Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into, effective this 7th day of
July 2008, by and between Apollo Group, Inc. (the “
Company ”), and Charles B. Edelstein (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 be for the period
commencing on August 26, 2008 (the “ Commencement
Date ”) and ending on the fourth anniversary of the
Commencement Date (the “ Initial Term ”),
unless sooner terminated in accordance with the provisions of
Section 7 of this Agreement. Should this Agreement continue in
effect through the end of the Initial Term, then this Agreement
will be automatically renewed from year to year thereafter, 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 this Agreement will not be so renewed (a "
Notice of Non-Renewal ”). The Initial Term,
together with each one-year renewal thereof (if any), shall
constitute the term (the “ Term ”) of
this Agreement.
2. Employment .
(a) Position. The Executive will
be employed as, and hold the title of, the Company’s Chief
Executive Officer and shall in such capacity have primary
responsibility for the implementation and execution of the
Company’s strategic business plans and objectives as approved
from time to time by the Company’s Board of Directors (the
“ Board ”). The Executive shall report
directly to the Board and shall have all the authority needed to
perform the duties and undertake the responsibilities of his
position. The Executive will be a member of the Chair’s
Cabinet and shall be involved in all the Company’s major
strategic decisions. The Executive will have the authority to hire
appropriate personnel as may be needed to carry out his
duties.
(b) Board Membership. On the
Commencement Date, the Executive shall be appointed to the Board.
The Company shall, during the remainder of the Term, use its best
efforts to have the Executive nominated for election and
re-election as a Board member at all meetings of the
Company’s Class B shareholders held during the Term at
which Board members are to be elected.
(c) 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
Board. 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 or (ii) managing personal
investments, so long as such clause (i) and
(ii) 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 $600,000, 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 (other than the fiscal year ending
August 31, 2008), 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 ”).
The Annual Bonus earned for each fiscal year shall be paid in
accordance with the Company’s customary practices, but in no
event more than seventy-five (75) days following the end of
such fiscal year. The Executive shall not be entitled to any Annual
Bonus for the Company’s fiscal year ending August 31,
2008. However, the Executive shall on the Commencement Date be paid
a sign-on bonus in the amount of $200,000 (the “
Sign-On Bonus ”), subject to the
Company’s collection of applicable federal, state and local
income and employment withholding taxes. Should the
Executive’s employment be terminated by the Company for Cause
(as defined below), or should the Executive voluntarily terminate
his employment other than for Good Reason (as defined below), at
any time prior to the first anniversary of the Commencement Date,
then the Executive shall at the time of such termination repay the
Sign-On Bonus to the Company.
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 (the “ Incentive Plan
”), and the award agreements evidencing those 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.
At the close of business on the Commencement Date, the Executive
will be granted stock options under the Incentive Plan for
1,000,000 shares of the Company’s Class A common stock
with an exercise price equal to the closing selling price per share
on such grant date and a maximum term of six (6) years (the
“ Initial Option Grant ”).
(b) Initial Restricted Stock
Unit Award. Should the Executive forfeit all or a portion of the
99,298 unvested shares of Credit Suisse Group common stock subject
to the outstanding stock-based awards made to him by his former
employer, Credit Suisse Group, in the form of units under the
Credit Suisse Group Performance Incentive Plan and Incentive Share
Unit Plan (collectively, the “ CS Equity
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Award” ), then the Executive will be granted
restricted stock units under the Incentive Plan covering that
number of shares of the Company’s Class A common stock
(rounded to next whole share) determined pursuant to the following
procedure:
first, the dollar value of the
unvested shares of Credit Suisse Group common stock forfeited under
the CS Equity Award will be determined by multiplying the number of
those forfeited shares by the closing selling price per share of
Credit Suisse Group common stock on the Commencement Date;
and
then, the dollar amount so determined
will be divided by the closing selling price per share of the
Company’s Class A common stock on the Commencement Date
to determine the number of shares of Class A common stock
subject to this particular award.
In
addition, to the extent the Executive avoids the forfeiture of one
or more of the 99,298 unvested shares of Credit Suisse Group common
stock subject to the CS Equity Award, the Executive will be granted
a restricted stock unit award under the Incentive Plan covering the
number of shares of the Company’s Class A common stock
(rounded to next whole share) determined pursuant to the following
procedure:
first, the dollar value of the
unvested shares of Credit Suisse Group common stock not forfeited
under the CS Equity Award will be determined by multiplying the
number of those non-forfeited shares by the closing selling price
per share of Credit Suisse Group common stock on the Commencement
Date;
then, the dollar amount so determined
will be divided by the closing selling price per share of the
Company’s Class A common stock on the Commencement Date;
and
finally, the number of shares of
Class A common stock so calculated will be multiplied by 0.25
to determine the number of shares of Class A common stock
subject to this particular award.
