevailing
party and may award attorneys’ fees to the Company with respect to any other
claim on which it is the prevailing party and it is determined by the arbitrator
that such claim by the Executive was frivolous in that it presented no colorable
arguments for recovery; but the maximum amount of attorneys’ fees that may be
awarded to the Company other than with respect to any claim brought under
Section 17 shall not exceed one hundred thousand dollars ($100,000). The
arbitration shall be instead of any civil litigation; and the Executive hereby
waives any right to a jury trial. The arbitrator’s decision shall be final and
binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof. In any situation in which emergency injunctive
relief may be necessary, either party may seek such relief from a court until
such time as the arbitrator is able to address the matter covered by this
Section 21. Both parties agree that the state and federal courts located in
Chicago, Illinois, will be the sole venue for any such action involving
emergency injunctive relief, and the parties submit to personal jurisdiction in
these courts for this purpose. Judgment upon any award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
     22. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) will be in writing and will be deemed to have been given when
personally delivered or on the third business day following mailing if sent by
registered or certified mail, return receipt requested, postage prepaid, or upon
receipt if overnight delivery service is used, addressed as follows:
To the Executive:
Charles Edelstein
219 East Lake Shore Drive
No. 8D
Chicago, IL 60611

18

--------------------------------------------------------------------------------

 

With a copy to:
Russell Shapiro
Peter Donati
Levenfeld Pearlstein, LLC
2 N. LaSalle, Suite 1300
Chicago, Illinois 60602
To the Company:
Apollo Group, Inc
4025 S. Riverpoint Parkway
Phoenix, AZ 85040
Attention: General Counsel
     23. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
has been made by either party which is not expressly set forth in this
Agreement.
     24. Counterparts. This Agreement may be executed in several counterparts,
each of which will be deemed an original and all of which will constitute but
one and the same instrument. An electronic facsimile of a signature, when
delivered by the signing party to the non-signing party, will have the same
force and effect as an original.
     25. Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Arizona without giving
effect to the conflict of law principles thereof.
     26. Severability. If any provision of this Agreement as applied to any
party or to any circumstance should be adjudged by a court of competent
jurisdiction (or determined by the arbitrator) to be void or unenforceable for
any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permissible by law) the application of such provision under
circumstances different from those adjudicated by the court or determined by the
arbitrator, the application of any other provision of this Agreement, or the
enforceability or invalidity of this Agreement as a whole. Should any provision
of this Agreement become or be deemed invalid, illegal or unenforceable in any
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the extent necessary to conform to
applicable law so as to be valid and enforceable or, if such provision cannot be
so amended without materially altering the intention of the parties, then such
provision will be stricken, and the remainder of this Agreement shall continue
in full force and effect.

19

--------------------------------------------------------------------------------

 

     27. Entire Agreement. This Agreement, together with the Proprietary
Information and Inventions Agreement referred to in Section 9 and the
documentation for the equity grants referred to in Section 4, shall constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and shall supersede all prior agreements, if any, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.

                  CHARLES B. EDELSTEIN       APOLLO GROUP, INC.    
 
               
/s/ Charles B. Edelstein
      By:   /s/ Joseph L. D’Amico    
 
               
 
               
 
      Its:   President    

20

--------------------------------------------------------------------------------

 

EXHIBIT A
FORM OF GENERAL RELEASE

 

--------------------------------------------------------------------------------

 

