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     3. COMPENSATION.          (a) BASE SALARY. The Company shall pay the Employee and the Employee agrees to acceptfrom the Company in full payment for his services and promises to the Company a base salary at therate of Eight Hundred Fifty Thousand and No/100 Dollars ($850,000.00) per year, payable in equalbiweekly installments in accordance with the Company’s normal payroll practices for salariedemployees. This base salary may be adjusted annually by the Board or the Compensation Committee ofthe Board (the “Compensation Committee”) in its discretion; provided, however that any adjustmentthat decreases the Employee’s base salary must be approved by the Employee before such adjustmentbecomes effective.          (b) BONUS AND OTHER COMPENSATION. The Employee shall also receive such bonuses andother forms of compensation as may be declared from time to time by the Board or the CompensationCommittee in its sole and absolute discretion. Any bonus awarded to the Employee shall be paid bythe 15th day of the third calendar month following the close of the Company’s fiscal year for whichsuch bonus is earned or as soon thereafter as administratively practicable, but in no event shallsuch payment be made later December 31st of that calendar year in which fiscal year ends.     4. FRINGE BENEFITS. The Employee shall be entitled to participate in any benefitprograms adopted from time to time by the Company for the benefit of its employees, and theEmployee shall receive such other fringe benefits as may be granted to him from time to time by theBoard or the Compensation Committee.     5. BUSINESS EXPENSES. The Company shall reimburse the Employee for any and allnecessary, customary and usual expenses, properly receipted in accordance with the Company’spolicies, incurred by the Employee in the performance of his duties hereunder. Employee must submitproper documentation for each such expense within sixty (60) days after the later of (i) Employee’sincurrence of such expense or (ii) Employee’s receipt of the invoice for such expense. If suchexpense qualifies hereunder for reimbursement, then the Company will reimburse Employee for thatexpense within thirty (30) business days thereafter. In no event shall any such expense bereimbursed later than the close of the calendar year following the calendar year in which incurred.     6. DEATH OR DISABILITY.          (a) TERMINATION OF EMPLOYMENT. If the Employee dies while employed by the Company, theEmployee’s employment shall automatically cease and terminate. The Company’s obligation to pay theEmployee’s base salary pursuant to Section 3 shall terminate as of the date of the Employee’sdeath, and any accrued but unpaid salary and vacation pay due the Employee shall be paid at thattime. If Employee becomes physically or mentally disabled while employed by the Company, and as aresult thereof becomes unable to continue the proper performance of his duties hereunder, with orwithout reasonable accommodation, then the Employee’s employment hereunder and the Company’sobligation to
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pay the Employee’s base salary pursuant to Section 3 shall be terminated as of the date theEmployee is determined to be disabled, and any accrued but unpaid salary and vacation pay due theEmployee shall be paid at that time; provided, however, that the Employee shall be eligible toreceive payments in accordance with the terms and conditions of the amended and restated DeferredCompensation Agreement entered into by the parties on this date pursuant to Section 18 of thisEmployment Agreement, a copy of which is attached hereto as Exhibit A (the “Deferred CompensationAgreement”).          (b) DEFINITION OF DISABLED. The Employee shall be considered to be “disabled” forpurposes of this Section 6, if in the judgment of a licensed physician selected by the Board, theEmployee is unable to perform his customary duties under this Employment Agreement because of aphysical or mental impairment. The determination by the physician shall be binding and conclusivefor all purposes.     7. TERMINATION BY THE COMPANY.          (a) TERMINATION FOR CAUSE. The Company may terminate this Employment Agreement for“cause” at any time before the end of the Initial Term or the end of any Renewal Term. Anillustrative, but not exclusive, listing of matters that shall be deemed to constitute “cause”follows:          (1) the refusal of the Employee to implement or adhere to lawful policies ordirectives of the Board;          (2) the repeated failure of the Employee to achieve performance objectivesestablished and clearly stated from time to time by the Board or the CompensationCommittee in consultation with the Employee;          (3) conduct of a criminal nature which may have an adverse impact on theCompany’s reputation and standing in the community;          (4) conduct that is in violation of Employee’s common law duty of loyalty tothe Company; or          (5) fraudulent conduct in connection with the business affairs of the Company,regardless of whether said conduct is designed to defraud the Company or others.          If Employee’s employment is terminated for “cause”, Employee’s employment may be terminatedimmediately without any advance written notice. Notwithstanding the above, the Company mayterminate this Employment Agreement for cause only upon the affirmative vote of two-thirds of theBoard members that constitute a quorum.          (b) TERMINATION WITHOUT CAUSE. The Company shall not have the authority to terminatethis Employment Agreement without cause.
