Document:

exv10w3

 

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

     AGREEMENT, dated this 8th day of May, 2007, between Renegy Holdings, Inc., a Delaware
corporation (the “Company”) with offices at 301 W. Warner Road, Suite 132, Tempe, Arizona 85284,
and Scott Higginson (the “Executive”),

W I T N E S S E T H:

     WHEREAS, the Company is entering into that certain Contribution and Merger Agreement by and
among the Company, Catalytica Energy Systems, Inc., Snowflake Acquisition Corporation, Renegy, LLC,
Renegy Trucking, LLC, Snowflake White Mountain Power, LLC, Robert M. Worsley, Christi M. Worsley
and the Robert M. Worsley and Christi M. Worsley Revocable Trust (the “CMA”); and

     WHEREAS in connection with the transactions contemplated under the CMA, the Company and
Executive wish to enter into an employment and compensation arrangement on the terms and conditions
set forth herein which shall supersede all previous agreements concerning employment between
Executive and any party to the CMA;

     NOW, THEREFORE, the Company and Executive mutually agree as follows:

     1. Employment. Subject to the terms and conditions of this Agreement, the Company
agrees to employ the Executive as its Senior Vice President during the Employment Period (as
defined in Section 5) and Executive agrees to perform such acts and duties and furnish such
services to the Company and its affiliates consistent with such position as the Company’s Chief
Executive Officer or Board of Directors shall from time to time direct. The Executive shall report
directly to the President or Chief Executive Officer of the Company and shall perform under his
supervision. The Executive hereby accepts such employment and agrees to devote at least ninety
percent (90%) of his time and best efforts to the duties provided herein, provided, that the
Executive may engage in other business activities which (i) involve no conflict of interest with
the interests of the Company (subject to approval by the Board of Directors, which approval shall
not be unreasonably withheld) or (ii) would not result in violation of Section 13 hereof, and in
the case of either (i) or (ii), which do not materially interfere with the performance by the
Executive of his duties under this Agreement. Executive may devote up to ten-percent (10%) of his
time, in the aggregate, to Permitted Activities (as defined in Section 13(c) below).

     2. Compensation. For services rendered to the Company during the term of this
Agreement, the Company shall compensate the Executive with an initial salary, payable in monthly
installments, of $200,000 per annum (“Base Salary”) less applicable withholding. Such Base Salary
shall be reviewed on an annual basis by the Compensation Committee of the Company’s Board of
Directors (the “Compensation Committee”) and shall be subject to being increased but not decreased
in the discretion of the Compensation Committee.

     3. Incentive Compensation.

 

 

     (a) In connection with the Executive’s execution of this Agreement, the Executive shall
receive 50,000 shares of common stock of the Company (“Common Stock”) and 50,000 stock options of
the Company (the “Initial Options”) (each of such numbers is before, and will be adjusted as a
result of, adjustment of capitalization pursuant to the CMA). All of the Initial Options shall be
“Incentive Stock Options” within the meaning of the Internal Revenue Code of 1986, as amended (the
“Code”), subject to the limitations of the Code. Any Initial Options which are not allowed to be
incentive stock options under the Code shall be non-qualified stock options. The Common Stock will
be issued and the Initial Options will be granted at Closing (as defined in the CMA), and the
Initial Options shall have an exercise price equal to the fair market value of the Company’s common
stock as of the date of grant. The Common Stock and Initial Options shall vest in full upon the
closing of the CMA and shall not be subject to any conditions or forfeiture, other than as may be
required by applicable law.

     (b) The Executive shall be eligible to receive a annual bonus on account of the Company’s 2007
fiscal year with a target payment equal to 100% of Base Salary based upon criteria developed by the
Board or its Compensation Committee (the “Target Bonus”). In 2008 and subsequent years, the Target
Bonus may be increased by the Board or its Compensation Committee, in its sole discretion and may
only be decreased with the consent of Executive. The Target Bonus may be paid to Executive in a
mixture of cash and equity compensation, as determined by the Compensation Committee in its sole
discretion; provided, however, that the cash component shall be no less than 50% of the Target
Bonus; provided, further, that for the 2007 fiscal year, the mixture shall be 50% cash and 50%
equity compensation and shall be pro-rated for the portion of 2007 during which Executive is
employed. In the event that the equity compensation component is paid in stock options, the number
of options shall be determined by dividing the dollar amount by the Black-Scholes value of Company
options (or by such other reasonable method of valuing Company options as the Compensation
Committee shall determine), and such options shall at a maximum be subject to a four-year vesting
schedule, with 1/48th of the covered shares vesting each month thereafter, so as to be
100% vested on the four year anniversary of the grant date, subject to Executive remaining a
Service Provider, as such term is defined in the Company’s 1995 Stock Plan (“Service Provider”) on
each vesting date.

     4. Benefits; Vacation. During the Employment Period, the Company shall provide or
cause to be provided to the Executive such employee benefits as are provided to other executive
officers of the Company, including family medical and dental, disability and life insurance, and
participation in pension and retirement plans, incentive compensation plans, stock option plans and
other benefit plans (collectively, the “Applicable Benefit Plans”). The Executive shall be entitled
to annual vacations in accordance with the Company’s vacation policies in effect from time to time
for executive officers of the Company.

     5. Term: Employment Period. The “Employment Period” shall commence on the Effective
Time (as defined in the CMA) (the “Effective Date”) and shall continue for an initial term of three
(3) years (the “Initial Term”). Thereafter, the Employment Period shall continue for successive
one (1) year terms (the “Additional Terms”) unless either the Company or the Executive provides
written notice of termination of the Employment Period not less than one hundred twenty (120) days
prior to the end of the Initial Term or any Additional Term, or unless
earlier terminated pursuant to Section 6. If the Executive shall remain in the full time
employ of the Company beyond the Employment Period without any written agreement between the

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parties, this Agreement shall be deemed to continue on a month to month basis and either party
shall have the right to terminate this Agreement at the end of any ensuing calendar month on
written notice of at least thirty (30) days.

     6. Termination.

          (a) Executive’s employment with the company shall be “at will”. Either the Company or the
Executive may terminate this Agreement and Executive’s employment at any time, with or without
Cause or Good Reason (as such terms are defined below), in its or his sole discretion, upon thirty
(30) days prior written notice of termination.

          (b) Without limiting the foregoing Section 6(a), (i) the Executive may terminate his
employment with the company at any time for Good Reason, or (ii) the Company may terminate his
employment at any time for Cause. “Good Reason” shall mean any of the following: (i) the Company’s
failure to elect or reelect, or to appoint or reappoint, Executive to the office of Senior Vice
President of the Company; (ii) material changes by the Company in the Executive’s function, duties
or responsibilities of a scope less than that associated with the positions of Senior Vice
President of the Company; (iii) Executive’s Base Salary is reduced by the Company below the highest
Base Salary of Executive in effect during the Employment Period; (iv) relocation of Executive’s
principal place of employment to a place that is not within either the city limits of Tempe,
Arizona, or within a radius of twenty-five (25) miles of his primary residence; (v) failure by the
Company to obtain the assumption of this Agreement by any successor or assign of the Company; (vi)
material breach of this Agreement by the Company, which breach is not cured within five (5) days
after written notice thereof is delivered to the Company; or (vii) the occurrence of a Change of
Control (as defined in Section 14). “Cause” shall mean (i) the Executive’s willful, repeated or
negligent failure to perform his duties hereunder and to comply with any reasonable or proper
direction given by or on behalf of the Company’s Board of Directors and the continuation of such
failure following twenty (20) days written notice to such effect, (ii) the Executive being guilty
of serious misconduct on the Company’s premises or elsewhere, whether during the performance of his
duties or not, which is reasonably likely to cause material damage to the reputation of the Company
or render it materially more difficult for the Executive to satisfactorily continue to perform his
duties and the continuation or a second instance of such serious misconduct following twenty (20)
days written notice to such effect; (iii) the Executive being found guilty in a criminal court of
any offense of a nature which is reasonably likely to materially adversely affect the reputation of
the Company or to materially prejudice its interests if the Executive were to continue to be
employed by the Company; (iv) the Executive’s commission of any act of fraud or theft involving the
Company or its business, or any intentional tort against the Company; or (v) the Executive’s
violation of any of the material terms, covenants, representations or warranties contained in this
Agreement and failure to correct such violation within twenty (20) days after written notice by the
Company. Notwithstanding the foregoing, “Cause” shall only be deemed to exist if it is so
determined by the Board of Directors of the Company, after the Executive and his counsel are first
given the opportunity to address the Board with respect to such determination at a duly noticed
meeting of the Board of Directors.

          (c) “Disability” shall mean that the Executive, in the good faith determination of the Board
of Directors of the Company, based on the advice of a qualified physician after a

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proper
examination of the Executive (which Executive shall take reasonable actions to facilitate), is
unable to render services of the character contemplated hereby and that such inability (i) may be
expected to be permanent, or (ii) may be expected to continue for a period of at least six (6)
consecutive months (or for shorter periods totaling more than six (6) months during any period of
twelve (12) consecutive months). Termination resulting from Disability may only be effected after
at least thirty (30) days written notice by the Company of its intention to terminate the
Executive’s employment.

          (d) “Termination Date” shall mean (i) if this Agreement is terminated on account of death, the
date of death; (ii) if this Agreement is terminated for Disability, the date established by the
Company pursuant to Section 6(c) hereof; (iii) if this Agreement is terminated by the Company, the
date on which a notice of termination is given to the Executive; (iv) if the Agreement is
terminated by the Executive, the date the Executive ceases work; or (v) if this Agreement expires
by its terms, the last day of the term of this Agreement. Notwithstanding the foregoing, if within
thirty (30) days after any notice of termination is given, the party receiving such notice notifies
the other party that a dispute exists concerning the termination, the Termination Date shall be the
date finally determined to be the Termination Date, either by mutual written agreement of the
parties or by binding arbitration in the manner provided in Section 21 hereof; provided that the
Termination Date shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute with reasonable
diligence.

     7. Severance:

          (a) If (i) the Company terminates the employment of the Executive against his will and without
Cause (including by giving notice of termination of the Agreement pursuant to Section 5), or (ii)
the Executive terminates his employment for Good Reason, if the Executive executes and does not
revoke a standard release in a form reasonably acceptable to the Company the Executive shall be
entitled to receive salary, Incentive Compensation and vacation accrued through the Termination
Date, plus the following:

               (i) an amount equal to two years of Executive’s Base Salary in effect on the Termination Date;

               (ii) a pro-rated portion of the amount of Incentive Compensation Executive would earn for the
fiscal year in which the termination occurs if the results of operations of the Company for the
period from the beginning of such fiscal year to the Termination Date were annualized (the
“Pro-Rated Incentive Compensation”); and

               (iii) full vesting of all outstanding stock options held by Executive.

The Company shall make the termination payment required hereunder within thirty (30) days of the
Termination Date. Notwithstanding the foregoing, the Company shall not be required to pay any
severance pay for any period following the Termination Date if the Executive violates the
provisions of Section 13 of this Agreement in any material respect, and fails to cure such
violation within thirty (30) days after written notice from the Company to the Executive detailing
such violation.

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          (b) If (i) the Executive voluntarily terminates his employment other than for Good Reason,
(ii) the Executive’s employment is terminated due to death or Disability, or (iii) the Executive is
terminated by the Company for Cause, then the Executive shall be entitled to receive salary and
accrued vacation through the Termination Date only. In the event of death or Disability the
Executive shall also be entitled to receive the Pro-Rated Incentive Compensation and vesting of
outstanding stock options as provided in Section 7(a).

          (c) Subject to Executive timely electing continuation coverage under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall subsidize
Executive and his eligible dependents’ COBRA premiums so that Executive pays the same premium as an
active employee of the Company for a period equal to the lesser of (i) eighteen (18) months
following Executive’s termination date, or (ii) the date on which Executive becomes covered under
the group health plans of another employer with comparable group health benefits and levels of
coverage; and

          (d) The Executive acknowledges that, upon termination of his employment, he is entitled to no
other compensation, severance or other benefits other than those specifically set forth in this
Agreement or any applicable Stock Option Agreement, or pursuant to any Applicable Benefit Plan.

     8. Expenses. The Company shall pay or reimburse the Executive for all expenses
normally reimbursed by Company, reasonably incurred by him in furtherance of his duties hereunder,
and authorized and approved by the Company in compliance with such rules relating thereto as the
Company may, from time to time, adopt and as may be required in order to permit such payments as
proper deductions to Company under the Internal Revenue Code of 1986, as amended, and the rule and
regulations adopted pursuant thereto now or hereafter in effect.

     9. Facilities and Services. The Company shall furnish the Executive with office
space, secretarial and support staff and such other facilities and services as shall be reasonably
necessary for the performance of his duties under this Agreement.

     10. Mitigation Not Required. In the event this Agreement is terminated, the Executive
shall not be required to mitigate amounts payable pursuant hereto by seeking other employment or
otherwise. The Executive’s acceptance of any such other employment shall not diminish or impair
the amounts payable to the Executive pursuant hereto.

     11. Place of Performance. The Executive shall perform his duties primarily in Tempe,
Arizona or locations within a reasonable proximity thereof, which location may include his primary
residence, except for reasonable travel as the performance of the Executive’s duties may require.

     12. Insurance and Indemnity. During the Employment Period, if available at reasonable
costs, the Company shall maintain, at its expense, officers and directors fiduciary liability
insurance covering the Executive and all other executive officers and directors in an
amount of no less than $10,000,000. The Company shall also indemnify the Executive, to the
fullest extent permitted by law, from any liability asserted against or incurred by the Executive

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by reason of the fact that the Executive is or was an officer or director of the Company or any
affiliate or related party or is or was serving in any capacity at the request of the Company for
any other corporation, partnership, joint venture, trust, employment benefit plan or other
enterprise. This indemnity shall survive termination of this Agreement.

     13. Noncompete and Non-Solicitation.

     (a) The Executive agrees that, except in accordance with his duties under this Agreement on
behalf of the Company, or with respect to any Permitted Activities (as defined in Section 13(c)
below):

           (i) During the term of this Agreement, Executive will not participate in, be employed in any
capacity by, serve as director, consultant, agent or representative for, or have any interest,
directly or indirectly, in any enterprise which is engaged in a business competitive with the
business of the Company or any of its subsidiaries conducted during the term of the Executive’s
employment with the Company, or which is being actively developed during the term of the
Executive’s employment with the Company; and

           (ii) The Executive acknowledges that the nature of the Company’s business is such that if
Executive were to become employed by, or substantially involved in, the business of a competitor of
the Company during the twelve (12) months following termination of Executive’s employment with the
Company, it would be very difficult for Executive not to rely on or use the Company’s trade secrets
and confidential information. Thus, to avoid the inevitable disclosure of the Company’s trade
secrets and confidential information, Executive agrees and acknowledges that Executive’s right to
receive the payments set forth in Section 7 or 14 (to the extent Executive is otherwise entitled to
such payments) shall be conditioned upon Executive not directly or indirectly engaging in (whether
as an employee, consultant, proprietor, principal, partner, stockholder, corporate officer,
director or otherwise), nor having any ownership interest in or participating in the financing,
operation, management or control of, any person, firm, corporation or business that competes with
the Company or is a customer or client of the Company during the one year period following the
Termination Date (“Competition”); provided, however, that following his termination of employment
with the Company, Executive shall be permitted to work for an entity in Competition with the
Company whose primary business is not providing products or services competitive with the products
or services of the Company, so long as Executive does not engage in a business that makes such
entity in Competition with the Company.

     (b) Notwithstanding the provisions of Section 13(a), Executive may, without violating this
Section 13(a), own, as a passive investment, shares of capital stock of a publicly held-corporation
that engages in Competition where the number of shares of such corporation’s capital stock that are
owned by Executive represent less than three percent (3%) of the total number of shares of such
corporation’s capital stock outstanding.

     (c) For the purposes of this Agreement, “Permitted Activities” shall mean those activities
identified on Exhibit A.

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     (d) Non-Solicitation. The Executive further agrees and acknowledges, for such 12
month period following termination of Executive’s employment with the Company for any reason, that
Executive’s right to receive the payments set forth in Sections 7 and 14 (to the extent Executive
is otherwise entitled to such payments) shall be conditioned upon Executive not either directly or
indirectly soliciting, inducing, recruiting or encouraging an employee to leave his or her
employment either for Executive or for any other entity or person with which or whom Executive has
a business relationship.

     (e) Understanding of Covenants. The Executive represents that he (i) is familiar with
the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of his
obligations hereunder, including, without limitation, the reasonableness of the length of time,
scope and geographic coverage of these covenants.

     14. Provisions After Change of Control.

          (a) In the event Executive’s employment with the Company is terminated (other than as a
consequence of death or Disability) either (x) by the Company for any reason other than for Cause
during a Pending Change of Control (as hereinafter defined) or within twenty-four (24) months
following the occurrence of a Change of Control, or (y) by Executive for Good Reason within
twenty-four (24) months following the occurrence of a Change of Control, if the Executive executes
a standard release in a form reasonably acceptable to the Company, then Executive shall be entitled
to receive from the Company, in lieu of the severance payment otherwise payable pursuant to Section
7(a), the following:

               (i) an amount equal to two (2) years of Executive’s Base Salary in effect on the Termination
Date;

               (ii) the maximum amount of the Incentive Compensation which Executive could earn for the
fiscal year in which the Termination Date occurs; and

               (iii) full vesting of all outstanding stock options held by Executive.

The Company shall make the termination payments required hereunder within ten (10) days of the
Termination Date. Notwithstanding the foregoing, the Company shall not be required to pay the
termination payments set forth in this Section 14 for any period following the Termination Date if
the Executive violates the provisions of Section 13 of this Agreement in any material respect, and
fails to cure such violation within thirty (30) days after written notice from the Company to the
Executive detailing such violation.

          (b) For purposes of this Agreement, the term “Change of Control” shall mean:

               (i) The acquisition, other than from the Company, by any individual, entity or group (within
the meaning of Rule 13d-3 promulgated under the Exchange Act or any successor provision) (any of
the foregoing described in this Section 14(b)(i) hereafter a “Person”) of 50% or more of either (a)
the then outstanding shares of Capital Stock of the Company (the “Outstanding Capital Stock”) or
(b) the combined voting power of the then outstanding voting securities of the Company entitled to
vote generally in the election of

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directors (the “Voting Securities”), provided, however, that any acquisition by (x) the
Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which,
following such acquisition, more than 60% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Capital Stock and Voting Securities, as
the case may be, shall not constitute a Change of Control; or

               (ii) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating to the election of
the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A, or any
successor section, promulgated under the Exchange Act); or

               (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation
(a “Business Combination”), in each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior to such Business Combination
do not, following such Business Combination, beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from the Business Combination; or

               (iv) a sale or other disposition of all or substantially all of the assets of the Company
other than to a corporation with respect to which, following such sale or disposition, more than
60% of respectively, the then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of directors is
then owned beneficially, directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding Capital Stock and Voting
Securities immediately prior to such sale or disposition in substantially the same proportion as
their ownership of the Outstanding Capital Stock and Voting Securities, as the case may be,
immediately prior to such sale or disposition; or

               (v) The first purchase under a tender offer or exchange offer for 50% or more of the
outstanding shares of stock (or securities convertible into stock) of the Company, other than an
offer by the Company or any of its subsidiaries or any employee benefit plan sponsored by the
Company or any of its subsidiaries.

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          (c) For purposes of this Agreement, the term “Pending Change of Control” shall mean the
occurrence of one of the following events as the result of which a Change in Control pursuant
thereto is reasonably expected within ninety (90) days after the date of determination as to
whether there is a Pending Change in Control: (i) the Company executes a letter of intent, term
sheet or similar instrument with respect to a transaction or series of transactions, the
consummation of which would result in a Change of Control; (ii) the Board approves a transaction or
series of transactions, the consummation of which would result in a Change of Control; (iii) a
Person makes a public announcement of a tender offer for the Common Stock of the Company, the
consummation of which would result in a Change of Control; or (iv) a Person makes a public
announcement of, or makes a public filing with respect to, the intention of that Person to seek to
change the membership of the Board of Directors of the Company in a manner that would result in a
Change of Control. A Pending Change of Control shall cease to exist upon a Change of Control.

     15. Code Section 409A. Notwithstanding any provisions of this Agreement to the
contrary, if Executive is a “specified employee” within the meaning of Section 409A of the Code and
any temporary, proposed or final regulations thereunder (together, “Section 409A”) at the time of
Executive’s termination, and any severance payments (including any benefits which provide for a
“deferral of compensation” within the meaning of Section 409A) to be made to Executive pursuant to
this Agreement will not be paid or provided in full by March 15 of the year following the year in
which Executive’s “separation from service” (within the meaning of Section 409A) occurs, then only
that portion of such severance payments up to the 409A Limit (as defined below) may be made within
the first six (6) months following Executive’s separation from service in accordance with the
applicable payment schedule. Any portion of such severance payments in excess of the 409A Limit
shall accrue and, to the extent such severance payments would otherwise have been payable within
the first six (6) months following Executive’s separation from service, will become payable the
date that is six (6) months and one (1) day following the date of Executive’s separation from
service. All subsequent severance payments, if any, will be payable as provided in this Agreement.
For purposes of this Agreement, the “409A Limit” means the lesser of:

(a) two (2) times the Executive’s annualized compensation based upon the Executive’s annual
rate of pay (the determination of Executive’s annual rate of pay for this purpose shall be
as determined in accordance with Section 409A if additional guidance is released after the
date of this Agreement or, if no such guidance is released, Executive’s annual rate of pay
shall be deemed to be Executive’s annual base salary); and

(b) two (2) times the maximum amount that may be taken into account under a qualified plan
pursuant to Section 401(a)(17) of the Code for the year in which the Executive has a
separation from service.

The intent of this Agreement is for all payments made hereunder to comply with the requirements of
Section 409A; to the extent any terms of this Agreement are ambiguous, such terms shall be
interpreted in accordance with such intent.

     16. Certain Additional Payments by Company.

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          (a) Anything in this Agreement to the contrary notwithstanding, if it shall be determined that
any payment or distribution by the Company to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) is
determined without regard to any additional payments required under this Section 16 (a “Payment”)
would be subject to the excise tax imposed by Section 409A, or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then
Executive shall be entitled to receive, in addition to the Payment, a payment (a “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without limitation, any
federal or state income taxes (and any interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, Executive will have received the Gross-Up Payment in
an amount equal to the Excise Tax imposed upon the Payment. The maximum amount of any Gross-Up
Payment shall be $150,000.

          (b) Subject to the provision of Section 16(c), all determinations required to be made under
this Section 16, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by a “Big Four” accounting firm retained by the Company as its auditor at the time such
determinations are required (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and Executive within fifteen (15) business days of the receipt of
notice from the Company that there has been a Payment, or such earlier time as is required by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 16, shall be paid by the Company to
Executive within ten (10) business days of the Company’s receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive’s
applicable federal income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive.
As a result of the uncertainty in the application of Section 409A at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. If Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm should determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.

          (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable, but in no event later than ten (10) business
days after Executive has been informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is required to be paid. Executive shall
not pay such claim prior to the expiration of the thirty- (30)- day period following the date on
which Executive gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such thirty- (30)- day period that the Company desires to
consent such claim, Executive shall:

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               (i) give the Company any information reasonably required by the Company relating to such
claim,

               (ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, but not limited to, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order effectively to contest such claim, and

               (iv) permit the Company to participate in any proceedings relation to such claim; provided,
however, that 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 for (A) any Excise Tax or federal or state income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and payment of costs and
expenses, and (B) any federal, state and local income tax imposed with respect to the payment of
amounts pursuant to clause (A) above and this clause (B), based on the highest marginal income tax
rate applicable to Executive for the tax year such payments are includable in his taxable income.
Without limitation on the foregoing provisions of this Section 16(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearing sand conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless from (X) any Excise Tax or federal or state income tax
(including interest or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance, and (Y) any federal, state and local
income tax imposed with respect to the payment of amounts pursuant to clause (X) above and this
clause (Y), based on the highest marginal income tax rate applicable to Executive for the tax year
such payments are includable in his taxable income; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of Executive with respect
to which such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues within respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

11

 

          (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to
Section 16(c), Executive becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company’s complying with the requirements of Section 16(c))
promptly pay to the Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto) and, as and when received, an amount equal to any savings
in federal and state income taxes realized by Executive by reason of the payment to the Company of
such refunds and interest. If, after the receipt by Executive of an amount advanced by the Company
pursuant to Section 16(c), a determination is made that Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid.

     17. Notices. Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing and if sent by registered or certified mail, return receipt requested
to his residence in the case of the Executive, or to its principal office in the case of the
Company, or to such other addresses as they may respectively designate in writing.

     18. Entire Agreement; Waiver. This Agreement contains the entire understanding of the
parties and may not be changed orally but only by an agreement in writing, signed by the party
against whom enforcement of any waiver, change, modification or discharge is sought. Waiver of or
failure to exercise any rights provided by this Agreement in any respect shall not be deemed a
waiver of any further or future rights.

     19. Binding Effect; Assignment. The rights and obligations of this Agreement shall
bind and inure to the benefit of any successor of the Company by reorganization, merger or
consolidation, or any assignee of all or substantially all of the Company’s business or properties.
The Executive’s rights hereunder are personal to and shall not be transferable nor assignable by
the Executive.

     20. Headings. The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.

     21. Governing Law; Arbitration. This Agreement shall be construed in accordance with
and governed for all purposes by the laws and public policy of the State of Arizona applicable to
contracts executed and to be wholly performed within such state. Any dispute or controversy
arising out of or relating to this Agreement shall be settled by arbitration in accordance with the
rules of the American Arbitration Association and judgment upon the award may be entered in any
court having jurisdiction thereof. The arbitration shall be held in Maricopa County or in such
other place as the parties hereto may agree.

     22. Further Assurances. Each of the parties agrees to execute, acknowledge, deliver
and perform, and cause to be executed, acknowledged, delivered and performed, at any time and from
time to time, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney
and/or assurances as may be necessary or proper to carry out the provisions or intent of this
Agreement.

12

 

     23. Severability. The parties agree that if any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.

     24. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
Agreement.

[Signature page follows.]

13

 

     IN WITNESS WHEREOF, Renegy Holdings, Inc. has caused by instrument to be signed by a duly
authorized officer and the Executive has hereunto set his hand the day and year first above
written.

	 	 	 	 	 	 	 
	Renegy Holdings, Inc.	 	 	 	 
	 
	 	 	 	 	 	 
	By

	 	/s/ Robert W. Zack
	 	 	 	/s/ Scott Higginson
	 

	 	 
	 	 	 	 
	 

	 	Name: Robert W. Zack

Title: CEO/CFO
	 	 	 	                         Scott Higginson

Signature Page to Employment Agreement

 

Exhibit A to Scott Higginson Employment Agreement

Permitted Activities

For the purposes of this Agreement, “Permitted Activities” shall mean (i) serving as a consultant
to the Clark County Regional Flood Control District of Nevada, (ii) engaging in governmental
affairs work on behalf of Four Square Group and (iii) engaging in any other businesses activities
and investments of the Executive or its affiliates that are not directly related to the renewable
energy industry, including, without limitation, those activities and investments of NZ Legacy, LLC
and Robert M. Worsley and his affiliates as set forth on Exhibit A hereto.

	•	 	Real estate and land development joint ventures;
	 
	•	 	Acquisitions, dispositions or exchanges of various parcels of land
and mineral rights with the US federal government;
	 
	•	 	Sales or exchanges of mineral rights with public or private
parties in Arizona, New Mexico and Colorado;
	 
	•	 	Sales or leasing of cell tower space, billboard space, and similar
space on lands currently owned or purchased in the future;
	 
	•	 	Rawhide cattle and other ranching activities;
	 
	•	 	Mining for uranium, travertine, oil and gas, clays, water,
petrified wood, sandstone/flagstone, salt, potash, sand and gravel
and other minerals;
	 
	•	 	Farming, ranching, leasing, or other activities on property
currently owned or purchased in the future;

15exv10w1

 

EMPLOYMENT AGREEMENT

          THIS AGREEMENT is entered into, effective this 5th day of June 2007, by and between
Apollo Group, Inc. (the “Company”), and Joseph L. D’Amico (the “Executive”) (hereinafter
collectively referred to as “the parties”).

          WHEREAS, the Company has determined that it is in the best interests of the Company and its
shareholders to employ the Executive as described herein;

          WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying
the terms of such employment; and

          WHEREAS, the Executive desires to enter into this Agreement and to accept such employment;

          NOW, THEREFORE, in consideration of the foregoing and the respective agreements of the
parties contained herein, the parties hereby agree as follows:

     1. Term. The initial term of employment under this Agreement will
commence immediately following the Executive’s termination of employment with FTI Consulting, Inc.
and its affiliates, including FTI, LLC (the “Commencement Date”) and will continue for a three-year
period (the “Initial Term”); provided, however, that thereafter the term of employment under this
Agreement will be automatically renewed from year to year, unless either the Company or the
Executive will have given written notice to the other at least sixty (60) calendar days prior
thereto that the term of employment under this Agreement will not be so renewed (a “Notice of
Non-Renewal”).

     2. Employment.

     (a) Position. The Executive will be employed as, and hold the title of, Executive Vice
President of Finance and Chief Financial Officer, and will have the duties, powers, and
responsibilities as are customary for such position. The Executive will be given the authority
needed to perform the duties and undertake the responsibilities assigned to his position. The
Executive will have the authority to hire appropriate personnel as may be needed to carry out his
duties. The Executive will report to either the Company’s President or the Company’s Chief
Executive Officer or to any other individual with equivalent authority.

     (b) Obligations. The Executive shall devote his full business time and attention to the
business and affairs of the Company. During the term of this Agreement, the Executive shall not
engage in any other employment, service or consulting activity without the prior written approval
of the Company’s Board of Directors. The foregoing, however, shall not preclude the Executive from
(i) serving on any corporate, civic or charitable boards or committees on which the Executive is
serving on the Commencement Date, provided those positions are listed in attached Schedule I, or on
which he commences service following the Commencement Date with the prior written approval of the
Board of Directors, (ii) providing services for a limited time to FTI Consulting, Inc. in order to
transition to third parties Executive’s existing responsibilities, including without limitation,
his responsibilities with respect to Tower Records; or (iii) managing personal investments, so long
as such clause (i), (ii) and (iii) activities do not interfere with the performance of the
Executive’s responsibilities hereunder.

 

 

     3. Base Salary and Bonus.

     (a) Base Salary. The Company agrees to pay or cause to be paid to the Executive an annual base
salary at the rate of $500,000, less applicable withholding. This base salary will be subject to
annual review and may be increased from time to time by the Compensation Committee of the Board of
Directors (the “Compensation Committee”) upon consideration of such factors as the Executive’s
responsibilities, compensation of similar executives within the Company and in other companies,
performance of the Executive, and other pertinent factors. The Executive’s annual rate of base
salary, as it may be increased from time to time, will be hereinafter referred to as the “Base
Salary”. Such Base Salary will be payable in accordance with the Company’s customary practices
applicable to its executives.

     (b) Bonus. For each fiscal year completed during the Term, the Executive will be eligible to
receive an annual cash bonus (“Annual Bonus”) based upon individual and Company performance goals
that are established in good faith by the Compensation Committee and that are reasonable in
comparison to the individual and Company performance goals the Compensation Committee sets for the
Company’s other executive officers, provided that the Executive’s target Annual Bonus will be no
less than 100% of his Base Salary (the “Target Bonus”). Notwithstanding the foregoing, the
Executive shall be entitled to an Annual Bonus equal to $700,000 for the fiscal year ending August
31, 2007. The Annual Bonus for each fiscal year shall be paid in accordance with the Company’s
customary practices, but in no event more than 75 days following the end of such fiscal year.

     4. Equity Compensation Awards. In addition to the grants below, the Executive will
be eligible during the Term for grants of equity compensation awards in accordance with the
Company’s policies, as in effect from time to time. The grants below will be issued pursuant and
subject to the terms of the Company’s 2000 Stock Incentive Plan, as amended and restated effective
as of August 28, 2004 and as subsequently amended to expressly provide for the grant of restricted
stock units (the “Incentive Plan”) and to the award agreements evidencing the grants, except that
in the event of any conflict between the terms of the Incentive Plan or the award agreements and
this Agreement, the terms of this Agreement will control:

     (a) Initial Stock Option Grant. On the later of: (i) the Commencement Date; and (ii) the third
business day following the Company’s release of its earnings results for the fiscal quarter ending
May 31, 2007, the Compensation Committee shall grant the Executive stock options for 500,000 shares
of Class A common stock with an exercise price equal to the closing selling price per share on that
date and a term of four (4) years (the “Initial Option Grant”).

     (b) Initial Restricted Stock Unit Award. On the later of: (i) the Commencement Date; and
(ii) the third business day following the Company’s release of its earnings results for the fiscal
quarter ending May 31, 2007, the Compensation Committee shall grant the Executive restricted stock
units covering 60,000 shares of the Company’s Class A common stock (the “Initial RSU Award’). Each
restricted stock unit will represent the right to receive one share of such Class A common stock
upon the vesting of that unit, subject to the Company’s collection of all applicable withholding
taxes.

     (c) Vesting. The Initial Option Grant will vest and become exercisable either (i) in a series
of three successive equal annual installments upon the Executive’s completion of each year of
employment with the Company over the three-year period measured from the Commencement Date
(regardless of the actual grant date); or (ii) as otherwise provided in Section 8(a), and those
grants will be subject to the vesting acceleration provisions set forth in Sections 8 and 11 of
this Agreement. The shares of the Company’s Class A common stock underlying the Initial RSU Award
will vest and become immediately issuable, subject to the Company’s collection of the applicable
withholding taxes, either: (i) in a series of three successive equal annual installments upon the
Executive’s completion of each year of

2

 

employment with the Company over the three-year period measured from the Commencement Date
(regardless of the actual grant date); or (ii) as otherwise provided in Section 8(a). In
addition, the Initial RSU Award will be subject to the vesting acceleration provisions of
Sections 8 and 11 of this Agreement.

     (d) Shares to Be Registered; Stock Certificates. All shares issued to the Executive pursuant
to his exercise of the Initial Option Grant and the vesting of the Initial RSU Award will be
registered under an appropriate and effective registration statement under the Securities Act of
1933, as amended (the “1933 Act”).

     (e) The Company represents and warrants that this Agreement, the grants described in
subsections (a) and (b) above, and the terms of those grants have been authorized and approved by
the Compensation Committee.

     5. Employee Benefits. Provided he otherwise satisfies any applicable
eligibility requirements for participation, the Executive will be entitled to participate in the
welfare, retirement, perquisite, and fringe benefit plans, practices, and programs maintained by
the Company and made available to senior executives generally and as may be in effect from time to
time. The Executive’s participation in any such plans, practices and programs for which he
satisfies the applicable eligibility requirements will be on the same basis and terms as are
applicable to senior executives of the Company generally.

     6. Other Benefits.

     (a) Expenses. Subject to applicable Company policies, including (without limitation) the
timely submission of appropriate documentation and expense reports, the Executive will be entitled
to receive prompt reimbursement of all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing, or otherwise furthering the
business or interests of the Company, including without limitation, round trip first class airfare
to accommodate Executive’s commute to and from Chicago/Phoenix, at such times as the Executive
shall reasonably determine. In addition, and not in limitation of the foregoing, the Company
shall provide the Executive with a monthly allowance of $2,500 during the term of this Agreement
for the Executive’s Arizona housing, food and other similar expenses. Each such monthly payment to
the Executive shall be made no later than five (5) business days after the end of the applicable
month.

     (b) Office and Facilities. The Executive will be provided with appropriate offices in
Chicago, Illinois and share such secretarial and other support facilities as are commensurate with
the Executive’s status with the Company and adequate for the performance of his duties hereunder.

     (c) Vacation. During the Term, the Executive will be eligible for paid vacation in
accordance with the Company’s policies, as may be in effect from time to time, for its senior
executives generally; provided, however, that the Executive will be eligible for no less than four
weeks of paid vacation per year.

     7. Termination. Except for a Notice of Non-Renewal, as described in Section 1, the
Executive’s employment hereunder may only be terminated in accordance with the following terms and
conditions:

     (a) Termination by the Company without Cause. The Company will be entitled to terminate the
Executive’s employment at any time by delivering a Notice of Termination to the Executive pursuant
to Section 7(e); provided, however, that any termination of the Executive’s employment for Cause
shall be governed by the provisions of Section 7(b).

3

 

     (b) Termination by the Company for Cause.

          (i) The Company may terminate the Executive’s employment hereunder for “Cause” (as defined
below) by delivering to him a Notice of Termination. For purposes of the foregoing, any of the
following shall constitute grounds for terminating the Executive’s employment for Cause: (A) the
Executive’s pleading “guilty” or “no contest” to, or his conviction of, a felony or any crime
involving moral turpitude, (B) his commission of any act of fraud or any act of personal
dishonesty involving the property or assets of the Company intended to result in substantial
financial enrichment to the Executive, (C) a material breach by the Executive of one or more of
his obligations under Section 9 of this Agreement or his Proprietary Information and Inventions
Agreement with the Company, (D) a material breach by the Executive of any of his other obligations
under this Agreement or any other agreement with the Company, (E) the Executive’s commission of a
material violation of Company policy which would result in an employment termination if committed
by any other employee of the Company or his gross misconduct, (F) the Executive’s material
dereliction of the major duties, functions and responsibilities of his executive position (other
than a failure resulting from the Executive’s incapacity due to physical or mental illness), (G) a
material breach by the Executive of any of the Executive’s fiduciary obligations as an officer of
the Company or (H) the Executive’s willful and knowing participation in the preparation or release
of false or materially misleading financial statements relating to the Company’s operations and
financial condition or his willful and knowing submission of any false or erroneous certification
required of him under the Sarbanes-Oxley Act of 2002 or any securities exchange on which shares of
the Company’s Class A common stock are at the time listed for trading. However, prior to any
termination of the Executive’s employment for Cause based on any of the reasons specified in
clauses (C) through (F) and the delivery of a Notice of Termination in connection therewith, the
Company shall give written notice to the Executive of the actions or omissions deemed to
constitute the grounds for such a termination for Cause, and the Executive shall have a period of
not less than sixty (60) calendar days after the receipt of such notice in which to cure the
specified default in his performance and thereby avoid a Notice of Termination under this
subsection (b)(i).

          (ii) In the event the Executive is provided with a Notice of Termination under subsection
(b)(i), the Notice of Termination shall specify a Termination Date that is no earlier than the
third business day following the date of the Notice of Termination, and the Executive will have
three (3) business days following the date of such Notice of Termination to submit a written
request to the Board for a meeting to review the circumstances of his termination. If the Executive
timely submits such a written request to the Board, the Board or a committee of the Board shall set
a meeting whereby the Executive, together with his counsel, shall be permitted to present any
mitigating circumstances or other information as to why he should not be terminated for Cause, and
the Executive’s Termination Date shall be delayed until such meeting has occurred. Such meeting
will be held, at the Executive’s option, either on a mutually agreeable date prior to the
Termination Date specified in the Notice of Termination or on a mutually agreeable date within
fifteen (15) calendar days after his timely written notice to the Company requesting such a
meeting. Within five (5) business days after such meeting, the Board or committee of the Board, as
applicable, shall deliver written notice to the Executive of its final determination and, if the
termination decision is upheld, the final actual Termination Date. During the period following the
date of the Notice of Termination until the Termination Date or other resolution of the matter, the
Company shall have the option to place the Executive on an unpaid leave of absence. The rights
under this subsection will not be deemed to prejudice the Executive’s other rights and remedies in
any way or give rise to any waiver, estoppel, or other defense or bar. Without limiting the
foregoing sentence and for purposes of clarification, the failure by the Executive to request a
meeting under this subsection, to participate in a meeting that has been requested, or to present
any evidence or argument will not prevent the Executive from making any claim against the Company,
from seeking any legal or equitable remedy, or from putting forward any evidence or argument at any
judicial or arbitral hearing.

4

 

     (c) Termination by the Executive. The Executive may terminate his employment hereunder for
“Good Reason” by delivering to the Company (1) a Preliminary Notice of Good Reason (as defined
below) no later than one hundred and twenty (120) calendar days following the act or omission
which the Executive sets forth in such notice as grounds for a Good Reason termination, and (2)
not earlier than fourteen (14) calendar days after the delivery of such Preliminary Notice or (if
later) the third business day following the Company’s failure to take appropriate remedial action
within the applicable sixty (60)-day cure period provided below to the Company following the
receipt of such the Preliminary Notice, a Notice of Termination. For purposes of this Agreement,
“Good Reason” means:

          (i) a material reduction in the scope of the Executive’s duties, responsibilities or
authority;

          (ii) the repeated assignment to the Executive of duties materially inconsistent with the
Executive’s positions, duties, authority or responsibilities, or a materially adverse change in
Executive’s reporting requirements as set forth in Section 2(a) hereof or an adverse change to his
title set forth in Section 2(a) hereof: provided however, that none of the following shall
constitute Good Reason: (A) the occasional assignment of duties that are inconsistent with Section
2(a) hereof, (B) a change in the Executive’s reporting requirements so that he is required to
report to a person with equivalent authority of the Company’s President or Chief Executive Officer
but without such title or (C) any change in the Executive’s title which does not affect his status
as one of the five (5) highest ranking officers of the Company;

          (iii) a relocation of the Executive’s principal place of employment other than in Chicago,
Illinois; provided, however that travel to other locations as reasonably required to carry out the
Executive’s duties and responsibilities hereunder and travel from time to time to the Company’s
headquarters as reasonably requested by the Company shall not be a basis for a termination for
Good Reason; or

          (iv) a material breach by the Company of any of its obligations under this
Agreement.

     In no event will any acts or omissions of the Company which are not the result of bad faith
and which are cured within sixty (60) days after receipt of written notice from the Executive
identifying in reasonable detail the acts or omissions constituting “Good Reason” (a “Preliminary
Notice of Good Reason”) be deemed to constitute grounds for a Good Reason resignation. A
Preliminary Notice of Good Reason will not, by itself, constitute a Notice of Termination.

     A ten percent (10%) or less aggregate reduction in the Executive’s base salary and Target
Bonus shall not constitute Good Reason if substantially all of the other executive officers of the
Company are subject to the same aggregate reduction to their base salary and target bonuses.

     (d) Termination due to the Executive’s Death or Disability. This Agreement will terminate upon
the death of the Executive. The Company may terminate the Executive’s employment hereunder if he is
unable to perform, with or without reasonable accommodation, the principal duties and
responsibilities of his position with the Company for a period of six (6) consecutive months or
more by reason of any physical or mental injury or impairment; provided, however, that in the event
the Executive is at the time covered under any long-term disability benefit program in effect for
the Company’s executive officers or employees, such termination of the Executive’s employment shall
not occur prior to the date he first becomes eligible to receive benefits under such program. The
termination of the Executive’s employment under such circumstances shall, for purposes of this
Agreement, constitute a termination for “Disability.”

5

 

     (e) Notice of Termination. Any purported termination for Cause by the Company or for Good
Reason by the Executive will be communicated by a written Notice of Termination to the other at
least three (3) business days prior to the Termination Date (as defined below). For purposes of
this Agreement, a “Notice of Termination” will mean a notice which indicates the specific
termination provision in this Agreement relied upon and will, with respect to a termination for
Cause or Good Reason, set forth in reasonable detail the facts and circumstances claimed to provide
a basis for such termination of the Executive’s employment under the provision so indicated. Any
termination by the Company under this Section 7 other than for Cause or by the Executive without
Good Reason will be communicated by a written Notice of Termination to the other party fourteen
(14) calendar days prior to the Termination Date. However, the Company may elect to pay the
Executive in lieu of fourteen (14) calendar days’ written notice. For purposes of this Agreement,
no such purported termination of employment pursuant to this Section 7 will be effective without
such Notice of Termination.

     (f) Termination Date. “Termination Date” will mean in the case of the Executive’s death, the
date of death; in the case of non-renewal of the Agreement pursuant to Section 1, the date the Term
of the Agreement expires; and in all other cases, the date specified in the Notice of Termination.

     8. Compensation Upon Termination.

     (a) Except
as provided further in this Section 8(a), if the Executive’s employment is
terminated: (i) by the Company for Cause; (ii) by reason of the Executive’s death or Disability;
(iii) pursuant to a Notice of Non-Renewal delivered by the Executive; or (iv) by the Executive by
delivery of a written notice of resignation without Good Reason, the Company’s sole obligations
hereunder will be to pay the Executive or his estate on the Termination Date the following amounts
earned hereunder but not paid as of the Termination Date: (i) Base Salary, (ii) reimbursement for
any and all monies advanced or expenses incurred pursuant to Section 6(a) through the Termination
Date, provided the Executive has submitted appropriate documentation for such expenses, and (iii)
the amount of the Executive’s accrued but unpaid vacation time (together, these amounts will be
referred to as the “Accrued Obligations”). In addition to the Accrued Obligations, in the event
the Executive’s employment terminates by reason of the Executive’s death or Disability or pursuant
to a Notice of Non-Renewal delivered by the Executive, the Executive or his estate will be paid his
Target Bonus, pro-rated for his actual period of service during the fiscal year in which such
termination of employment occurs. Furthermore, if the Executive’s employment terminates as a result
of his death or Disability, then any unvested stock options, restricted stock, restricted stock
units, or other equity granted to the Executive that would have otherwise been vested on the date
of such termination of employment had the vesting schedule for each of those grants been in the
form of successive equal monthly installments over the applicable vesting period will immediately
vest. The Executive’s entitlement to any other benefits will be determined in accordance with the
Company’s employee benefit plans then in effect.

     (b) If the Executive’s employment is terminated: (i) by the Company for any reason other than
for Cause; (ii) by the Executive for Good Reason; or (iii) pursuant to a Notice of Non-Renewal
delivered by the Company, the Executive will, in addition to the Accrued Obligations, be entitled
to the following compensation and benefits from the Company, provided and only if he (i) executes
and delivers to the Company a general release (substantially in the form of attached Exhibit A)
which becomes effective and enforceable in accordance with applicable law and (ii) complies with
the restrictive covenants set forth in Section 10:

          (i) an amount equal to the product of (A) two and (B) the sum of the Executive’s Base Salary
and Target Bonus at the time of the Notice of Termination, to be paid in equal increments, in
accordance with the Company’s normal payroll practices, over the one-year measured from the
Termination Date;

6

 

          (ii) one hundred percent vesting of the Initial RSU Award and accelerated vesting of the
Initial Option Grant to the extent of the greater of (A) fifty percent of the then unvested
portion of each such grant or (B) the portion of each such grant which would have vested had the
Executive completed an additional twelve (12) months of employment with the Company prior to the
Termination Date;

          (iii) provided the Executive and/or his dependents are eligible and timely elect to continue
their healthcare coverage under the Company’s group health plan pursuant to their rights under
COBRA, continued coverage under such plan at the Company’s expense until the earliest of (A) the
end of the eighteen (18)-month period measured from the Termination Date, (B) the date that the
Executive and/or his eligible dependents are no longer eligible for COBRA coverage and (C) the
date that the Executive becomes eligible for such coverage under the health plan of any new
employer (the Executive agrees to provide the Company with written notice of such eligibility
within ten calendar days); and

          (iv) the Executive’s entitlement to any other benefits will be determined in accordance with
the Company’s employee benefit plans then in effect.

     (c) The Executive shall have the right to resign, for any reason or no reason, at any time
within the thirty (30) day period beginning six (6) months after the closing of a Change in Control
(as defined in Section 11) and to receive, in connection with such resignation, the same severance
benefits to which he would be entitled under Section 8(b) above had such resignation been for Good
Reason; provided, however, that the Executive’s entitlement to severance benefits under this
Section 8(c) shall be conditioned upon (i) his execution and delivery to the Company of a general
release (substantially in the form of attached Exhibit A) which becomes effective and enforceable
in accordance with applicable law and (ii) his compliance with the restrictive covenants set forth
in Section 10 of this Agreement.

     (d) The Executive will not be required to mitigate the amount of any payment provided for in
this Section 8 by seeking other employment or otherwise, and no such payment or benefit will be
eliminated, offset or reduced by the amount of any compensation provided to the Executive in any
subsequent employment.

     (e) The exercise period with respect to the Initial Option Grant shall not be accelerated upon
the Executive’s termination of employment for any reason.

     9. Confidentiality.

     (a) The Executive hereby acknowledges that the Company may, from time to time during the Term,
disclose to the Executive confidential information pertaining to the Company’s business, strategic
plans, technology or financial affairs. All information, data and know-how, whether or not in
writing, of a private or confidential nature concerning the Company’s trade secrets, processes,
systems, marketing strategies and future marketing plans, student enrollment lists, prospective
course offerings, finances and financial reports, employee and faculty member information and other
organizational information (collectively, “Proprietary Information”) is and shall remain the sole
and exclusive property of the Company and shall not be used or disclosed by the Executive except to
the extent necessary to perform his duties and responsibilities under this Agreement. All tangible
manifestations of such Proprietary Information (whether written, printed or otherwise reproduced)
shall be returned by the Executive upon the termination of his employment hereunder, and the
Executive shall not retain any copies or excerpts of the returned items. The foregoing restrictions
on the use, disclosure and disposition of the Company’s Proprietary Information shall also apply to
the Executive’s use, disclosure and disposition of any confidential information relating to the
business or affairs of the Company’s faculty, students and employees.

7

 

     (b) The Executive shall on the Commencement Date execute and deliver to the Company the
standard form Proprietary Information and Inventions Agreement, as attached as Exhibit B to this
Agreement. The Executive shall, throughout the term of this Agreement and thereafter, remain
subject to the terms and conditions of such Proprietary Information and Inventions Agreement.

     (c) The Executive shall not, in connection with his duties and responsibilities hereunder,
improperly use or disclose any trade secrets or proprietary and confidential information of any
former employer or other person or entity.

     10. Restrictive Covenants. At all times during the Executive’s employment with the
Company, and for a period of one (1) year after the termination of his employment with the
Company (the “Restriction Period”), regardless of the reason or cause for such termination, the
Executive shall comply with the following restrictions:

     (a) The Executive shall not directly or indirectly encourage or solicit any employee, faculty
member, consultant or independent contractor to leave the employment or service of the Company (or
any affiliated company) for any reason or interfere in any other manner with any employment or
service relationships at the time existing between the Company (or any affiliated company) and its
employees, faculty members, consultants and independent contractors.

     (b) The Executive shall not directly or indirectly solicit any vendor, supplier, licensor,
licensee or other business affiliate of the Company (or any affiliated company) with respect to
products or services competitive with those offered by the Company or directly or indirectly induce
any such person to terminate its existing business relationship with the Company (or affiliated
company) or interfere in any other manner with any existing business relationship between the
Company (or any affiliated company) and any such vendor, supplier, licensor, licensee or other
business affiliate.

     (c) The Executive shall not, on his own or as an employee, agent, promoter, consultant,
advisor, independent contractor, general partner, officer, director, investor, lender or guarantor
or in any other capacity, directly or indirectly:

          (i) conduct, engage in, be connected with, have any interest in, or assist any person or
entity engaged in, any business, whether in the United States, any possession of the United States
or any foreign country or territory, that competes with any of the businesses or programs
conducted by the Company in the education industry during the period of his employment with the
Company (hereafter collectively referred to as the “Businesses”); or

          (ii) permit his name to be used in connection with a business which is competitive or
substantially similar to the Businesses.

     Notwithstanding the foregoing: (i) the Executive may own, directly or indirectly, solely as
an investment, up to one percent (1%) of any class of publicly traded securities of any business
that is competitive or substantially similar to the Business and (ii) the Executive’s employment
with any consulting firm, investment banking firm, private equity fund, hedge fund or similar
investment fund following the termination of his employment with the Company shall not be deemed a
breach of his restrictive covenant under this Section 10(c).

     11. Change in Control. For purposes of this Agreement, “Change in Control” shall have
the same meaning assigned to such term under the Incentive Plan, and upon the occurrence of such
Change in Control, any unvested stock options, restricted stock, restricted stock units, or other
equity granted to the Executive and outstanding at that time shall vest on an accelerated basis to
the same extent as all other outstanding awards under the Incentive Plan held by individuals who
are executive officers of the Company at that time.

8

 

     12. Gross-Up Payment. The provisions of this Section 12 shall only be in force and
effect for the twenty-four (24)-month period measured from the Commencement Date and shall
automatically become null and void upon the expiration of that twenty-four (24)-month period:

     (a) In the event it should be determined that any payment or distribution of any type to or
for the benefit of the Executive made by the Company, any of its affiliates, any Person who
acquires ownership or effective control of the Company or ownership of a substantial portion of the
Company’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations thereunder—a “Change in Control Event”) or any affiliate
of such Person, whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to as the “Excise
Tax”), then the Executive will be entitled to receive an additional payment (a “Gross-Up Payment”)
in an amount such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Total Payments.

     (b) All determinations as to whether any of the Total Payments are “parachute payments”
(within the meaning of Section 280G of the Code), whether a Gross-Up Payment is required, the
amount of such Gross-Up Payment, and any amounts relevant to the last sentence of the paragraph
above, will be made by an independent registered public accounting firm selected by the Company
from among the largest four accounting firms in the United States (the “Accounting Firm”). The
Accounting Firm selected by the Company will not have an ongoing audit or consulting relationship
with the Company at the time it is selected. The Accounting Firm will provide its determination
(the “Determination”), together with detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matter, both to the Company and the Executive within ten
(10) business days after the effective date of the Change in Control or such earlier time as is
requested by the Company or the Executive (if the Executive reasonably believes that any of the
Total Payments may be subject to the Excise Tax). Any determination by the Accounting Firm will be
binding upon the Company and the Executive. The Gross- Up Payment determined on the basis of the
Accounting Firm’s Determination shall be paid to or on behalf of Executive within five (5) business
days after the completion of such Determination. However, as a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that the Company may have to make one or more subsequent Gross-Up
Payments (“Underpayment”), or that Gross-Up Payments may have been made by the Company which
should not have been made (“Overpayments”). In either such event, the Accounting Firm will
determine the amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the amount of such Underpayment will be paid by the Company to or for the benefit of
the Executive within five (5) business days following such determination. In the case of an
Overpayment, the Executive will, at the direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of returns and claims for refund), follow reasonable
instructions from, and procedures established by, the Company, and otherwise reasonably
cooperate with the Company to correct such Overpayment. In addition, should the Company decide
to contest any assessment by the Internal Revenue Service of a Code Section 4999 excise tax on one
or more items comprising the Total Payments, the Executive will comply with all reasonable actions
requested by the Company in connection with such proceedings, but shall not be required to incur
any out-of-pocket costs in so doing. In no event shall any Gross-Up Payment to which the Executive
becomes entitled pursuant to this Section 12 be made later than the close of the calendar year in
which the Code Section 4999 tax triggering the right to such payment is paid by or on behalf of the
Executive. To the extent the Executive may become entitled to any reimbursement of expenses
incurred by him at the direction of the Company in connection with any tax audit or litigation
addressing the existence or amount of the Code Section 4999

9

 

excise tax, such reimbursement shall be paid to the Executive no later than the close of the
calendar year in which the Code Section 4999 tax that is the subject of such audit or litigation
is paid by or on behalf of the Executive or, if no Code Section 4999 tax is found to be due as a
result of such audit or litigation, no later than the close of the calendar year in which the
audit is completed or there is a final and nonappealable settlement or other resolution of the
litigation.

     13. Benefit Limitation. The provisions of this Section 13 shall automatically come
into force and effect upon the expiration of the twenty-four (24)-month period measured from the
Commencement Date:

     (a) In the event it is determined that the Total Payments would otherwise exceed the amount
that could be received by the Executive without the imposition of an excise tax under Section
4999 of the Code (the “Safe Harbor Amount”), then the Total Payments shall be reduced to the
extent, and only to the extent, necessary to assure that their aggregate present value, as
determined in accordance the applicable provisions of Code Section 280G and the regulations
thereunder, does not exceed the greater of the following dollar amounts (the “Benefit Limit”):

(A) The Safe Harbor Amount, or

(B) the greatest after-tax amount payable to the Executive after taking into
account any excise tax imposed under Code Section 4999 on the Total
Payments.

     All determinations under this Section 13 shall be made by the Accounting Firm. However, in
determining whether such Benefit Limit is exceeded, the Accounting Firm shall make a reasonable
determination of the value to be assigned to the restrictive covenants in effect for the Executive
pursuant to Section 10 of the Agreement, and the amount of his potential parachute payment under
Code Section 280G shall reduced by the value of those restrictive covenants to the extent
consistent with Code Section 280G and the regulations thereunder.

     14. Section 409A. Certain payments contemplated by this Agreement may be “deferred
compensation” for purposes of Section 409A of the Code. Accordingly, the following provisions shall
be in effect for purposes of avoiding or mitigating any adverse tax consequences to the Executive
under Code Section 409A.

     (a) It is the intent of the parties that the provisions of this Agreement comply with all
applicable requirements of Code Section 409A. Accordingly, to the extent any provisions of this
Agreement would otherwise contravene one or more requirements or limitations of Code Section 409A,
then the Company and the Executive shall, within the remedial amendment period provided under the
regulations issued under Code Section 409A, effect through mutual agreement the
appropriate amendments to those provisions which are necessary in order to bring the provisions of
this Agreement into compliance with Section 409A: provided such amendments shall not reduce the
dollar amount of any such item of deferred compensation or adversely affect the vesting provisions
applicable to such item or otherwise reduce the present value of that item. If any federal
legislation is enacted during the term of this Agreement which imposes a dollar limit on deferred
compensation, then the Executive will co-operate with the Company in restructuring any items of
compensation under this Agreement that are deemed to be deferred compensation subject to such
limitation; provided such restructuring shall not reduce the dollar amount of any such item or
adversely affect the vesting provisions applicable to such item or otherwise reduce the present
value of that item.

     (b) Notwithstanding any provision to the contrary in this Agreement, no payments or benefits
to which the Executive becomes entitled under Section 8 of this Agreement shall be made or paid to
the

10

 

Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the
date of his “separation from service” with the Company or (ii) the date of his death, if the
Executive is deemed at the time of such separation from service a “key employee” within the
meaning of that term under Code Section 416(i) and such delayed commencement is otherwise required
in order to avoid a prohibited distribution under Code Section 409A(a)(2). Upon the expiration of
the applicable Code Section 409A(a)(2) deferral period, all payments deferred pursuant to this
subsection 14(b) shall be paid in a lump sum to the Executive, and any remaining payments due
under this Agreement shall be paid in accordance with the normal payment dates specified for them
herein. For purposes of the foregoing, Executive shall be deemed to have incurred a separation
from service at such time as the level of his bona fide services as an employee or independent
contractor permanently decreases to a level that is not more than twenty percent (20%) of the
average level of services he rendered as an employee or independent contractor during the
immediately preceding thirty-six (36) months (or such shorter period for which he may have
rendered such service). Any such determination, however, shall be made in accordance with the
applicable standards of the Treasury Regulations issued under Code Section 409A.

     (c) Should the Executive comply with the provisions of subsections 14(a) and 14(b) above but
nevertheless incur the 20% penalty tax imposed under Section 409A with respect to one or more
payments or benefits provided to him under this Agreement, then the Executive will be entitled to
receive an additional payment (the “409A Gross-Up Payment”) in an amount such that after payment
by the Executive of all taxes (including any interest or penalties imposed with respect to such
taxes), including any tax imposed upon the 409A Gross-Up Payment, the Executive retains an amount
of the 409A Gross-Up Payment equal to the 20% tax imposed upon the Executive’s deferred
compensation. Any 409A Gross-Up Payment to which the Executive becomes entitled pursuant to this
subsection 14(c) shall be made no later than the close of the calendar year in which the Code
Section 409A penalty tax triggering the right to such payment is paid by or on behalf of the
Executive.

     15. Legal Fees. Within fourteen (14) calendar days of this Agreement becoming
effective, the Company will reimburse the Executive for his legal fees incurred in connection with
the Agreement’s preparation and negotiation, up to a maximum dollar amount of $15,000.00.

     16. Indemnification. The Executive shall be covered by any policy of liability
insurance which the Company maintains during the Term for its officers and directors (“D&O
Insurance”), to the maximum extent of such coverage provided any other executive officer of the
Company. The Company agrees to provide the Executive with information about all D&O Insurance
maintained during the Term, including proof that such insurance is in place and the terms of
coverage, upon the Executive’s reasonable request. In addition to any rights the Executive may have
under such D&O Insurance, applicable law, or the articles of incorporation and bylaws of the
Company and except as may be prohibited by applicable law, the Company agrees to indemnify, defend,
and hold the Executive harmless from and against any and all claims and/or liability arising from,
as a result of, or in connection with the Executive’s employment by the Company or any outside
appointments and offices held at the Company’s request, except to the extent such claims or
liability are attributable to the Executive’s gross negligence or willful misconduct.

     17. Injunctive Relief. The Executive expressly agrees that the covenants set forth in
Sections 9 and 10 of this Agreement are reasonable and necessary to protect the Company and its
legitimate business interests, and to prevent the unauthorized dissemination of Proprietary
Information to competitors of the Company. The Executive also agrees that the Company will be
irreparably harmed and that damages alone cannot adequately compensate the Company if there is a
violation of Section 9 or 10 of this Agreement by the Executive, and that injunctive relief against
the Executive is essential for the protection of the Company. Therefore, in the event of any such
breach, it is agreed that, in addition to any

11

 

other remedies available, the Company shall be entitled as a matter of right to injunctive relief
in any court of competent jurisdiction, plus attorneys’ fees actually incurred for the securing
of such relief.

     18. Survival of Certain Provisions. The provisions of Sections 8, 9, 10, 11, 12, 13,
14, 16, 17, 20, 19, 21, 22, 25 and 26 will survive any termination of this Agreement.

     19. Withholdings. Any compensation and/or benefits provided to the Executive by the
Company shall be subject to the Company’s collection of all applicable payroll deductions and
applicable withholding and payroll taxes.

     20. Successors and Assigns. This Agreement will be binding upon and will inure to the
benefit of the Company, its successors and assigns, and the Company will require any successor or
assign to expressly assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession or assignment had
taken place. The term “the Company” as used herein will include any such successors and assigns to
the Company’s business and/or assets. The term “successors and assigns” as used herein will mean a
corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or
substantially all the assets and business of the Company (including this Agreement) whether by
operation of law or otherwise. This Agreement will inure to the benefit of and be enforceable by
the Executive’s legal personal representative.

     21. Arbitration. Except as otherwise provided in Section 17, any controversy or
claim between the Company or any of its affiliates and the Executive arising out of or relating to
this Agreement or its termination or any other dispute between the parties, whether arising in
tort, contract, or pursuant to a statute, regulation, or ordinance now in existence or which may in
the future be enacted or recognized will be settled and determined by a single arbitrator whose
award will be accepted as final and binding upon the parties. The arbitration shall be conducted
in Chicago, Illinois and in accordance with the American Arbitration Association (“AAA”) Employment
Arbitration Rules in effect at the time such arbitration is properly initiated. To the extent that
any of the AAA rules or anything in the Agreement conflicts with any arbitration procedures
required by applicable law, the arbitration procedures required by applicable law shall govern.
The costs of the arbitration, including administrative fees and fees charged by the arbitrator,
will be borne by the Company. Each party will bear its or his own travel expenses and attorneys’
fees: provided, however that the arbitrator (i) shall award attorneys’ fees to the Executive with
respect to any claim for breach of this Agreement on which he is the prevailing party and may award
attorneys’ fees to the Executive as otherwise allowed by law and (ii) shall award attorneys’ fees
to the Company with respect to any claim brought under Section 17 on which it is the prevailing
party and may award attorneys’ fees to the Company with respect to any other claim on which it is
the prevailing party and it is determined by the arbitrator that such claim by the Executive was
frivolous in that it presented no colorable arguments for recovery; but the maximum amount of
attorneys’ fees that may be awarded to the Company other than with respect to any claim brought
under Section 17 shall not exceed one hundred thousand dollars ($100,000). The arbitration shall
be instead of any civil litigation; and the Executive hereby waives any right to a jury trial. The
arbitrator’s decision shall be final and binding to the fullest extent permitted by law and
enforceable by any court having jurisdiction thereof. In any situation in which emergency
injunctive relief may be necessary, either party may seek such relief from a court until such time
as the arbitrator is able to address the matter covered by this Section 21. Both parties agree that
the state and federal courts located in Chicago, Illinois, will be the sole venue for any such
action involving emergency injunctive relief, and the parties submit to personal jurisdiction in
these courts for this purpose. Judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.

     22. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of Termination) will be in
writing and will be

12

 

deemed to have been given when personally delivered or on the third business day following mailing
if sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt
if overnight delivery service is used, addressed as follows:

13

 

To the Executive:

Joseph L. D’Amico 

14054 W.
Austrian Court 

Homer Glen,

IL 60491

With a copy to:

Horwood Marcus & Berk Chartered

180 N. LaSalle Street, Suite 3700

Chicago, Illinois 60601

Attn: Keith H. Berk

To the Company:

Apollo Group, Inc

4615 East Elwood Street

Phoenix, AZ 85040

Attention: General Counsel

With a copy to:

John Hartigan

Morgan Lewis & Bockius LLP

300 South Grand Avenue

Los Angeles, CA 90071

     23. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the
Executive and the Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this Agreement to be performed
by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation, oral or otherwise,
express or implied, with respect to the subject matter hereof has been made by either party which
is not expressly set forth in this Agreement.

     24. Counterparts. This Agreement may be executed in several counterparts, each of
which will be deemed an original and all of which will constitute but one and the same instrument.
An electronic facsimile of a signature, when delivered by the signing party to the non-signing
party, will have the same force and effect as an original.

     25. Governing Law. This Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Arizona without giving effect to the conflict of law
principles thereof.

     26. Severabilitv. If any provision of this Agreement as applied to any party or to
any circumstance should be adjudged by a court of competent jurisdiction (or determined by the
arbitrator) to be void or unenforceable for any reason, the invalidity of that provision shall in
no way affect (to the maximum extent permissible by law) the application of such provision under
circumstances different from those adjudicated by the court or determined by the arbitrator, the
application of any other provision of this Agreement, or the enforceability or invalidity of this
Agreement as a whole. Should any provision of this Agreement become or be deemed invalid, illegal
or unenforceable in any jurisdiction by reason of

14

 

the scope, extent or duration of its coverage, then such provision shall be deemed amended to the
extent necessary to conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the parties, then such
provision will be stricken, and the remainder of this Agreement shall continue in full force and
effect.

     27. Entire
Agreement. This Agreement, together with the Proprietary Information and
Inventions Agreement referred to in Section 9 and the documentation for the equity grants referred
to in Section 4, shall constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and shall supersede all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto with respect to the subject matter
hereof.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer and the Executive has executed this Agreement as of the day and year first above
written.

	 	 	 	 	 	 	 	 	 
	JOSEPH L. D’AMICO	 	 	 	THE APOLLO GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Joseph L. D’Amico
 

	 	 
	 	By:
	 	/s/ Gregory W. Cappelli
 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Its:
	 	Assistant to the Chairman	 	 

15

 

EXHIBIT A

FORM OF GENERAL RELEASE

 

 

GENERAL RELEASE

          This
AGREEMENT is made as of ____, 200_, by and between Joseph L.
D’Amico (“Executive”), and Apollo Group, Inc. (the “Company”).

          In consideration for the severance benefits offered by the Company to Executive
pursuant to Section 8 of his Employment Agreement with the
Company dated ____, 2007 (the “Employment
Agreement”), Executive agree as follows:

     1. Termination of Employment. Executive acknowledges that his employment with the
Company is terminated effective _____ (the “Termination Date”), and he agrees that he will
not apply for or seek re-employment with the Company, its parent companies, subsidiaries and
affiliates after that date. Executive agrees that he has received and reviewed his final paycheck
and he has received all wages and accrued but unpaid vacation pay earned by him through the
Termination Date.

     2. Waiver and Release.

          (a) Except as set forth in Section 2(b), which identifies claims expressly excluded from this
release, Executive hereby releases the Company, all affiliated companies, and their respective
officers, directors, agents, employees, stockholders, successors and assigns from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorney fees, damages,
indemnities and obligations of every kind and nature, in law, equity or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising from or relating to
Executive’s employment with the Company and the termination of that employment, including (without
limitation): claims of wrongful discharge, emotional distress, defamation, fraud, breach of
contract, breach of the covenant of good faith and fair dealing, discrimination claims based on
sex, age, race, national origin, disability or any other basis under Title VII of the Civil Rights
Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”),
the Americans with Disability Act, the Employee Retirement Income Security Act, as amended, the
Equal Pay Act of 1963, as amended, and any similar law of any state or governmental entity, any
contract claims, tort claims and wage or benefit claims, including (without limitation) claims for
salary, bonuses, commissions, equity awards (including stock grants, stock options and restricted
stock units), vesting acceleration, vacation pay, fringe benefits, severance pay or any other form
of compensation.

          (b) The only claims that Executive is not waiving and releasing under this Agreement are
claims he may have for (1) unemployment, state disability, worker’s compensation, and/or paid
family leave insurance benefits pursuant to the terms of applicable state law; (2) continuation of
existing participation in Company-sponsored group health benefit plans under the federal law known
as “COBRA” and/or under an applicable state law counterpart(s); (3) any benefits entitlements that
are vested and unpaid as of his termination date pursuant to the terms of a Company-sponsored
benefit plan; (4) any benefits to which he is entitled pursuant to Section 8 of the Employment
Agreement or his rights to indemnification pursuant to Section 16 of the Employment Agreement, (5)
violation of any federal state or local statutory and/or public policy right or entitlement that,
by applicable law, is not waivable; and (6) any wrongful act or omission occurring after the date
he executes this Agreement. In addition, nothing in this Agreement prevents or prohibits Executive
from filing a claim with the Equal Employment Opportunity Commission (EEOC) or any other government
agency that is responsible for enforcing a law on behalf of the government and deems such claims
not waivable. However, because Executive is

 

 

hereby waiving and releasing all claims “for monetary damages and any other form of personal
relief (per Section 2(a) above), he may only seek and receive non-personal forms of relief from
the EEOC and similar government agencies.

          (c) Executive represents that he has not filed any complaints, charges, claims, grievances, or
lawsuits against the Company and/or any related persons with any local, state or federal agency or
court, or with any other forum.

          (d) Executive acknowledges that he may discover facts different from or in addition to those
he now knows or believes to be true with respect to the claims, demands, causes of action,
obligations, damages, and liabilities of any nature whatsoever that are the subject of this
Agreement, and he expressly agrees to assume the risk of the possible discovery of additional or
different facts, and agrees that this Agreement shall be and remain in effect in all respects
regardless of such additional or different facts. Executive expressly acknowledges that this
Agreement is intended to include, and does include in its effect, without limitation, all claims
which Executive does not know or suspect to exist in his favor against the Company and/or any
related persons at the moment of execution thereof, and that this Agreement expressly contemplates
extinguishing all such claims.

          (e) Executive understands and agrees that the Company has no obligation to provide him with
any severance benefits under the Employment Agreement unless he executes this Agreement. Executive
also understands that he has received or will receive, regardless of the execution of this
Agreement, all wages owed to him, together with any accrued but unpaid vacation pay, less
applicable withholdings and deductions, earned through the Termination Date.

          (f) This Agreement is binding on Executive, his heirs, legal representatives and assigns.

     3. Entire Agreement. This Agreement and the Employment Agreement constitute the entire
understanding and agreement between Executive and the Company in connection with the matters
described, and replaces and cancels all previous agreements and commitments, whether spoken or
written, with respect to such matters. Nothing in this Agreement supersedes or replaces any of
Executive’s obligations under his Employment Agreement that survive termination, including, but not
limited to (i) his (and the Company’s) agreement to arbitrate disputes, (ii) his restrictive
covenants under Section 10 of the Employment Agreement and (iii) his obligations under Section 9 of
the Employment Agreement, his existing Proprietary Information Inventions Agreement with the
Company and any other obligations not to use or disclose Company confidential and/or proprietary
information.

     4. Modification in Writing. No oral agreement, statement, promise, commitment or
representation shall alter or terminate the provisions of this Agreement. This Agreement cannot
be changed or modified except by written agreement signed by Executive and authorized
representatives of the Company.

     5. Governing Law; Jurisdiction. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Arizona.

     6. Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.

18

 

     7. No Admission of Liability. This Agreement does not constitute an admission of any
unlawful discriminatory acts or liability of any kind by the Company or anyone acting under their
supervision or on their behalf. This Agreement may not be used or introduced as evidence in any
legal proceeding, except to enforce or challenge its terms.

     8. Acknowledgements. Executive is advised to consult with an attorney of his choice
prior to executing this Agreement. By signing below, Executive acknowledges and certifies that he:

          (a) has read and understands all of the terms of this Agreement and is not relying on any
representations or statements, written or oral, not set forth in this Agreement;

          (b) has been provided a consideration period of twenty-one calendar days within which to
decide whether he will execute this Agreement and that no one hurried him into executing this
Agreement;

          (c) is signing this Agreement knowingly and voluntarily; and

          (d) has the right to revoke this Agreement within seven (7) days after signing it, by
providing written notice of revocation via certified mail to the Company to the address specified
in the Employment Agreement. Executive’s written notice of revocation must be postmarked on or
before the end of the eighth (8th) calendar day after he has timely signed this Agreement. This
deadline will be extended to the next business day should it fall on a Saturday, Sunday or holiday
recognized by the U.S. Postal Service.

     Because of the revocation period, the Company’s obligations under this Agreement shall not
become effective or enforceable until the eighth (8th) calendar day after the date Executive
signs this Agreement provided he has delivered it to the Company without modification and not
revoked it (the “Effective Date”).

I HAVE READ, UNDERSTAND AND VOLUNTARILY ACCEPT AND AGREE TO THE ABOVE TERMS

JOSEPH L. D’AMICO

	 	 	 
	                                                            

	 	Date:                                                              , 20                                         
	 
	 	 
	Signature
	 	 

19

 

EXHIBIT B

FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

 

SCHEDULE I

LIST OF EXISTING BOARD MEMBERSHIPS

None

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