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 This Employment Agreement involves

ASPEN GROUP, INC. | Aspen Group, Inc | Aspen University Inc

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Title: EMPLOYMENT AGREEMENT
Governing Law: Arizona     Date: 8/29/2016
Industry: Conglomerates     Sector: Conglomerates

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Exhibit 10.12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) entered into as of March 1, 2014 (the “Effective Date”), between Aspen University Inc., a Delaware corporation (the “Company”), and Cheri St. Arnauld, Ed. D (the “Executive”).  

WHEREAS, in its business, the Company has acquired and developed certain trade secrets, including, but not limited to, proprietary processes, sales methods and techniques, and other like confidential business and technical information, including but not limited to, technical information, design systems, pricing methods, pricing rates or discounts, processes, procedures, formulas, designs of computer software, or improvements, or any portion or phase thereof, whether patented, or not, or unpatentable, that is of any value whatsoever to the Company, as well as information relating to the Company’s Services (as defined), information concerning proposed new Services, market feasibility studies, proposed or existing marketing techniques or plans (whether developed or produced by the Company or by any other person or entity for the Company), other Confidential Information, as defined in Section 9(a), and information about the Company’s executives, officers, and directors, which necessarily will be communicated to the Executive by reason of her employment by the Company; and

 

WHEREAS, the Company has strong and legitimate business interests in preserving and protecting its investment in the Executive, its trade secrets and Confidential Information, and its substantial, significant, or key, relationships with vendors, and Students, as defined below, whether actual or prospective; and

 

WHEREAS, the Company desires to preserve and protect its legitimate business interests further by restricting competitive activities of the Executive during the term of this Agreement and for a reasonable time following the termination of this Agreement; and

WHEREAS, the Executive has a substantial employment, educational and experience background in the areas of expertise desired by the Company and will retain ownership and the right to use all prior-gained skills, insights, techniques and abilities which the Executive brings to this employment and nothing in this agreement will obligate the Executive to forfeit that or the right to make a living by use of these pre-developed abilities; and  

WHEREAS, the Company desires to employ the Executive and to ensure the continued availability to the Company of the Executive’s services, and the Executive is willing to accept such employment and render such services, all upon and subject to the terms and conditions contained in this Agreement; and

WHEREAS, the Company represents to the Executive that it is and expects to be sufficiently financially solvent to meet the payment promises and obligations made to the Executive as set forth in this Agreement and understands that the Executive is relying on this representation in entering into  this Agreement and her promises to the Company:

 


 

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth in this Agreement, and intending to be legally bound, the Company and the Executive agree as follows:

1.

Representations and Warranties .  The Executive hereby represents and warrants to the Company that she (i) is not subject to any non-solicitation or non-competition agreement affecting her employment with the Company (other than any prior agreement with the Company), (ii) is not subject to any confidentiality or nonuse/nondisclosure agreement affecting her  employment with the Company (other than any prior agreement with the Company), and (iii) has brought to the Company no trade secrets, confidential business information, documents, or other personal property of a prior employer.  The recitals above are incorporated in this agreement as representations and covenants. Each party covenants to act in good faith in the discharge of this Agreement.

2.

Term of Employment .

(a)

Term .  The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company for a period of three years commencing as of the Effective Date (such period, as it may be extended or renewed, the “Term”), unless sooner terminated in accordance with the provisions of Section 6.  The Term shall be automatically renewed for successive one-year terms unless notice of non-renewal is given by either party at least 30 days before the end of the Term.

(b)

Continuing Effect .  Notwithstanding any termination of this Agreement, at the end of the Term or otherwise, the provisions of Sections 6(e), 7, 8, 9, 10, 12 15, 18, 19, and 22 shall remain in full force and effect and the provisions of Section 9 shall be binding upon the legal representatives, successors and assigns of the Executive.  

3.

Duties .

