Exhibit 10.02


 


EXECUTION COPY


 


EMPLOYMENT AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


2.                                      Employment
of Executive; Duties and Status.


 


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


 





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4.                                      Compensation
and General Benefits.


 


4.1                               Base
Salary.


 


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


 


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


 


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


 


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


 


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


 


4.4                               Fringe
Benefits.


 


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


 


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


 


(b)                                 Insurance.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4.6                               Parachute
Treatment.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5.                                      Confidentiality
and Non-Competition.


 


5.1                               Confidentiality;
Intellectual Property.


 


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


 


(b)                                 The
Executive acknowledges and agrees that:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5.2                               Noncompetition
and Nonsolicitation.


 


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


 


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


 


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


 


11





















 


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


 


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


 


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


 


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


 


12





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13





















 


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


 


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


 


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


 


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


 


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


 


(f)                                    Confidential
or Proprietary Information means:


 


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


 


14





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15





















 


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


 


5.5                               Interpretation;
Severability.


 


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


 


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


 


16





















 


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


 


6.                                      Termination.


 


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


 


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


 


6.3                               Death
or Disability of the Executive.


 


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


 


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


 


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


 


17





















 


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


 


6.4                               Termination
For Good Cause.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


18





















 


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


 


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


 


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


 


6.5                               Termination
For Good Reason.


 


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


 


19





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


20





















 


6.8                               Payments
Upon Termination.


 


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


 


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


 


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


 


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


 


21





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


22





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


23





















 


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


 


7.                                      Miscellaneous.


 


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


 


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


 


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


 


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


 


24





















 


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


 


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


 


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


 


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


 


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


 


If to
the Company, to:


 


Laureate
Education, Inc.


1001
Fleet Street


Baltimore,
Maryland 21202


Attn:
Robert W. Zentz, Esquire


 


If to
the Executive, to:


 


Douglas
L. Becker


c/o
Laureate Education, Inc.


1001
Fleet Street


Baltimore,
Maryland  21202


 


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


 


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


 


25





















 


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


 


[THIS SPACE INTENTIONALLY LEFT BLANK]


 


26





















 


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


 


 


	
  WITNESS/

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  LAUREATE
  EDUCATION, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert W.
  Zentz

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Robert W. Zentz

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Douglas L.
  Becker

  	
  (SEAL)

  
	
   

  	
   

  	
  Douglas L.
  Becker

  	
   

  



 


[Signature Page to Employment Agreement]


 





















 


EMPLOYMENT AGREEMENT


 


Schedule 2(c)


 


Pre-authorized
Entities


 


•                  Educate,
Inc.


•                  Constellation
Energy Group, Inc.


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


•                  Sterling
Educational Real Estate


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


•                  Sterling
Capital Partners II, LLC (Founding Member)


•                  Sterling
Capital Partners, LLC


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


 





















 


Schedule 4.2


 


Year 2004 Bonus Criteria for Base Bonus


 


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