GENERAL RELEASE
          This AGREEMENT is made as of                     , 200___, by and
between Charles B. Edelstein (“Executive”), and Apollo Group, Inc. (the
“Company”).
     In consideration for the severance benefits offered by the Company to
Executive pursuant to Section 8 of his Employment Agreement with the Company
dated July 7, 2008 (the “Employment Agreement”), Executive agree as follows:
     1. Termination of Employment. Executive acknowledges that his employment
with the Company is terminated effective                      (the “Termination
Date”), and he agrees that he will not apply for or seek re-employment with the
Company, its parent companies, subsidiaries and affiliates after that date.
Executive agrees that he has received and reviewed his final paycheck and he has
received all wages and accrued but unpaid vacation pay earned by him through the
Termination Date.
     2. Waiver and Release.
          (a) Except as set forth in Section 2(b), which identifies claims
expressly excluded from this release, Executive hereby releases the Company, all
affiliated companies, and their respective officers, directors, agents,
employees, stockholders, successors and assigns from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorney fees, damages,
indemnities and obligations of every kind and nature, in law, equity or
otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising from or relating to Executive’s employment with the Company
and the termination of that employment, including (without limitation): claims
of wrongful discharge, emotional distress, defamation, fraud, breach of
contract, breach of the covenant of good faith and fair dealing, discrimination
claims based on sex, age, race, national origin, disability or any other basis
under Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act of 1967, as amended (“ADEA”), the Americans
with Disability Act, the Employee Retirement Income Security Act, as amended,
the Equal Pay Act of 1963, as amended, and any similar law of any state or
governmental entity, any contract claims, tort claims and wage or benefit
claims, including (without limitation) claims for salary, bonuses, commissions,
equity awards (including stock grants, stock options and restricted stock
units), vesting acceleration, vacation pay, fringe benefits, severance pay or
any other form of compensation.
          (b) The only claims that Executive is not waiving and releasing under
this Agreement are claims he may have for (1) unemployment, state disability,
worker’s compensation, and/or paid family leave insurance benefits pursuant to
the terms of applicable state law; (2) continuation of existing participation in
Company-sponsored group health benefit plans under the federal law known as
“COBRA” and/or under an applicable state law counterpart(s); (3) any benefits
entitlements that are vested and unpaid as of his termination date pursuant to
the terms of a Company-sponsored benefit plan; (4) any benefits to which he is
entitled pursuant to Section 8 of the Employment Agreement or his rights to
indemnification pursuant to Section 16 of the Employment Agreement, (5)
violation of any federal state or local statutory and/or public policy right or
entitlement that, by applicable law, is not waivable; and (6) any wrongful act
or omission occurring after the date he executes this Agreement. In addition,
nothing in this Agreement prevents or prohibits Executive from filing a claim
with the Equal Employment Opportunity Commission (EEOC) or any other government
agency that is responsible for enforcing a law on behalf of the government and
deems such claims not waivable. However, because Executive is

 

--------------------------------------------------------------------------------

 

hereby waiving and releasing all claims “for monetary damages and any other form
of personal relief” (per Section 3(a) above), he may only seek and receive
non-personal forms of relief from the EEOC and similar government agencies.
          (c) Executive represents that he has not filed any complaints,
charges, claims, grievances, or lawsuits against the Company and/or any related
persons with any local, state or federal agency or court, or with any other
forum.
          (d) Executive acknowledges that he may discover facts different from
or in addition to those he now knows or believes to be true with respect to the
claims, demands, causes of action, obligations, damages, and liabilities of any
nature whatsoever that are the subject of this Agreement, and he expressly
agrees to assume the risk of the possible discovery of additional or different
facts, and agrees that this Agreement shall be and remain in effect in all
respects regardless of such additional or different facts. Executive expressly
acknowledges that this Agreement is intended to include, and does include in its
effect, without limitation, all claims which Executive does not know or suspect
to exist in his favor against the Company and/or any related persons at the
moment of execution thereof, and that this Agreement expressly contemplates
extinguishing all such claims.
          (e) Executive understands and agrees that the Company has no
obligation to provide him with any severance benefits under the Employment
Agreement unless he executes this Agreement. Executive also understands that he
has received or will receive, regardless of the execution of this Agreement, all
wages owed to him, together with any accrued but unpaid vacation pay, less
applicable withholdings and deductions, earned through the Termination Date.
          (f) This Agreement is binding on Executive, his heirs, legal
representatives and assigns.
     3. Entire Agreement. This Agreement and the Employment Agreement constitute
the entire understanding and agreement between Executive and the Company in
connection with the matters described, and replaces and cancels all previous
agreements and commitments, whether spoken or written, with respect to such
matters. Nothing in this Agreement supersedes or replaces any of Executive’s
obligations under his Employment Agreement that survive termination, including,
but not limited to (i) his (and the Company’s) agreement to arbitrate disputes,
(ii) his restrictive covenants under Section 10 of the Employment Agreement and
(iii) his obligations under Section 9 of the Employment Agreement, his existing
Proprietary Information Inventions Agreement with the Company and any other
obligations not to use or disclose Company confidential and/or proprietary
information.
     4. Modification in Writing. No oral agreement, statement, promise,
commitment or representation shall alter or terminate the provisions of this
Agreement. This Agreement cannot be changed or modified except by written
agreement signed by Executive and authorized representatives of the Company.
     5. Governing Law; Jurisdiction. This Agreement shall be governed by and
enforced in accordance with the laws of the State of Arizona.
     6. Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

