Document:

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                                                                    Exhibit 10.2

                               APOLLO GROUP, INC.

                 SECOND AMENDED AND RESTATED DIRECTOR STOCK PLAN

                                    ARTICLE 1

                       ESTABLISHMENT, PURPOSE AND DURATION

      1.1 Establishment of the Plan. Apollo Group, Inc., an Arizona corporation,
hereby establishes the "Apollo Group, Inc. Director Stock Plan" (the "Plan") for
the benefit of its Nonemployee Directors. The Plan sets forth the terms of
initial and annual grants of Stock Options to Nonemployee Directors, and such
grants are subject to the terms and provisions in this Plan.

      1.2 Purpose of the Plan. The purpose of the Plan is to encourage ownership
in the Company by Nonemployee Directors and to strengthen the ability of the
Company to attract and retain the services of experienced and knowledgeable
individuals as Nonemployee Directors of the Company and to provide those
individuals with a further incentive to work for the best interests of the
Company and its shareholders.

      1.3 Effective Date. The Plan is effective as of August 5, 1994 (the
"Effective Date"). Within one year after the Effective Date, the Plan shall be
submitted to the shareholders of the Company for their approval. The Plan will
be deemed to be approved by the shareholders if it receives the affirmative vote
of the holders of a majority of the shares of stock of the Company present, or
represented, and entitled to vote at a meeting duly held (or by the written
consent of the holders of a majority of the shares of stock of the Company
entitled to vote) in accordance with the applicable provisions of the Arizona
General Corporation Law and the Company's Bylaws and Articles of Incorporation.
Any Awards granted under the Plan prior to shareholder approval are effective
when made (unless the Committee specifies otherwise at the time of grant), but
no Award may be exercised or settled and no restrictions relating to any Award
may lapse before shareholder approval. If the shareholders fail to approve the
Plan, any Award previously made shall be automatically canceled without any
further act.

      1.4 Duration of the Plan. The Plan shall remain in effect until all Shares
subject to it shall have been purchased or acquired according to the Plan's
provisions, subject to the right of the Board of Directors to terminate the Plan
at any time pursuant to Article 8 or Section 9.4. However, no Award may be
granted under the Plan after the tenth anniversary date of the Effective Date of
the Plan.

                                    ARTICLE 2

                          DEFINITIONS AND CONSTRUCTION

      2.1 Definitions. For purposes of the Plan, the following terms will have
the meanings set forth below:

            (a) "Award" means a grant of Nonqualified Stock Options under the
      Plan.

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            (b) "Board" or "Board of Directors" means the Board of Directors of
      the Company, and includes any committee of the Board of Directors
      designated by the Board to administer this Plan.

            (c) "Change in Control" means and includes each of the following:

                  (1) Any consolidation or liquidation of the Company in which
            the Company is not the continuing or surviving corporation or
            pursuant to which Shares would be converted into cash, securities or
            other property, other than a merger of the Company in which the
            holders of the Shares immediately before the merger have the same
            proportionate ownership of common stock of the surviving corporation
            immediately after the merger;

                  (2) The shareholders of the Company approve any plan or
            proposal for the liquidation or dissolution of the Company; or

                  (3) Substantially all of the assets of the Company are sold or
            otherwise transferred to parties that are not within a "controlled
            group of corporations" (as defined in Section 1563 of the Code) in
            which the Company is a member.

            (d) "Code" means the Internal Revenue Code of 1986, as amended from
      time to time.

            (e) "Committee" means the committee appointed by the Board to
      administer the Plan.

            (f) "Company" means Apollo Group, Inc., an Arizona corporation, or
      any successor as provided in Section 9.3.

            (g) "Disability" means a permanent and total disability, within the
      meaning of Code Section 22(e)(3). To the extent permitted pursuant to
      Section 16 of the Exchange Act, Disability shall be determined by the
      Board in good faith, upon receipt of sufficient competent medical advice
      from one or more individuals, selected by the Board, who are qualified to
      give professional medical advice.

            (h) "Exchange Act" means the Securities Exchange Act of 1934, as
      amended from time to time, or any successor provision.

            (i) "Fair Market Value" means the closing price for the Shares on
      the relevant date, or (if there were no sales on such date) the closing
      price on the nearest day before the relevant date, as reported on The
      Nasdaq National Market System (or on any national securities exchange on
      which the Shares are then listed).

            (j) "Grant Date" means September 1, 1994 and each anniversary of
      that date through September 1, 2003.

            (k) "Nonemployee Director" means any individual who is a member of
      the Board of Directors of the Company, but who is not otherwise an
      employee of the

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      Company and is not a director, officer, or employee of any of the
      Company's subsidiaries. Effective for Options granted on or after January
      10, 1995, a Non-Employee Director means any individual who is a member of
      the Board of Directors of the Company, but who is not otherwise an
      employee of the Company and is not an officer or employee of any of the
      Company's subsidiaries.