The
restricted stock unit award or awards determined in accordance with
the foregoing provisions of this Section 4(b) shall be collectively
referred to as the “ Initial RSU Award ”
and shall be granted on the third business day following the public
release of the Company’s financial results for the fiscal
year ending August 31, 2008 (the “ Public Release
Award Date ”); provided, however, that in the event
the Commencement Date is after August 31, 2008, the Initial
RSU Award shall be granted on the Commencement Date. 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) Supplemental Restricted
Stock Unit Award. On the Public Release Award Date or (if the
Commencement Date is after August 31, 2008) the Commencement
Date, the Executive shall also be issued a supplemental restricted
stock unit under the Incentive Plan covering an additional 8,000
shares of the Company’s Class A common stock (the
“ Supplemental 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.
(d) Vesting. The Initial Option
Grant will vest and become exercisable in a series of four
successive equal annual installments upon the Executive’s
completion of each year of employment with the Company over the
four-year period measured from the Commencement Date (regardless of
the actual
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grant
date). The shares of the Company’s Class A common stock
underlying the Supplemental RSU Award will vest and become issuable
in a series of annual installments as follows: (a) forty
percent (40%) of the shares subject to the Supplemental RSU Award
will vest and become issuable upon the Executive’s completion
of one year of employment with the Company measured from the
Commencement Date, (b) an additional forty percent (40%) of
the award will vest and become issuable upon the Executive’s
completion of two years of employment with the Company measured
from the Commencement Date and (c) the remaining twenty
percent (20%) of the Supplemental RSU Award will vest and become
issuable upon the Executive’s completion of three years of
employment with the Company measured from the Commencement Date. In
addition, the Initial Option Grant and the Supplemental RSU Award
will each be subject to the vesting acceleration provisions set
forth in Sections 8 and 11 of this Agreement. The Initial RSU
Award will be subject to the following performance and service
vesting requirements:
(i) The
vesting of the Initial RSU Award will be tied to the
Company’s attainment of net book income, after tax expense,
of $250 million for the 2009 fiscal year. Net book income,
after tax expense, will be calculated on a consolidated basis with
the Company’s consolidated subsidiaries for financial
reporting purposes and in accordance with generally accepted
accounting principles and shall be determined on the basis of the
Company’s audited financial statements, subject to the
following modifications:
- There
shall be excluded: (i) all stock-based compensation accrued
for such fiscal year pursuant to Statement of Financial Accounting
Standards 123R and any other GAAP expense for such fiscal year
relating to equity compensation awards, (ii) any
extraordinary, nonrecurring items as determined in accordance with
Accounting Principles Board Opinion No. 30, and (iii) all
amounts (including settlement payments, judgment or verdict
amounts, legal fees, costs and other litigation/settlement
expenses) expensed during the 2009 fiscal year in connection with
the settlement or disposition of the litigation matters identified
in Item 3 of the Company’s Form 10-K for the fiscal year
ending August 31, 2008.
(ii) None
of the Initial Restricted Stock Unit Award will vest unless such
performance goal is attained. However, if such performance goal is
attained, then the shares of Class A common stock underlying
the Initial RSU Award will vest and become issuable in installments
over the Executive’s period of continued employment with the
Company as follows: (a) forty percent (40%) of the shares
subject to the Initial RSU Award will vest upon the
Executive’s completion of one year of employment with the
Company measured from the Commencement Date and will be issued
immediately upon the Compensation Committee’s certification
of the attainment of the performance goal, (b) an additional
forty percent (40%) of the award will vest and become issuable upon
the Executive’s completion of two years of employment with
the Company measured from the Commencement Date and (c) the
remaining twenty percent (20%) of the Initial RSU Award will vest
and become issuable upon the Executive’s completion of three
years of employment with the Company measured from the Commencement
Date. In addition, the Initial RSU Award will be subject to the
vesting acceleration provisions of Sections 8 and 11 of this
Agreement. All issuances under the Initial RSU Award will be
subject to the Company’s collection of the applicable
withholding taxes.
(e) 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 and Supplemental RSU Award will be registered
under an appropriate and effective registration statement under the
Securities Act of 1933, as amended (the “1933
Act”).
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(f) The Company represents and
warrants that this Agreement, the grants described in subsections
(a), (b) and (c) above and the terms of those grants have
been authorized and approved by the Compensation Committee and that
any requisite amendments to the Incentive Plan will be adopted by
the Board and approved by the Company’s Class B
shareholders prior to the applicable grant date.
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, as 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.