23

--------------------------------------------------------------------------------

 

     7. No Admission of Liability. This Agreement does not constitute an
admission of any unlawful discriminatory acts or liability of any kind by the
Company or anyone acting under their supervision or on their behalf. This
Agreement may not be used or introduced as evidence in any legal proceeding,
except to enforce or challenge its terms.
     8. Acknowledgements. Executive is advised to consult with an attorney of
his choice prior to executing this Agreement. By signing below, Executive
acknowledges and certifies that he:
          (a) has read and understands all of the terms of this Agreement and is
not relying on any representations or statements, written or oral, not set forth
in this Agreement;
          (b) has been provided a consideration period of twenty-one calendar
days within which to decide whether he will execute this Agreement and that no
one hurried him into executing this Agreement;
          (c) is signing this Agreement knowingly and voluntarily; and
          (d) has the right to revoke this Agreement within seven (7) days after
signing it, by providing written notice of revocation via certified mail to the
Company to the address specified in the Employment Agreement. Executive’s
written notice of revocation must be postmarked on or before the end of the
eighth (8th) calendar day after he has timely signed this Agreement. This
deadline will be extended to the next business day should it fall on a Saturday,
Sunday or holiday recognized by the U.S. Postal Service.
     Because of the revocation period, the Company’s obligations under this
Agreement shall not become effective or enforceable until the eighth (8th)
calendar day after the date Executive signs this Agreement provided he has
delivered it to the Company without modification and not revoked it (the
“Effective Date”).
I HAVE READ, UNDERSTAND AND VOLUNTARILY ACCEPT AND AGREE TO THE ABOVE TERMS
CHARLES B. EDELSTEIN

     
                                                                      
          
 
Date:                                                                                ,
20___
 
   
Signature
   

24

--------------------------------------------------------------------------------

 

EXHIBIT B
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

--------------------------------------------------------------------------------

 

PROPRIETARY INFORMATION AND INVENTIONS
AGREEMENT
This Proprietary Information and Inventions Agreement (“PIIA”) confirms certain
terms of my employment with Apollo Group, Inc., is a condition of my employment,
and is a material part of the consideration for my employment by Apollo Group,
Inc. The headings contained in this PIIA are for convenience only, have no legal
significance, and are not intended to change or limit this PIIA in any matter
whatsoever.
     A. Definitions
          1. The “Company”
          As used in this PIIA, the term “Company” refers to Apollo Group, Inc.,
each of its subsidiaries, affiliated and parent companies, and successors and
assigns. I recognize and agree that my obligations under this PIIA and all terms
of this PIIA apply to me regardless of whether I am employed by or provide
services to Apollo Group, Inc., any subsidiary, affiliate or parent companies of
Apollo Group, Inc.
          2. “Proprietary Information”
          I understand that the Company possesses and will possess Proprietary
Information which is important to its business. For purposes of this PIIA,
“Proprietary Information” is information that was or will be developed, created,
or discovered by or on behalf of the Company, or which became or will become
known by, or was or is conveyed to the Company, which has commercial value in
the Company’s business. Such Proprietary Information includes information
concerning the organization, business and finances of the Company or of any
third party which the Company is under an obligation to keep confidential that
is maintained by the Company as confidential, including (without limitation):
          a. the Company’s Lead List which is comprised of prospective students
who meet the admission requirements of the Company;
          b. data and information on current and prospective corporate accounts,
including, but not limited to, the identity of the corporate accounts, the
decision makers or decision influencers, the buying criteria of the accounts and
programs for those accounts;
          c. the management process, training materials, scripts, programs and
preferred responses to features and benefits provided to Admission Counselors;
          d. the certification training materials and processes for the
certification of the Company’s Student Advisors (known as the ACU online
learning system program), including, but not limited to, the tests taken,
materials provided and course work;
          e. the information and data contained in the Company’s enrollment data
system, all monthly enrollment reports;