            (l) "Nonqualified Stock Option" or "NQSO" means an option to
      purchase Shares, granted under Article 6, that is not intended to be an
      incentive stock option qualifying under Code Section 422.

            (m) "Option" means a Nonqualified Stock Option granted under the
      Plan.

            (n) "Participant" means a Nonemployee Director of the Company who
      has been granted an Award under the Plan.

            (o) "Person" shall have the meaning in Section 3(a)(9) of the
      Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
      "group" as defined in Section 13(d).

            (p) "Shares" means Apollo Education Group Class A Stock.

      2.2 Gender and Number. Except as indicated by the context, any masculine
term also shall include the feminine, the plural shall include the singular and
the singular shall include the plural.

      2.3 Severability. If any provision of the Plan is determined to be invalid
for any reason, the remaining portion of the Plan shall be construed and
enforced as if the invalid provision had not been included.

                                    ARTICLE 3

                                 ADMINISTRATION

      3.1 The Committee. The Plan will be administered by either the Board of
Directors or the Committee appointed by the Board, subject to the restrictions
set forth in the Plan. If the Board does not appoint a Committee, any reference
herein to the Committee shall be to the Board.

      3.2 Administration by the Committee. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner that
is consistent with the Plan's provisions. However, the Committee does not have
the power to determine Plan eligibility, or to determine the number, the price,
the vesting period, or the timing of Awards to be made under the Plan to any
Participant.

      3.3 Decisions Binding. The Committee's determinations and decisions under
the Plan, and all related orders or resolutions of the Board shall be final,
conclusive, and binding on all persons, including the Company, its stockholders,
employees, Participants, and their estates and beneficiaries.

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                                    ARTICLE 4

                           SHARES SUBJECT TO THE PLAN

      4.1 Number of Shares. Subject to adjustment as provided in Section 4.3,
the aggregate number of Shares available for grant under the Plan shall be
2,132,924 (which number takes into account all stock splits from February 6,
2001 through August 28, 2004 and after the conversion of the University of
Phoenix Online stock into the Shares). The Shares issued pursuant to Options
exercised under the Plan may be authorized and unissued Shares or Shares
reacquired by the Company, as determined by the Committee.

      4.2 Lapsed Awards. If any Option granted under the Plan terminates,
expires, or lapses for any reason, any Shares subject to purchase pursuant to
such Option again will be available for grant under the Plan.

      4.3 Adjustments in Authorized Shares. In the event a stock dividend is
declared upon the Shares, the Shares then subject to each Award (and the number
of shares subject thereto) shall be increased proportionately without any change
in the aggregate purchase price therefor. In the event the Shares shall be
changed into or exchanged for a different number or class of shares or shares of
another corporation, whether through reorganization, recapitalization, stock
split-up, reverse stock split up, combination of shares, merger or
consolidation, or any other increase or decrease in the number of Shares
effected without receipt of consideration by the Company, the Board, in its
discretion, shall have the authority to substitute for Shares then subject to
each Award the number and class of shares into which each outstanding Share
shall be so exchanged, all without any change in the aggregate purchase price
for the Shares then subject to each Award.

                                    ARTICLE 5

                          ELIGIBILITY AND PARTICIPATION

      5.1 Eligibility. Persons eligible to participate in the Plan are limited
to Nonemployee Directors.

      5.2 Actual Participation. All eligible Nonemployee Directors will receive
grants of Options pursuant to Article 6.

                                    ARTICLE 6

                              ANNUAL OPTION GRANTS

      6.1 Initial Grant of Options. Immediately following the Company's initial
public offering of the Shares, each individual who is a Nonemployee Director on
such date shall be granted an Option to purchase 10,000 such shares at an
exercise price per share that is equal to the initial public offering price. In
addition, immediately following the Company's initial public offering of
University of Phoenix Online stock, each individual who is a Nonemployee
Director on such date shall be granted an Option to purchase 10,000 shares of
University of Phoenix Online stock at an exercise price per share that is equal
to the initial public offering price. With

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the exception of Section 6.4 hereof, the specific terms of the Options are
subject to the provisions of this Article 6 and the Option Agreement executed
pursuant to Section 6.3.

      6.1A A One Time Grant of Options. Each individual who, on January 10,
1995, is both a director of the Company and a director of any subsidiary of the
Company shall be granted an Option to purchase 20,000 Shares as of January 10,
1995, at an exercise price equal to the Fair Market Value for the Shares on
January 10, 1995.

      6.2 Annual Grant of Options. Each individual who is a Nonemployee Director
on the relevant Grant Date shall be granted an Option to purchase 20,250 Shares
on each September 1 through 2003, subject to the limitation on the number of
Shares that may be awarded under this Plan.