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          (c) FINAL COMPENSATION PAYMENTS. The Company’s obligation to pay the Employee’s basesalary pursuant to Section 3 shall terminate upon the Employee’s termination for cause, theEmployee’s retirement or the Employee’s voluntary termination of employment with the Company. Anyaccrued but unpaid salary and vacation pay due the Employee at the time of such termination ofemployment shall be paid at that time. To the extent the Employee is, at the time of suchtermination of employment, participating in one or more deferred compensation arrangements subjectto Section 409A of the Code (including, without limitation, the Deferred Compensation Agreement),the payments and benefits provided under those arrangements shall continue to be governed by, andto become due and payable in accordance with, the specific terms and conditions of thosearrangements, and nothing in this Employment Agreement shall be deemed to modify or alter thoseterms and conditions.     8. TERMINATION BY THE EMPLOYEE. The Employee shall have the right to terminate thisEmployment Agreement at any time. The Employee agrees to provide the Company with thirty (30) daysprior written notice of any such termination. The Company’s obligation to pay the Employee’s basesalary pursuant to Section 3 shall cease as of the Employee’s last day of work, and any accrued butunpaid salary and vacation pay due the Employee shall be paid at that time.     9. EFFECT OF TERMINATION. Upon the proper termination of this Employment Agreement bythe Company or upon the termination of this Employment Agreement by the Employee, this EmploymentAgreement shall thereupon be and become void and of no further force or effect, except that theProprietary Information provision of Section 10, and the Arbitration provisions of Section 16 shallcontinue to govern any disputes arising hereunder and any payments due pursuant to the provisionsof this Employment Agreement for services rendered prior to the termination shall be made asprovided in this Employment Agreement.     10. PROPRIETARY INFORMATION.          (a) RETURN OF PROPRIETARY INFORMATION. Upon termination of this Employment Agreementfor any reason, the Employee shall immediately turn over to the Company any “proprietaryinformation,” as defined below. The Employee shall have no right to retain any copies of anymaterial qualifying as “proprietary information” for any reason whatsoever after termination of hisemployment hereunder without the express written consent of the Company.          (b) NON DISCLOSURE. It is understood and agreed that, in the course of his employmenthereunder and through his activities for and on behalf of the Company, the Employee will receive,deal with and have access to the Company’s proprietary information and that the Employee holds theCompany’s proprietary information in trust and confidence for the Company. The Employee shall not,during the term of this Employment Agreement or thereafter, in any fashion, form or manner,directly or indirectly, retain, make copies of, divulge, disclose or communicate to any person, inany manner whatsoever, any of the Company’s proprietary information or any information of any kind,nature or description whatsoever concerning any matters affecting or relating to the Company’sbusiness, except when necessary or required in the normal course of the Employee’s employmenthereunder and for the benefit of the Company or with the express written consent of the Company.
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          (c) PROPRIETARY INFORMATION DEFINED. For purposes of this Employment Agreement,“proprietary information” means and includes information concerning the organization, business andfinances of the Company or of any third party which the Company is under an obligation to keepconfidential that is maintained by the Company as confidential, including (without limitation):          (i) the Company’s Lead List which is comprised of prospective students who meetthe admission requirements of the Company;          (ii) the information and data on current and prospective corporate accounts,including, but not limited to, the identity of the corporate accounts, the decisionmakers or decision influencers, the buying criteria of the accounts and programs forthose accounts;          (iii) the management process, training materials, scripts, programs andpreferred responses to features and benefits provided to Admission Counselors;          (iv) the certification training materials and processes for the certificationof 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;          (v) the information and data contained in the Company’s enrollment data system,all monthly enrollment reports;          (vi) the salary, terms of employment, tenure and performance information on thefaculty members and other employees of the Company, all business models andfinancial information, data and materials of the Company not otherwise available tothe general public through the Company’s Annual Report or otherwise;          (vii) all market research or works for hire materials, including, but notlimited to, industry data, demographics, company profiles and/or specific consumerbehavior information, all monthly financial, statistical and operational informationand reports including but not limited to the “Yellow Book”, and all otherinformation concerning enrollment by campus, profit and loss per campus and theterms of any lease;          (viii) all monthly financial statements, including, but not limited to, the“Board Book”;          (ix) all internally developed source code, including, but not limited to,modifications to existing source codes for student information systems (such asGalaxy, Campus Tracking, OSIRIS and eCampus), academic systems (such as rEsource andOnLine Learning System (OLS), proprietary modifications to packaged applications(such as PeopleSoft, Oracle Financials and EV3 HRizon) and all future internallydeveloped source code; and