Page 1 of 8

--------------------------------------------------------------------------------

 

          f. salary, terms of employment, tenure and performance review
information on the faculty members and other employees of the Company, all
business models and financial information, data and materials of the Company not
otherwise available to the general public through the Company’s Annual Report or
otherwise;
          g. all market research or works for hire materials, including, but not
limited to, industry data, demographics, company profiles and/or specific
consumer behavior information, all monthly financial, statistical and
operational information and reports including but not limited to the “Yellow
Book”, and all other information concerning enrollment by campus, profit and
loss per campus and the terms of any lease;
          h. all monthly financial statements, including, but not limited to,
the “Board Book”;
          i. all internally developed source code, including, but not limited
to, modifications to existing source codes for student information systems (such
as Galaxy, Campus Tracking, OSIRIS and eCampus), academic systems (such as
rEsource and OnLine Learning System (OLS), proprietary modifications to packaged
applications (such as PeopleSoft, Oracle Financials and ADP HRizon) and all
future internally developed source code.
          I understand and agree that my employment creates a relationship of
confidence and trust between the Company and me with respect to Proprietary
Information.
          3. “Company Documents and Materials”
          I understand that the Company possesses or will possess “Company
Documents and Materials” which are important to its business. For purposes of
this PIIA, “Company Documents and Materials” are documents or other media or
tangible items that contain or embody Proprietary Information or any other
information concerning the business, operations or plans of the Company, whether
such documents, media or items have been prepared by me or by others.
          Such Company Documents and Materials include (without limitation)
blueprints, drawings, photographs, charts, graphs, notebooks, customer lists,
computer disks, tapes, computer hard drives, floppy disks, CD ROMS, or
printouts, sound recordings and other printed, typewritten or handwritten
documents, sample products, prototypes and models and any information recorded
in any other form whatsoever. Such Company Documents and Materials also include
copies of any of the foregoing.
     B. Assignment of Rights
          All Proprietary Information and all patents, patent rights,
copyrights, trade secret rights, trademark rights and other rights (including,
without limitation, intellectual property rights) anywhere in the world in
connection therewith is and shall be the sole property of the Company. I hereby
assign to the Company any and all rights, title and interest I may have or
acquire in such Proprietary Information.

Page 2 of 8

--------------------------------------------------------------------------------

 

          At all times, both during my employment by the Company and after its
termination, I will keep in confidence and trust and will not use or disclose
any Proprietary Information or anything relating to it without the prior written
consent of an officer of the Company, except as may be necessary in the ordinary
course of performing my duties to the Company.
     C. Maintenance and Return of Company Documents and Materials
          I agree to make and maintain adequate and current written records, in
a form specified by the Company, of all inventions, trade secrets and works of
authorship assigned or to be assigned to the Company pursuant to this PIIA. All
Company Documents and Materials are and shall be the sole property of the
Company.
          I agree that during my employment by the Company, I will not remove
any Company Documents and Materials from the business premises of the Company or
deliver any Company Documents and Materials to any person or entity outside the
Company, except in connection with performing the duties of my employment. I
further agree that, immediately upon the termination of my employment by me or
by the Company for any reason, or during my employment if so requested by the
Company, I will return all Company Documents and Materials, apparatus, equipment
and other physical property, or any reproduction of such property, excepting
only (i) my personal copies of records relating to my compensation; (ii) my
personal copies of any materials previously distributed generally to
stockholders of the Company; and (iii) my copy of this PIIA.
     D. Disclosure of Inventions to the Company
          I will promptly disclose in writing to the Chair of the Company’s
Board of Directors or to such other person designated by the Board all
“Inventions,” which includes (without limitation) all software programs or
subroutines, source or object code, algorithms, improvements, inventions, works
of authorship, trade secrets, technology, designs, formulas, ideas, processes,
techniques, know-how and data, whether or not patentable, made or discovered or
conceived or reduced to practice or developed by me, either alone or jointly
with others, during the term of my employment.
          I will also disclose to the Chair of the Company’s Board of Directors
or to such other person designated by the Board all Inventions made, discovered,
conceived, reduced to practice, or developed by me within six (6) months after
the termination of my employment with the Company which resulted, in whole or in
part, from my prior employment by the Company. Such disclosures shall be
received by the Company in confidence (to the extent such Inventions are not
assigned to the Company pursuant to Section (E) below) and do not extend the
assignment made in Section (E) below.
          Notwithstanding any other provision of this Agreement to the contrary,
this Agreement does not obligate me to assign to the Company any of my rights in
an invention for which no equipment, supplies, facility, or trade secret
information of the Company was used and