      6.3 Option Agreement. Each Option grant will be evidenced by an Option
Agreement that will not include any terms or conditions that are inconsistent
with the terms and conditions of this Plan.

      6.4 Option Price. Except as otherwise provided herein, the exercise price
per Share under an Option granted pursuant to this Article 6 shall be equal to
the Fair Market Value of such Share on the Grant Date ("Option Price").

      6.5 Duration of Options. Each Option granted under this Article 6 shall
expire on the tenth (10th) anniversary date of its grant unless the Option is
earlier terminated, forfeited, or surrendered pursuant to a provision of this
Plan.

      6.6 Vesting of Shares Subject to Option. Participants shall be entitled to
exercise Options granted under this Article 6 at any time within the time period
beginning six (6) months and one day after grant of the Option, and ending ten
(10) years after grant of the Option.

      6.7 Payment. Options are exercised by delivering a written notice of
exercise to the Secretary of the Company, setting forth the number of Shares to
be exercised, accompanied by full payment for the Shares. The Option Price is
payable:

            (a) in cash or its equivalent;

            (b) by tendering previously acquired Shares having a Fair Market
      Value at the time of exercise equal to the total Option Price (provided
      that the Shares tendered upon Option exercise have been held by the
      Participant for at least six (6) months prior to their tender to satisfy
      the Option Price); or

            (c) by a combination of (a) and (b).

      As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased pursuant to the exercise of the Option.

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      6.8 Restrictions on Share Transferability. To the extent necessary to
ensure that Options granted under this Article 6 comply with applicable law, the
Board shall impose restrictions on any Shares acquired pursuant to the exercise
of an Option under this Article 6, including, without limitation, restrictions
under applicable Federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.

      6.9 Termination of Service on Board of Directors Due to Death or
Disability. If a Participant's service on the Board is terminated by reason of
death or Disability, and a portion of the Participant's Award is not fully
vested as of that date, the portion of the Participant's Award that is
exercisable and fully vested will remain exercisable. The portion of the Award
that is not fully vested is forfeited and returned to the Company (and shall
once again be available for grant under the Plan).

      To the extent an Option is exercisable as of the date of death or
Disability, it will remain exercisable at any time prior to its expiration date,
or for one (1) year after the date of death or Disability, whichever period is
shorter, by the Participant or such person or persons as shall have been named
as the Participant's legal representative or beneficiary, or by such persons
that have acquired the Participant's rights under the Option by will or by the
laws of descent and distribution.

      6.10 Termination of Service on Board of Directors for Other Reasons. If
the Participant's service on the Board is terminated for any reason other than
for death or Disability, any outstanding Options held by the Participant that
are not fully vested as of the date of termination are immediately forfeited to
the Company (and shall once again become available for grant under the Plan). To
the extent an Option is exercisable as of such date, it will remain exercisable
for one (1) year after the date the Participant's service on the Board
terminates.

      6.11 Nontransferability of Options. No Option granted under this Article 6
may be sold, transferred, pledged, assigned, or otherwise alienated, other than
by will, or by the laws of descent and distribution. Further, all Options
granted to a Participant under this Article 6 shall be exercisable during his or
her lifetime only by such Participant.

                                    ARTICLE 7

                                CHANGE IN CONTROL

      7.1 Awards. If a Change of Control occurs, all outstanding Awards shall
become fully exercisable and all restrictions on such outstanding Awards shall
lapse. Upon, or in anticipation of, such an event, the Committee may cause every
Award outstanding hereunder to terminate at a specific time in the future and
shall give each Participant the right to exercise such Awards during a period of
time as the Committee, in its sole and absolute discretion, shall determine.

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                                    ARTICLE 8

                    AMENDMENT, MODIFICATION, AND TERMINATION

      8.1 Amendment, Modification, and Termination. Subject to the terms set
forth in this Section 8.1, the Committee may terminate, amend, or modify the
Plan at any time; provided, however, that shareholder approval is required for
any Plan amendment that would materially increase the benefits to Participants
or the number of securities that may be issued, or materially modify the
eligibility requirements in the Plan. Further, Plan provisions relating to the
amount, price, and timing of securities to be awarded under the Plan may not be
amended more than once every six (6) months.

      8.2 Awards Previously Granted. Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant holding the Award.

                                    ARTICLE 9

                                  MISCELLANEOUS

      9.1 Indemnification. Each individual who is or shall have been a member of
the Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under this Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to assume and
defend the same before he or she undertakes to defend it on his or her own
behalf.