Accordingly, the Executive shall submit appropriate evidence of
each such expense within sixty (60) days after the later or
(i) his incurrence of that expense or (ii) his receipt of the
invoice or billing statement for such expense, and the Company
shall provide the Executive with the requisite reimbursement within
ten (10) business days thereafter; provided, however, that no
expense shall be reimbursed later than the close of the calendar
year following the calendar year in which that expense is
incurred.
(b) Offices and Facilities. The
Executive will be provided with appropriate offices at the
Company’s corporate headquarters in Phoenix, Arizona and at
the Company’s office location in Chicago, Illinois and with
such secretarial and other support facilities at such locations as
are commensurate with the Executive’s status with the Company
and adequate for the performance of his duties hereunder. The
Executive shall not be required to spend any specific amount of
time at the Company’s corporate headquarters in Phoenix,
Arizona location (or any successor location), but shall be present
at such location to the extent necessary to fulfill his duties and
responsibilities as Chief Executive Officer. Executive shall also
be required to travel to other locations from time to time in the
performance of his duties as Chief Executive Officer.
(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
(d) Living Expenses. Until such
time as the Company makes available Company-owned or leased housing
to the Executive in the geographic location of the Company’s
corporate headquarters in Phoenix, Arizona, the Company shall pay
the Executive a monthly living allowance in the dollar amount of
$3,000, less applicable withholdings, to cover his housing, food
and other living costs while he is in the Phoenix Metropolitan
Area. The payment for each month shall be made on the first regular
pay day in that month.
(e) Commuting Expenses. The
Company will reimburse the Executive for reasonable expenses
incurred in commuting to the Company’s corporate headquarters
in Phoenix, Arizona. Accordingly, the Executive shall submit
appropriate evidence of each such commuting expense within sixty
(60) days after the later of (i) his incurrence of that
expense or (ii) his receipt of the invoice or
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billing
statement for such expense, and the Company shall provide the
Executive with the requisite reimbursement within ten
(10) business days thereafter; provided, however, that the
amount of round-trip air travel to be so reimbursed shall in no
event exceed the cost of a first class round-trip ticket between
Phoenix, Arizona and Chicago, Illinois on a commercial
airline.
(f) Conditions to Reimbursement.
Any amounts to which the Executive becomes entitled pursuant to the
foregoing provisions of this Section 6 (whether by way of
reimbursement or in-kind benefits) in each calendar year within the
Term of this Agreement shall not reduce the amounts (or in-kind
benefits) to which the Executive may become entitled hereunder in
any other calendar year within such Term. In no event will any
expense otherwise reimbursable hereunder be reimbursed later than
the close of the calendar year following the calendar year in which
that expense is incurred. In addition, none of the
Executive’s rights to reimbursement or in-kind benefits
hereunder may be liquidated or exchanged for any other
benefit.
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 (i) any termination of the
Executive’s employment for Cause shall be governed by the
provisions of Section 7(b) and (ii) the Company shall have no
right to terminate the Executive’s employment without Cause
on or before the Commencement Date.
(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).
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(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.
(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) a Notice of
Termination 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 Preliminary Notice, but in no event later than sixty
(60) days after the expiration of such cure period. 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 neither of the following shall
constitute Good Reason: (A) the occasional assignment of
duties that are inconsistent with Section 2(a) hereof or (B) a
ten percent (10%) or less aggregate reduction in the
Executive’s Base Salary and Target Bonus 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;
(iii) a
requirement that the Executive relocate his principal residence
from Chicago, Illinois to the geographic location of the
Company’s principal corporate headquarters in Phoenix,
Arizona or any successor location; provided, however, that travel
to the Company’s principal corporate headquarters in Phoenix,
Arizona (or any successor location) or to other locations as
reasonably required to carry out the Executive’s duties and
responsibilities hereunder shall not be a basis for a termination
for Good Reason; or
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(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.
(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
.”