Page 3 of 8

--------------------------------------------------------------------------------

 

which was developed entirely on my own time, unless (a) the invention relates
(i) directly to the business of the Company, or (ii) to the Company’s actual or
demonstrably anticipated research or development, or (b) the invention results
from any work performed by me for the Company.
     E. Right to New Ideas
          1. Assignment of Inventions to the Company
          I agree that all Inventions that I make, discover, conceive, reduce to
practice or develop (in whole or in part, either alone or jointly with others)
during my employment shall be the sole property of the Company to the maximum
extent permitted by applicable law. However, any inventions that I make,
discover, conceive, reduce to practice or develop (in whole or in part, either
alone or jointly with others) during my employment shall not be the sole
property of the Company so long as such inventions have been developed entirely
on my own time without using any of the Company’s equipment, supplies,
facilities or Proprietary Information, unless such inventions constitute
Inventions for purposes of this Agreement because:
a. they relate at the time of conception or reduction to practice of the
invention to the Company’s business, or actual or demonstrably anticipated
research or development of the Company, or
b. they result from any work I performed for the Company.
          2. Works Made for Hire
          The Company shall be the sole owner of all patents, patent rights,
copyrights, trade secret rights, trademark rights and all other intellectual
property or other rights in connection with Inventions. I further acknowledge
and agree that such Inventions, including (without limitation) any computer
programs, programming documentation, and other works of authorship, are “works
made for hire” for purposes of the Company’s rights under copyright laws. I
hereby assign to the Company any and all rights, title and interest I may have
or acquire in such Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, service or process a prior
Invention owned by me or in which I have interest, the Company is hereby granted
and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
sublicensable, worldwide license to make, have made, modify, use, market, sell
and distribute such prior Invention as part of or in connection with such
product, service or process.
          3. Cooperation
          I agree to perform, during and after my employment, all acts deemed
necessary or desirable by the Company to permit and assist it, at the Company’s
expense, in further evidencing and perfecting the assignments made to the
Company under this PIIA and in obtaining, maintaining, defending and enforcing
patents, patent rights, copyrights, trademark rights, trade secret rights or any
other rights in connection with such Inventions and improvements thereto in any
and all countries. Such acts may include (without limitation) execution of
documents and assistance or cooperation in legal proceedings. I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents, as my agents and attorney-in-fact to act for and on my behalf and
instead of me, to execute and file any

Page 4 of 8

--------------------------------------------------------------------------------

 

documents, applications or related findings and to do all other lawfully
permitted acts to further the purposes set forth above in this Subsection 3,
including (without limitation) the perfection of assignment and the prosecution
and issuance of patents, patent applications, copyright applications and
registrations, trademark applications and registrations or other rights in
connection with such Inventions and improvements thereto with the same legal
force and effect as if executed by me.
          4. Assignment or Waiver of Moral Rights
          Any assignment of copyright hereunder (and any ownership of a
copyright as a work made for hire) includes all rights of paternity, integrity,
disclosure and withdrawal and any other rights that may be known as or referred
to as “moral rights” (collectively “Moral Rights”). To the extent such Moral
Rights cannot be assigned under applicable law and to the extent the following
is allowed by the laws in the various countries where Moral Rights exist, I
hereby waive such Moral Rights and consent to any action of the Company that
would violate such Moral Rights in the absence of such consent.
          5. List of Inventions
          I have attached hereto as Appendix A a complete list of all inventions
or improvements to which I claim ownership and that I desire to remove from the
operation of this PIIA (except for the license granted in Section (E)(2) above),
and I acknowledge and agree that such list is complete. If no such list is
attached to this PIIA, I represent that I have no such inventions or
improvements at the time of signing this PIIA.
     F. Company Authorization for Publication
          Prior to my submitting or disclosing for possible publication or
dissemination outside the Company any material prepared by me that incorporates
information that concerns the Company’s business or anticipated research, I
agree to deliver a copy of such material to an officer of the Company for his or
her review. Within twenty (20) days following such submission, the Company
agrees to notify me in writing whether the Company believes such material
contains any Proprietary Information or Inventions, and I agree to make such
deletions and revisions as are reasonably requested by the Company to protect
its Proprietary Information and Inventions. I further agree to obtain the
written consent of the Company prior to any review of such material by persons
outside the Company.
     G. Restrictive Covenants
          At all times during my employment with the Company, and for a period
of one (1) year thereafter, I shall not directly or indirectly encourage or
solicit any employee, faculty member, consultant or independent contractor to
leave the employment or service of the Company for any reason or interfere in
any other manner with such relationships at the time existing between the
Company and its employees, faculty members, consultants and independent
contractors. As part of this restriction, I will not interview or provide any
input to any third party