      The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such individuals may be entitled under the
Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

      9.2 Beneficiary Designation. Each Participant under the Plan may name any
beneficiary or beneficiaries to whom any benefit under the Plan is to be paid in
the event of his or her death. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

      9.3 Successors. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the

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existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

      9.4 Requirements of Law. The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.
Notwithstanding any other provision of the Plan, the Committee may, at its sole
discretion, terminate, amend, or modify the Plan in any way necessary to comply
with applicable requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission as interpreted pursuant to no-action letters and
interpretive releases.

      9.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Arizona.

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                                                                    Exhibit 10.5

                               APOLLO GROUP, INC.

                           SECOND AMENDED AND RESTATED

                        1994 EMPLOYEE STOCK PURCHASE PLAN

      1. Purpose. The purpose of this 1994 Employee Stock Purchase Plan (the
"Plan") of Apollo Group, Inc. (the "Company") is to encourage stock ownership by
employees of the Company and its Subsidiaries and thereby provide employees with
an incentive to contribute to the profitability and success of the Company. The
Plan, which is intended to qualify as an "employee stock purchase plan" meeting
the requirements of Section 423 of the Code, is for the exclusive benefit of
eligible employees of the Company and its Subsidiaries.

      2. Definitions. For purposes of the Plan, in addition to the terms defined
in Section 1, terms are defined as set forth below:

            (a) "Board" means the Board of Directors of the Company.

            (b) "Cash Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding cash contributions
pending investment in Stock.

            (c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code will be deemed to include
successor provisions thereto and regulations thereunder.

            (d) "Custodian" means Smith Barney Inc., or such successor thereto
as may be appointed by the Board.

            (e) "Earnings" means that portion of a Participant's salary or wages
which is designated as "regular pay" under the payroll system of the Company and
its Subsidiaries and received by a Participant for services rendered during a
specified pay period during which time the Participant participated in the Plan.

            (f) "Enrollment Date" means the first business day of each Offering
Period.

            (g) "Fair Market Value" means the closing sale price of Stock
reported in the table entitled "Nasdaq National Market Issues" or any successor
table in the Wall Street Journal (or, if Stock is then principally traded on a
national securities exchange, in the table reporting composite transactions for
such exchange) for such date or, if no shares of Stock were traded on that date,
on the next preceding day on which there was such a trade.

            (h) "Offering Period" means the three-month period beginning on
January 1, April 1, July 1, or October 1 of each year, with the first Offering
Period to begin on the first such date after the Company's Stock is publicly
traded on the Nasdaq National Market or a national securities exchange.

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            (i) "Participant" means an employee of the Company or a Subsidiary
who is participating in the Plan.

            (j) "Purchase Date" means the fifth business day after the end of
each Offering Period.

            (k) "Purchase Right" means a Participant's option to purchase shares
which is deemed to be outstanding during an Offering Period. A Purchase Right
represents an "option" as such term is used under Section 423 of the Code.

            (l) "Stock" means the Company's Apollo Education Group Class A
common stock, no par value per share, and such other securities as may be
substituted or resubstituted for Stock under Section 4.

            (m) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired upon
investment under the Plan.

            (n) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

      3. Administration.

            (a) Board Administration. The Plan will be administered by the
Board; provided, however, that the Board may delegate any administrative duties
and authority (other than authority to amend the Plan) to any Board committee or
to any officers or employees or committee thereof as the Board may designate (in
which case references herein to the Board will be deemed to mean the
administrator to which such duties and authority have been delegated). The Board
will have full authority to adopt, amend, suspend, waive, and rescind such rules
and regulations and appoint such agents as it may deem necessary or advisable to
administer the Plan, to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan and rules
and regulations thereunder, to furnish to the Custodian such information as the
Custodian may require, and to make all other decisions and determinations under
the Plan (including determinations relating to eligibility). No person acting in
connection with the administration of the Plan will, in that capacity,
participate in deciding any matter relating to his or her participation in the
Plan.

            (b) The Custodian. The Custodian will act as custodian under the
Plan, and will perform such duties as are set forth in the Plan and in any
agreement between the Company and the Custodian. The Custodian will establish
and maintain, as agent for Participants, Cash and Stock accounts and any other
subaccounts as may be necessary or desirable for the administration of the Plan.

            (c) Waivers. The Board may waive or modify any requirement that a
notice or election be made or filed under the Plan a specified period in advance
in an individual case or

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by adoption of a rule or regulation under the Plan, without the necessity of an
amendment to the Plan.

            (d) Other Administrative Provisions. The Company will furnish
information from its records as directed by the Board, and such records,
including as to a Participant's Earnings, will be conclusive on all persons
unless determined by the Board to be incorrect. Each Participant and other
person claiming benefits under the Plan must furnish to the Company in writing
an up-to-date mailing address and any other information as the Board or
Custodian may reasonably request. Any communication, statement, or notice mailed
with postage prepaid to any such Participant or other person at the last mailing
address filed with the Company will be deemed sufficiently given when mailed and
will be binding upon the named recipient. The Plan will be administered on a
reasonable and nondiscriminatory basis and will apply uniform rules to all
persons similarly situated. All Participants will have equal rights and
privileges (subject to the terms of the Plan) with respect to Purchase Right
outstanding during any given Offering Period.