(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) If the Executive’s
employment is terminated by the Company for Cause or by reason of
the Executive’s death or Disability, or if the Executive
provides a Notice of Non-Renewal or gives a written notice of
resignation without Good Reason, the Company’s sole
obligations hereunder will be to pay the Executive or his estate
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 timely and 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 death or
Disability, the Executive or his estate will be paid at that time a
special separation payment in a dollar amount determined by
multiplying (x) the average of his actual Annual Bonuses for
the three fiscal years (or fewer number of fiscal years of
employment with the Company) immediately preceding the fiscal year
in which such termination of employment occurs (or, solely with
respect to a triggering event occurring
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during
the Company’s 2009 fiscal year, the Executive’s target
bonus for such year) by (y) a fraction, the numerator of which
is the number of months (rounded to the next whole month) during
which the Executive is employed by the Company in the fiscal year
in which such termination of employment occurs and the denominator
of which is twelve (12). Furthermore, if the Executive’s
employment terminates as a result of his death, then any unvested
stock options, restricted stock, restricted stock units, or other
equity granted to the Executive that would otherwise vest solely on
the basis of his continued service with the Company will
immediately vest as to the number of shares in which the Executive
would have otherwise been vested on the date of his death had the
service vesting schedule for each of those grants been in the form
of successive equal monthly installments over the applicable
service vesting period. Should any such unvested equity awards also
have a performance-vesting component at the time of the
Executive’s death, then upon the attainment of the applicable
performance goals, the service vesting component of each such award
shall be applied as if that service vesting component had been in
the form of successive equal monthly installments over the
applicable service vesting period. 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 by the Company for any reason other than
for Cause, death or Disability or by the Executive for Good Reason,
or if the Company provides a Notice of Non-Renewal, the Executive
will, in addition to the Accrued Obligations, be entitled to the
following compensation and benefits from the Company, provided and
only if (i) the Executive executes and delivers to the Company
a general release substantially in the form of attached
Exhibit A (the “ Required Release ”)
within twenty-one (21) days (or forty-five (45) days if
such longer period is required under applicable law) after the date
of such termination of employment, (ii) the Required Release
becomes effective and enforceable in accordance with applicable law
after the expiration of any applicable revocation period and
(iii) the Executive complies with the restrictive covenants
set forth in Section 10:
(i) an amount equal to (A) two
times the Executive’s Base Salary and (B) two times the
average of his actual Annual Bonuses for the three fiscal years (or
fewer number of fiscal years of employment with the Company)
immediately preceding the fiscal year in which such termination of
employment occurs (or, solely with respect to a triggering event
occurring during the Company’s 2009 fiscal year, the
Executive’s target bonus for such year), with such payment to
be made in successive equal increments, in accordance with the
Company’s normal payroll practices, over the one-year period
measured from the date of the Executive’s Separation from
Service, beginning with the first pay day within the ninety
(90)-day period following the date of such Separation from Service
on which the Required Release is effective following the expiration
of any applicable revocation period, but in no event later than the
end of such ninety (90)-day period on which the Required Release is
so effective;
(ii) one hundred percent vesting of
the Initial RSU Award and the Supplemental 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 such grant or (B) the portion of 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. In the event the Initial RSU Award and
Supplemental RSU Award have not been made prior to the Termination
Date, then in lieu of the foregoing accelerated vesting of those
awards, the Company shall, concurrently with the initial payment
made under Section 8(b)(i), pay the Executive a cash amount
equal to the closing selling price on the Termination Date of the
shares of the Company’s Class A common stock that would
have
9
been subject to
the Initial RSU Award and Supplemental RSU Award on such
Termination Date pursuant to the applicable provisions of
Section 4 had those awards in fact been made prior to the
Termination Date. Such cash payment shall be subject to the
Company’s collection of all applicable federal, state and
local income and employment withholding taxes;
(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, the Company will reimburse
the Executive for the costs he incurs to obtain such continued
coverage for himself and his eligible dependents (collectively, the
“ Coverage Costs ”) 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). In order to obtain
reimbursement for such Coverage Costs, Executive must submit
appropriate evidence to the Company of each periodic payment within
sixty (60) days after the payment date, and the Company shall
within thirty (30) days after such submission reimburse the
Executive for that payment. During the period such medical care
coverage remains in effect hereunder, the following provisions
shall govern the arrangement: (a) the amount of Coverage Costs
eligible for reimbursement in any one calendar year of such
coverage shall not affect the amount of Coverage Costs eligible for
reimbursement in any other calendar year for which such
reimbursement is to be provided hereunder; (ii) no Coverage
Costs shall be reimbursed after the close of the calendar year
following the calendar year in which those Coverage Costs were
incurred; and (iii) the Executive’s right to the
reimbursement of such Coverage Costs cannot be liquidated or
exchanged for any other benefit. To the extent the reimbursed
Coverage Costs constitute taxable income to the Executive, the
Company shall report the reimbursement as taxable W-2 wages and
collect the applicable withholding taxes, and any remaining tax
liability shall be the Executive’s sole responsibility;
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 the satisfaction of
each of the following: (i) the Executive executes and delivers
to the Company the Required Release, within twenty-one
(21) days (or forty-five (45) days if such longer period
is required under applicable law) after the date of such
resignation, (ii) the Required Release becomes effective and
enforceable in accordance with applicable law after the expiration
of any applicable revocation period and (iii) the Executive
complies with the restrictive covenants set forth in
Section 10 of this Agreement.
(d) All payments and benefits
under this Section 8 (other than the reimbursement of Coverage
Costs during the applicable period of COBRA coverage) shall be
subject to the applicable holdback provisions of
Section 14(b).
10
(e) 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.
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.
(b) The Executive shall on the
Commencement Date execute and
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