Page 5 of 8

--------------------------------------------------------------------------------

 

regarding any such employee, faculty member, consultant or independent
contractor of the Company. However, this obligation shall not affect any
responsibility I may have as an employee of the Company with respect to the bona
fide hiring and firing of Company personnel.
     H. Former Employer’s and Others’ Information
          I represent that my performance of all the terms of this PIIA does not
and will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired or developed by me in confidence or in trust prior to
my employment by the Company.
          I agree that I will not disclose to the Company, or use in the
performance of my duties and responsibilities as an employee of the Company, any
trade secrets or confidential or proprietary information or material belonging
to any previous employers or other person or entity.
     I. Reformation and Severability
          I agree that if any provision, or portion of a provision, of this
Agreement is deemed unenforceable by reason of the scope, extent or duration of
its coverage, then such provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable. Should
any provision, or portion of a provision, of this Agreement be deemed
unenforceable for any other reason, such unenforceability will not affect any
other provision, or portion of a provision, of this Agreement and this Agreement
shall be construed as if such unenforceable provision, or portion of provision,
had never been contained herein.
     J. Authorization for Post-Termination Notification of Obligations Under
PIIA
          I hereby authorize the Company to notify any person or entity with
whom I become employed, or to whom I provide services, following the termination
of my employment with the Company of my ongoing obligations under this PIIA.
     K. Entire Agreement
          This PIIA, together with my Employment Agreement with Apollo Group,
Inc. dated July 7, 2008 (the “Employment Agreement”), sets forth the entire
agreement and understanding between the Company and me relating to the subject
matters covered therein, and this PIIA, together with the Employment Agreement,
merges, cancels, supersedes and replaces all prior discussions between us,
including (without limitation) any and all statements, representations,
negotiations, promises or agreements relating to the subject matters covered by
this PIIA that may have been made by any officer, employee or representative of
the Company.

Page 6 of 8

--------------------------------------------------------------------------------

 

I HAVE READ THIS PIIA CAREFULLY, AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS
THAT IT IMPOSES UPON ME WITHOUT RESERVATION.
I SIGN THIS PIIA FREELY AND VOLUNTARILY, WITHOUT COERCION OR DURESS.

                 
Date:
               
 
               
 
          Employee Signature    
 
               
 
               
 
          Employee Name [Please Print]    

Page 7 of 8

--------------------------------------------------------------------------------

 

APPENDIX A

1.   The following is a complete list of all Inventions or improvements relevant
to the subject matter of my employment by the Company that have been made or
discovered or conceived or first reduced to practice by me or jointly with
others prior to my employment by the Company that I desire to remove from the
operation of the Company’s Proprietary Information and Inventions Agreement
(“PIIA”), except for the license granted in Section (E)(2) of the PIIA:      
___    No inventions or improvements.       ___    See below:       ___    See
___(#) additional sheets attached.   2.   I propose to bring to my employment
the following materials and documents of a former employer or other
person/entity:       ___    No materials or documents       ___    See below:  
    ___    See ___(#) additional sheet(s) attached:

                 
Date:
               
 
               
 
          Employee Signature    

Page 8 of 8

--------------------------------------------------------------------------------

 

SCHEDULE I
LIST OF EXISTING BOARD MEMBERSHIPS
Junior Achievement of Chicago
Teach for America of Chicago