      4. Stock Subject to Plan. Subject to adjustment as hereinafter provided,
the aggregate number of shares of Stock reserved and available for issuance or
which may be otherwise acquired upon exercise of Purchase Rights under the Plan
shall be 7,593,750 (which number takes into account all stock splits from the
Effective Date through August 28, 2004 and after the conversion of the
University of Phoenix Online common stock into the Stock). Any shares of Stock
delivered by the Company under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. The number and kind of such
shares of Stock subject to the Plan will be proportionately adjusted, as
determined by the Board, in the event of any extraordinary dividend or other
distribution, recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange, or
other similar corporate transaction or event affecting the Stock.

      5. Enrollment and Contributions.

            (a) Eligibility. An employee of the Company or a Subsidiary may be
enrolled in the Plan for any Offering Period if such employee was continuously
so employed during the 90 days preceding the Enrollment Date, unless one of the
following applies to the employee:

                  (i) Such person has been employed for less than one year with
the Company or a Subsidiary;

                  (ii) Such person is a "highly compensated employee" of the
Company within the meaning of Section 414(q) of the Code and was a participant
in the Apollo Group, Inc. Long-Term Incentive Plan on September 1, 1994;

                  (iii) Such person would, immediately upon enrollment, be
deemed to own, for purposes of Section 423(b)(3) of the Code, an aggregate of
five percent or more of the total combined voting power or value of all
outstanding shares of all classes of the Company or any Subsidiary; or

                  (iv) Such person is no longer employed by the Company or a
Subsidiary.

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The Company will notify an employee of the date as of which he or she is
eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms.

Notwithstanding the above, any individual who is employed by the Company or a
Subsidiary designated by the Board and who is working outside of the United
States shall not be eligible to participate in the Plan if the laws of the
country in which the employee is working makes the offer of the Purchase Right
or the delivery of Stock under the Plan impractical. Additionally, the offer of
the Purchase Right and the delivery of Stock under the Plan shall be effective
for any individual who is employed by the Company or a Subsidiary and who is
working outside of the United States only after the Company has complied with
the applicable laws of the country in which the employee is working.

            (b) Initial Enrollment. An employee who is eligible under Section
5(a) (or who will become eligible on or before a given Enrollment Date) may,
after receiving current information about the Plan, initially enroll in the Plan
by executing and filing with the Company's Human Resources Office a properly
completed enrollment form, including thereon the employee's election as to the
rate of payroll contributions for the Offering Period. To be effective for any
Offering Period, such enrollment form must be filed at least 15 days before the
Enrollment Date for the Offering Period.

            (c) Automatic Re-enrollment for Subsequent Offering Periods. A
Participant whose enrollment in and payroll contributions under the Plan
continues throughout an Offering Period will automatically be reenrolled in the
Plan for the next Offering Period unless (i) the Participant terminates
enrollment before the Enrollment Date for the next Offering Period in accordance
with Section 7(a) or (ii) on such Enrollment Date he or she is ineligible to
participate under Section 5(a). The rate of payroll contributions for a
Participant who is automatically re-enrolled for an Offering Period will be the
same as what was in effect at the end of the preceding Offering Period, unless
the Participant files a new enrollment form at least 15 days before the
Enrollment Date for the Offering Period designating a different rate of payroll
contribution.

            (d) Payroll Contributions. A Participant will make contributions
under the Plan by means of payroll deductions from each payroll period which
ends during the Offering Period, at the rate elected by the Participant in his
or her enrollment form filed nearest to, but not later than, 15 days before the
Enrollment Date for the Offering Period (except that such rate may be changed
during the Offering Period to the extent permitted below). The rate of payroll
contributions elected by a Participant may not be less than one percent of the
Participant's Earnings for each payroll period ending during an Offering Period,
nor more than the greater of (A) 10 percent of the Participant's year-to-date
Earnings, or (B) $3,000 during any full or partial calendar year during which an
individual is eligible to participate in the Plan, and only whole percentages
may be elected; provided, however, that the Board may specify a lower minimum
rate and higher maximum rate or dollar amount. The foregoing and any election of
a Participant notwithstanding, a Participant's rate of payroll contributions
will be adjusted downward by the Company at any time or from time to time as
necessary to ensure that the limit on the amount of Stock purchased with respect
to an Offering Period set forth in Section 6(a)(iii) is not exceeded. A
Participant may elect to increase, decrease, or discontinue payroll
contributions for future Offering Periods by filing a new enrollment form at
least 15 days before the Enrollment Date for the Offering Period designating a
different rate of payroll contributions. In addition, a

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Participant may elect to decrease or discontinue payroll contributions during an
Offering Period by filing a new enrollment form, such change to be effective for
any payroll period beginning at least 15 days after such filing.