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          (x) all technical or non-technical data, formulas, compilations (includingbusiness, research or product plans), programs (including computer programs),devices (including improvements or modifications of devices), drawings (includingdesigns), processes, techniques, financial data, lists of customers, clients,partners, service providers or suppliers, price lists and planning, and specificterms of contracts.     11. TERMINATION OF PRIOR AGREEMENTS. This Employment Agreement, together with theDeferred Compensation Agreement and any other agreements evidencing outstanding equity ornon-equity incentive awards made to the Employee, terminates and supersedes any and all prioragreements and understandings between the parties with respect to employment or with respect to thecompensation of the Employee by the Company.     12. ASSIGNMENT. This Employment Agreement is personal in its nature and neither ofthe parties hereto shall, without the consent of the other, assign or transfer this EmploymentAgreement or any rights or obligations hereunder; provided that, in the event of the merger,consolidation or transfer or sale of all or substantially all of the assets of the Company with orto any other individual or entity, this Employment Agreement shall, subject to the provisionshereof, be binding upon and insure to the benefit of such successor and such successor shalldischarge and perform all the promises, covenants, duties and obligations of the Company hereunder.     13. GOVERNING LAW. This Employment Agreement and the legal relations thus createdbetween the parties hereto shall be governed by and construed under and in accordance with the lawsof the State of Arizona without resort to that State’s conflict-of-laws rules.     14. ENTIRE AGREEMENT. This Employment Agreement, together with the DeferredCompensation Agreement and any other agreements evidencing outstanding equity or non-equityincentive awards made to the Employee, embodies the entire agreement of the parties respecting thematters within its scope and may be modified only in writing.     15. WAIVER. Failure to insist upon strict compliance with any of the terms, covenantsor conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shallany waiver or relinquishment of, or failure to insist upon strict compliance with, any right orpower hereunder at any one or more times be deemed a waiver or relinquishment of such right orpower at any other time or times.     16. ARBITRATION. In the event any dispute or controversy arising out of thisAgreement cannot be settled by the parties, such controversy or dispute shall be submitted forarbitration in Phoenix, Arizona, and for this purpose each party hereby expressly consents to sucharbitration in such place. In the event the parties cannot mutually agree upon an arbitrator andprocedure to settle their dispute or controversy within fifteen (15) days after written demand byone of the parties for arbitration, then the dispute or controversy shall be arbitrated by a solearbitrator pursuant to the then-existing rules and regulations of the Center for Public ResourcesRules for Non-Administrated Arbitration of Business Disputes. The decision of the arbitrator
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shall be binding upon the parties hereto for all purposes, and judgment to enforce any suchbinding decision may be entered in Maricopa County Superior Court (and for this purpose each partyhereby expressly and irrevocably consents to the jurisdiction of said court). At the request ofeither party, arbitration proceedings shall be conducted in the utmost secrecy. In such case, alldocuments, testimony, and records shall be received, heard, and maintained by the arbitrator insecrecy, available for inspection only by either party and by their attorneys and experts who shallagree, in advance and in writing, to receive all such information in secrecy. In all otherrespects, the arbitration shall be conducted pursuant to the Uniform Arbitration Act as adopted inthe State of Arizona and the then-existing rules and regulations of the Center for Public ResourcesRules for Non-Administrated Arbitration of Business Disputes to the extent such rules are notinconsistent with such Act or this Agreement.     17. SEVERABILITY. In the event that a court of competent jurisdiction determines thatany portion of this Employment Agreement is in violation of any statute or public policy, then onlythe portions of this Employment Agreement which violate such statute or public policy shall bestricken. All portions of this Employment Agreement which do not violate any statute or publicpolicy shall continue in full force and effect. Further, any court order striking any portion ofthis Employment Agreement shall modify the stricken terms to give as much effect as possible to theintentions of the parties under this Employment Agreement.     18. DEFERRED COMPENSATION AGREEMENT. A separate Deferred Compensation Agreement, asamended and restated as of [ ], 2008, has been entered into by the parties and isattached hereto as Exhibit A.     19. SECTION 409A Notwithstanding any other provisions in this Employment Agreementto the contrary, the following special provisions shall govern the payment date of any payment orbenefit provided under this Employment Agreement that may be deemed to constitute an item ofdeferred compensation under Section 409A of the Code          (a) No payments or benefits subject to Section 409A of the Code to which Employee becomesentitled under this Employment Agreement in connection with his termination of employment with theCompany shall be made or provided to Employee prior to the date of Employee’s separation fromservice (as such term is defined in Section 1.409A-1(h) of the Treasury Regulations issued underSection 409A of the Code).          (b) In addition, no payments or benefits subject to Section 409A of the Code to which Employeebecomes entitled under this Employment Agreement in connection with his termination of employmentwith the Company shall be made or provided to Employee prior to the *earlier*of (i) the firstbusiness day of the seventh month following the date of Employee’s separation from service or(ii) the date of Employee’s death, if Employee is deemed at the time of such separation fromservice a “specified employee” within the meaning of that term under Section 409A of the Code andsuch delayed commencement is otherwise required in order to avoid a prohibited distribution underCode Section 409A(a)(2). Upon the expiration of the
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applicable deferral period, all payments deferred pursuant to this Section 19(b) shall be paidin a lump sum to Employee, and any remaining payments due under this Employment Agreement shall bepaid in accordance with the normal payment dates specified for them herein.     **IN WITNESS WHEREOF,**the Company has caused this Employment Agreement to be executed by itsduly authorized officer, and the Employee has signed this Employment Agreement, as of the 31stday of December, 2008.         **APOLLO GROUP, INC.**           By: