APOLLO GROUP, INC.
EMPLOYMENT AGREEMENT
As you know,
Apollo Group, Inc. (“Apollo”) proposes to purchase all
of the stock and interest in your current employer, Aptimus, Inc.
(“Aptimus”). If this acquisition is completed, Apollo
will hold Aptimus as a wholly-owned subsidiary of Apollo (such
subsidiary to be referred to herein as “Apollo
Marketing”) which will likely be re-named some time after the
closing of the acquisition (the “Closing”). We are
pleased to offer you employment with Apollo or Apollo Marketing
effective upon the Closing pursuant to the terms of this Employment
Agreement (the “Agreement”). If you accept this offer,
and the contingencies of this offer are satisfied, the terms of
your employment will be as follows after the date of the Closing
(the “Closing Date”).
You will initially
have the full-time regular position of Chief Executive Officer of
Apollo Marketing and will report to the Vice President of Marketing
of Apollo. You shall have such duties as are commensurate with your
position and such duties as may be assigned to you by the Vice
President of Marketing of Apollo.
You will be paid
as compensation for services a base salary at the annual rate of
$275,000, or at such higher rate as Apollo may determine from time
to time. Such salary shall be payable in accordance with the
standard payroll procedures of Apollo. The annual compensation
specified in this Section 2, together with any increases in
such compensation that may be granted from time to time, is
referred to in this Agreement as “base
salary.”
3. Annual
Performance Bonus
You shall be
eligible to receive a bonus of up to 75% of your base salary each
fiscal year (September 1 – August 31) (the “Annual
Performance Bonus”). This bonus shall be paid quarterly based
upon the achievement of certain individual and Apollo Marketing
performance criteria as agreed upon by Apollo and you. Payment of
the bonus, if any, shall be made within sixty (60) calendar days
following the end of the relevant quarter.
Your performance
targets for fiscal year 2008 shall be as agreed upon by Apollo and
you within thirty (30) days following the date that the merger
agreement between Aptimus and Apollo is signed. Performance targets
for any years after FY08 shall be as agreed upon by Apollo and
you.
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4.
One-Time Integration/Retention Bonus
You shall be
eligible to receive a one-time integration/retention bonus of up to
Two Hundred Six Thousand Two Hundred and Fifty Dollars ($206,250).
50% of this one-time integration/retention bonus will be paid based
upon the achievement of certain quarterly performance targets
related to the transition and integration of Aptimus into Apollo
during the first four full quarters (based on Apollo’s fiscal
quarters) following the Closing Date (the “Integration
Bonus”). These performance targets shall be as agreed upon by
Apollo and you within thirty (30) days following the date that
the merger agreement between Aptimus and Apollo is signed. Because
employee retention is one of the objectives of this bonus, you must
be actively employed by Apollo/Apollo Marketing on the last day of
each quarter to earn a bonus for the preceding quarter. The
determination of whether a quarterly Integration Bonus has been
earned and the amount of the bonus earned, if any, will be made by
Apollo in its discretion which shall be exercised in good faith.
Such a determination shall be made and the bonus paid, if any,
within sixty (60) calendar days following the end of the
relevant quarter.
Except as set
forth in Section 8, the remaining 50% of this bonus shall be
earned if you remain actively employed on a full time basis by
Apollo/Apollo Marketing through the end of the sixth (6th) full
month following the Closing Date (the “Retention
Bonus”). This bonus, if earned, shall be paid by no later
than the end of the seventh (7th) month following the Closing
Date.
It is currently
anticipated that Apollo/Apollo Marketing will continue
Aptimus’ employee benefit plans until employees can be
transitioned onto Apollo’s benefit plans. Notwithstanding the
forgoing, you will be entitled to no less than three (3) weeks
vacation per year, which shall be accrued in accordance with
Apollo’s vacation accrual policies. After you have
transitioned to Apollo’s benefit plans, you will receive
credit for the period of your service with Aptimus for purposes of
eligibility and vesting under such plans. The benefits you will be
eligible to receive will be equivalent to those generally
applicable to Apollo’s management employees.
(a) Apollo Four-Year Options
The Compensation
Committee of Apollo’s Board of Directors (the
“Compensation Committee”) will grant you a stock option
to purchase up to 75,000 shares of Apollo Group Inc. Class A
common stock (the “Four Year Option”) on the Closing
Date or as soon as practicable thereafter. The per share exercise
price of the Four Year Option will be equal to the fair market
value of the common stock at the close of business on the date the
option grant is made to you. The Four Year Option will be evidenced
by a standard stock option agreement (a copy of which is attached
as Exhibit A), and will be subject to the terms and conditions
of that agreement and the stock option plan under which the option
is granted. Such terms and conditions will include, but not be
limited to, vesting annually over four (4) years of active
service following the Closing Date and will expire six
(6) years from the date of grant.
(b) Apollo Two-Year Options
The Compensation
Committee will grant you a second stock option to purchase up to
25,000 shares of Apollo Group Inc. Class A common stock (the
“Two Year Option”) on the Closing Date or as soon as
practicable thereafter. The per share exercise price of the Two
Year Option will be equal to the fair market value of the common
stock at the close of business on the date the option grant is made
to you. The Two Year Option will be evidenced by a stock option
agreement (a copy of which is attached as Exhibit B), and will
be subject to the terms and conditions of that agreement and the
stock option plan under which the option is granted. The shares
subject to the Two Year Option shall vest in full after you have
provided two years of active service following the Closing Date.
Except as provided in Section 8, no shares subject to the Two
Year Option shall vest on a pro-rata basis or otherwise unless and
until you have provided two years of active service to Apollo,
Apollo Marketing (or any of their affiliates) after the Closing
Date.
(c) Apollo Marketing Options/Other Benefits
The mission of
Apollo Marketing is to establish a world class internet and direct
advertising company by: (i) maximizing the efficiency,
effectiveness and cost savings of generating the highest quality
leads for the University of Phoenix and other Apollo education
institutions, and (ii) building a substantial, high quality
lead generation business targeted at companies other than
educational companies. Apollo recognizes the importance of the
people who will execute the mission described above and will
consider implementing a program that enables such individuals to
share in the value created by Apollo Marketing that is in excess of
the value contributed by Apollo. While it will take some time to
finalize the appropriate incentive device and to evaluate the
proper individual incentive potentials, as soon as practicable
after the Closing, Apollo, in consultation with you, will evaluate
the feasibility of such a program, taking into consideration such
factors that it deems appropriate. If such a bonus is implemented,
Apollo will consider creating a pool representing such incremental
enterprise value and distributing this pool among appropriate
members of Apollo Marketing, Apollo management and key
contributors, in the form of phantom equity, additional Apollo
options, Apollo Marketing options or some other appropriate
incentive grant, as determined in good faith by Apollo. The final
structure of any such program is dependent on many variables and
factors, but Apollo understands the importance of aligning goals
and rewards to motivate a high performing team.
Apollo generally
issues stock options or other equity awards to its managers and key
employees once a year. Such option awards vary in number from year
to year, and may not be granted at all in a year, depending upon a
number of factors, including individual performance and the
performance of Apollo Marketing. If you are granted such stock
options, you will be notified by Apollo. It is possible that the
amount and/or frequency of such grants may be reduced, or such
grants eliminated entirely, if the program described in Section
6(c) above is implemented.
(e) Assumed Aptimus Awards
Pursuant to the
Merger Agreement, Apollo will assume certain “Aptimus
Awards” previously granted by Aptimus. For this purpose,
“Aptimus Awards” shall mean any prior grant of an
Aptimus restricted stock award, stock appreciation right or an
option to purchase Aptimus common stock that was made to you prior
to the Closing Date. One-half (1/2) of the unvested Aptimus Awards
outstanding on the Closing Date shall immediately vest on the
Closing Date.
This Agreement is
entered into in connection with Apollo’s acquisition of
Aptimus and your continuing services to Apollo/Apollo Marketing
after the Closing is a material inducement for Apollo to complete
the acquisition. Therefore, because your service to Apollo/Apollo
Marketing following the Closing is critical to the success of the
acquisition, you agree that you will remain actively employed by
Apollo or Apollo Marketing for at least two (2) years
following the Closing Date. This period will be referred to herein
as the “Term.” Notwithstanding the foregoing, your
employment may be terminated by Apollo or Apollo Marketing at any
time for any reason, with or without cause during or after the Term
by giving you thirty (30) days advance notice of termination
in the case of a termination without Cause (defined below) and
pursuant to Section 8 below in the case of a termination for
“Cause”. You agree that the only reason you may
terminate your employment during the Term is for “Good
Reason” in accordance with Section 8 of this
Agreement.
If your employment
is terminated by Apollo (or Apollo Marketing) with Cause, or by you
without Good Reason, then you will receive your salary and benefits
(including accrued, but unused vacation time) earned up to the
effective date of your termination and nothing else.
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