            (e) Crediting Payroll Contributions to Cash Accounts. All payroll
contributions by a Participant under the Plan will be credited to a Cash Account
maintained by the Custodian on behalf of the Participant. The Custodian will
credit payroll contributions upon receipt by the Custodian from the Company of
information, in such form as may be specified by the Custodian, identifying the
amount of payroll contribution to be deposited for each Participant. The Company
will deposit with the Custodian an amount equal to the aggregate payroll
contributions for the Offering Period (not otherwise repaid to Participant under
Section 7(b)) on or before the Purchase Date for such Offering Period.

            (f) No Interest on Cash Accounts. No amounts of interest will be
credited or payable by the Company on payroll contributions or by the Custodian
on cash balances in Participant's Cash Accounts pending investment in Stock
except to the extent, if any, that the Company or the Custodian, as applicable
to its respective role, determines in its sole discretion to pay interest on
such payroll contributions or cash balances.

            (g) Effect of Rehiring. If an individual terminates employment with,
or ceases to perform services for, the Company and is later rehired by, or again
commences performing services for the Company, the individual will be eligible
to participate in the Plan as of the Offering Period next following the date the
individual is rehired by or again commences providing services for the Company,
if the period that the individual was separated from employment with, or ceased
providing services for, the Company is less than one full calendar year. If the
period that the individual was separated from employment with, or ceased
providing services for, the Company is equal to or greater than one full
calendar year, the individual will be eligible to participate in the Plan only
after the individual has again satisfied the eligibility requirements set forth
in Section 5(a).

      6. Purchases of Stock.

            (a) Purchase Rights. Enrollment in the Plan for any Offering Period
by a Participant will constitute a grant by the Company of a Purchase Right to
such Participant for such Offering Period. Each Purchase Right will be subject
to the following terms:

                  (i) The Purchase prices at which Stock will be purchased under
a Purchase Right will be as specified in Section 6(c).

                  (ii) Except as limited in (iii) below, the number of shares of
Stock that may be purchased upon exercise of the Purchase Right for an Offering
Period will equal the number of shares (including fractional shares) that can be
purchased at the purchase price specified in Section 6(c) with the aggregate
amount credited to the Participant's Cash Account as of the Purchase Date.

                  (iii) The number of shares of Stock subject to a Participant's
Purchase Right for any Offering Period will not exceed the number derived by
dividing $6,250 by 100% of the Fair Market Value of one share of Stock on the
Enrollment Date for the Offering Period.

                                       5
<PAGE>

                  (iv) The Purchase Right will be automatically exercised on the
Purchase Date for the Offering Period.

                  (v) Payments by a Participant for Stock purchased under a
Purchase Right will be made only through payroll deduction in accordance with
Section 5 (d) and (e).

                  (vi) The Purchase Right will expire on the earlier of the
Purchase Date for the Offering Period or the date on which the Participant's
enrollment in the Plan terminates.

            (b) Purchase of Stock. At or as promptly as practicable after the
Purchase Date for an Offering Period, amounts credited to each Participant's
Cash Account as of such Purchase Date will be applied by the Custodian to the
purchase of shares of Stock, in accordance with the terms of the Plan. Shares of
Stock will be purchased by the Custodian from the Company. The Shares sold by
the Company to the Custodian may be authorized but unissued shares or treasury
shares, as permitted under Section 4 hereof. The Custodian will aggregate the
amounts in all Cash Accounts when purchasing Stock, and shares so purchased will
be allocated to each Participant's Stock Account in proportion to the cash
amounts withdrawn from such Participant's Cash Account. Upon completion of
purchases in respect of a Purchase Date (which will be completed in not more
than 30 days after the Purchase Date), all shares of Stock so purchased for a
Participant will be credited to the Participant's Stock Account.

            (c) Purchase Price. The purchase price of each share of Stock
purchased in respect of a Purchase Date will equal 85% of the lesser of (i) the
Fair Market Value of a share of Stock on the Enrollment Date or (ii) the Fair
Market Value of a share of Stock on the Purchase Date.

            (d) Dividend Reinvestment; Other Distributions. Cash dividends on
any Stock credited to a Participant's Stock Account will be automatically
reinvested in additional shares of Stock; such amounts will not be available in
the form of cash to Participants. All cash dividends paid on Stock credited to
Participants' Stock Accounts will be paid over by the Company to the Custodian
at the dividend payment date. The Custodian will aggregate all purchase of Stock
in connection with dividend reinvestment for a given dividend payment date.
Purchases of Stock for purposes of dividend reinvestment will be made as
promptly as practicable (but not more than 30 days) after a dividend payment
date. The Custodian will make such purchases, as directed by the Board, either
(i) in transactions on The Nasdaq National Market System, any securities
exchange upon which Stock is traded, otherwise in the over-the-counter market,
or in negotiated transactions, or (ii) directly from the Company at 100% of the
Fair Market Value of a share of Stock on the dividend payment date. Any shares
of Stock distributed as a dividend or other distribution in respect of shares of
Stock or in connection with a split of the Stock credited to a Participant's
Stock Account will be credited to such Account. In the event of any other
non-cash dividend or distribution in respect of Stock credited to a
Participant's Stock Account, the Custodian will, if reasonably practicable and
at the direction of the Board, sell any property received in such dividend or
distribution as promptly as practicable and use the proceeds to purchase
additional shares of Common Stock in the same manner as cash paid over to the
Custodian for purposes of dividend reinvestment.

                                       6
<PAGE>

            (e) Withdrawals and Transfers. Shares of Stock may be withdrawn from
a Participant's Stock Account, in which case one or more certificates for whole
shares may be issued in the name of, and delivered to, the Participant, with
such Participant receiving cash in lieu of fractional shares based on the Fair
Market Value of a share of Stock on the date of withdrawal. Alternatively, whole
shares of Stock may be withdrawn from a Participant's Stock Account by means of
a transfer to a broker-dealer or financial institution that maintains an account
for the Participant, together with the transfer of cash in lieu of fractional
shares based on the Fair Market Value of a share of Stock on the date of
withdrawal. Participants may not designate any other person to receive shares of
Stock withdrawn or transferred under the Plan. A Participant seeking to withdraw
or transfer shares of Stock must give instructions to the Custodian in such
manner and form as may be prescribed by the Custodian, which instructions will
be acted upon as promptly as practicable. Withdrawals and transfers will be
subject to any fees imposed in accordance with Section 8(a) hereof.

            (f) Excess Account Balances. If any amounts remain in a Cash Account
following a Purchase Date as a result of the limitation set forth in Section
6(a)(iii), such amounts which resulted from payroll contributions will be
returned to the Participant by the Custodian as promptly as practicable.

      7. Termination and Distributions.

            (a) Termination of Enrollment. A Participant's enrollment in the
Plan will terminate upon (i) the beginning of any payroll period or Offering
Period that begins after he or she files a written notice of termination of
enrollment with the Company, provided that such Participant will continue to be
deemed to be enrolled with respect to any completed Offering Period for which
purchases have not been completed, (ii) such time as the Participant becomes
ineligible to participate under Section 5(a)(i) of the Plan, or (iii) the
termination of the Participant's employment by the Company and its Subsidiaries.
An employee whose enrollment in the Plan terminates may again enroll in the Plan
as of any subsequent Enrollment Date that is at least 90 days after such
termination of enrollment if he or she satisfies the eligibility requirements of
Section 5(a) as of such Enrollment Date. A Participant's election to discontinue
payroll contributions will not constitute a termination of enrollment.

            (b) Distribution. As soon as practicable after a Participant's
enrollment in the Plan terminates, amounts in the Participant's Cash Account
which resulted from payroll contributions will be repaid to the Participant. If
amounts credited to the Participant's Cash Account have not yet been deposited
by the Company with the Custodian, the Company rather than the Custodian will
make the repayment to the Participant. The Custodian will continue to maintain
the Participant's Stock Account for the Participant until the earlier of such
time as the Participant directs the sale of all Stock in the Account, withdraws,
or transfers all Stock in the Account, or one year after the Participant ceases
to be employed by the Company and its Subsidiaries. If a Participant's
termination of enrollment results from his or her death, all amounts payable
will be paid to his or her estate.

                                       7
<PAGE>

      8. General.

            (a) Costs. Costs and expenses incurred in the administration of the
Plan and maintenance of Accounts will be paid by the Company, to the extent
provided in this Section 8(a). Any brokerage fees and commissions for the
purchase of Stock under the Plan (including Stock purchased upon reinvestment of
dividends and distributions) will be paid by the Company, but any brokerage fees
and commissions for the sale of Stock under the Plan by a Participant will be
borne by such Participant. The rate at which such fees and commissions will be
charged to Participants will be determined by the Custodian or any broker-dealer
used by the Custodian (including an affiliate of the Custodian), and
communicated from time to time to Participants. In addition, the Custodian may
impose or pass through a reasonable fee for the withdrawal of Stock in the form
of stock certificates (as permitted under Section 6(f)), and reasonable fees for
other services unrelated to the purchase of Stock under the Plan, to the extent
approved in writing by the Company and communicated to Participants.

            (b) Statements to Participants. The Custodian will reflect payroll
contributions, matching allocations (if any), purchases, sales, and withdrawals
and transfers of shares of Stock and other Plan transactions by appropriate
adjustments to the Participant's Accounts. The Custodian will, not less
frequently than quarterly, provide or cause to be provided a written statement
to the Participant showing the transactions in his or her Accounts and the date
thereof; the number of shares of Stock purchased or sold, the aggregate purchase
price paid or sales price received, the purchase or sales price per share, the
brokerage fees and commissions paid (if any), the total shares held for the
Participant's Stock Account (computed to at least three decimal places), and
other information.

            (c) Compliance with Section 423. It is the intent of the Company
that this Plan comply in all respects with applicable requirements of Section
423 of the Code and regulations thereunder. Accordingly, if any provision of
this Plan does not comply with such requirements, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements.

      9. General Provisions.

            (a) Compliance With Legal and Other Requirements. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other obligations
of the Company and the Custodian under the Plan will be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company may, in
its discretion, postpone the issuance or delivery of Stock upon exercise of
Purchase Rights until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule, or
regulation, listing or other required action with respect to any automated
quotation system or stock exchange upon which the Stock or other Company
securities are designated or listed, or compliance with any other contractual
obligation of the Company, as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations. The
Company may, in its discretion, postpone the issuance or delivery of Stock upon
exercise of Purchase

                                       8
<PAGE>

Rights until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule, or regulation, or
the laws of any country in which employees of the Company and a Subsidiary who
are nonresident aliens and who arc eligible to participate reside, or other
required action with respect to any automated quotation system or stock exchange
upon which the Stock or other Company securities are designated or listed, or
compliance with any other contractual obligation of the Company, as the Company
may consider appropriate.

            (b) Limits on Encumbering Rights. No right or interest of a
Participant under the Plan, including any Purchase Right, may be pledged,
encumbered, or hypothecated to or in favor of any party, subject to any lien,
obligation, or liability of such Participant, or otherwise assigned,
transferred, or disposed of except pursuant to the laws of descent or
distribution, and any right of a Participant under the Plan will be exercisable
during the Participant's lifetime only by the Participant.

            (c) No Right to Continued Employment. Neither the Plan nor any
action taken hereunder, including the grant of a Purchase Right, will be
construed as giving any employee the right to be retained in the employ of the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company or any of its Subsidiaries to terminate any employee's
employment at any time.

            (d) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan. (This provision and other Plan
provisions do not set forth an explanation of the tax consequences to
Participants under the Plan. A brief summary of the tax consequences will be
included in disclosure documents to be separately furnished to Participants.)

            (e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval of the
Company's shareholders within one year after such Board action if such
shareholder approval is required by any federal or state law or regulation or
the rules of any automated quotation system or stock exchange on which the Stock
may then be quoted or listed, or if such shareholder approval is necessary in
order for the Plan to continue to meet the requirements of Section 423 of the
Code, and the Board may otherwise, in its discretion, determine to submit other
such actions to shareholders for approval; provided, however, that, without the
consent of an affected Participant, no amendment, alteration, suspension,
discontinuation, or termination of the Plan may materially and adversely affect
the rights of such Participant with respect to outstanding Purchase Rights
relating to any Offering Period that has been completed prior to such Board
action. The foregoing notwithstanding, upon termination of the Plan the Board
may elect to terminate all outstanding Purchase Rights at such time as the Board
may designate; in the event of such termination of any Purchase Right prior to

                                       9
<PAGE>

its exercise, all amounts contributed to the Plan which remain in a
Participant's Cash Account will be returned to the Participant (without
interest) as promptly as practicable.

            (f) No Rights to Participate; No Shareholder Rights. No Participant
or employee will have any claim to participate in the Plan with respect to
Offering Periods that have not commenced, and the Company will have no
obligation to continue the Plan. No Purchase Right will confer on any
Participant any of the rights of a shareholder of the Company unless and until
Stock is duly issued or transferred and delivered to the Participant (or
credited to the Participant's Stock Account).

            (g) Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may result in the
crediting of fractional shares of Stock to the Participant's Stock Account. Such
fractional shares will be computed to at least three decimal places. Fractional
shares will not, however, be issued by the Company, and certificates
representing fractional shares will not be delivered to Participants under any
circumstances.

            (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the shareholders of the Company for approval
will be construed as creating any limitations on the power of the Board to adopt
such other compensatory arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.

            (i) Plan Year. The Plan will operate on a plan year which ends
December 31 in each year.

            (j) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan will be determined in
accordance with the laws of the State of Arizona, without giving effect to
principles of conflicts of laws, and applicable federal law.

            (k) Effective Date. The Plan was effective as of the date the Plan
was originally approved by shareholders of the Company, at a meeting thereof, by
a vote sufficient to meet the requirements of Section 423(b)(2) of the Code.

                                       10

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