(a)

General Duties .  The Executive shall serve as the Chief Academic Officer of the Company and its parent, Aspen Group, Inc. (the “Parent”), with duties and responsibilities that are customary for such an executive. The Executive shall report to the Company’s Chief Executive Officer.  The Executive shall also perform services for such subsidiaries of the Company as may be necessary.  The Executive shall use her best efforts to perform her duties and discharge her responsibilities pursuant to this Agreement competently, carefully and faithfully. In determining whether or not the Executive has used her best efforts hereunder, the Executive’s and the Company’s delegation of authority and all surrounding circumstances shall be taken into account and the best efforts of the Executive shall not be judged solely on the Company’s earnings or other results of the Executive’s performance, except as specifically provided to the contrary by this Agreement, and the determination shall in any event be reasonable and shall not be made arbitrarily or capriciously by Company.

(b)

Devotion of Time .  Subject to the last sentence of this Section 3(b), the Executive shall devote her full-time, attention and energies to the affairs of the Company and its subsidiaries and affiliates as are necessary to perform her duties and responsibilities pursuant to this Agreement. The Executive shall have reasonable off-hours and off-duty times for personal

 

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use.  The Executive shall not enter the employ of or serve as a consultant to, or in any way perform any services like those for which she is engaged here with or without compensation to, any other persons, business, or organization, without the prior consent of the Board of Directors of the Company (the “Board”).  Notwithstanding the above, the Executive shall be permitted to devote a reasonable amount of her time, to rest and to Executive’s personal, professional, charitable or similar pursuits and interests and to organizations, including serving as a non-executive director or an advisor to a board of directors, committee of any company or organization and the Executive shall have the right to continue the following personal pursuits to complete currently contracted work with students as well as agreements around her newly published book.

(c)

Location of Office . The Executive’s principal business office shall be in Scottsdale, Arizona. However, the Executive’s job responsibilities shall include all business travel necessary for the performance of her job including Company-paid travel to and lodging near the Company’s Denver, Colorado (or other) office locations.  

(d)

Adherence to Inside Information Policies .  The Executive acknowledges that the Company’s parent, Aspen Group, Inc. (the “Parent”), is publicly-held and, as a result, has implemented inside information policies designed to preclude its executives and those of its subsidiaries from violating the federal securities laws by trading on material, non-public information or passing such information on to others in breach of any duty owed to the Company, or any third party.  The Executive shall promptly execute any agreements generally distributed by the Parent to its employees requiring such employees to abide by its inside information policies.

4.

Compensation and Expenses .

(a)

Salary .  For the services of the Executive to be rendered under this Agreement, the Company shall pay the Executive an annual salary of $240,000 (the “Base Salary”), less such deductions as shall be required to be withheld by applicable law and regulations payable in accordance with the Company’s customary payroll practices.   Provided , however , that the Base Salary shall be payable at the rate of $120,000 per year until the earlier of (i) such time as the Parent generates positive adjusted earnings before income taxes, depreciation and amortization (“Adjusted EBITDA”) for any three month period beginning with the Effective Date or (ii) six months from the Effective Date, whichever first in time occurs. In the event (ii) is the first to occur and the Executive shall remain employed by the Company, she shall be paid at the annual rate of $240,000 per year. The method the Parent last uses in a Form 10-Q (or the Form 10-K for the year ending April 30, 2014) shall be used in determining Adjusted EBITDA.

(b)

Bonus .  During the Term, the Executive shall be eligible to receive discretionary bonuses at such times and such amounts as may be reasonably determined by the Board upon application by the Executive.  

(c)

Equity Incentive Compensation .  The Parent has granted the Executive the following, subject to commencing employment:  500,000 stock options (exercisable at $0.19 per share) which shall vest in three equal increments (with fractional shares first rounded up) on one, two and three-years from the Effective Date, subject to continued service as an employee of the Company on each applicable vesting date

 

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All of the options shall be subject to the terms of the Parent’s 2012 Equity Incentive Plan (the “Incentive Plan”) and will be exercisable for a period of five years from the date of this Agreement provided that they are vested at time of exercise.  The exercisability of the options shall be subject to the execution of the Parent’s standard option agreement which is attached as Exhibit A .

(d)

Expenses .  In addition to any compensation received pursuant to this Section 4, the Company will reimburse or advance funds to the Executive for all reasonable documented travel, meals and lodging (including travel expenses incurred by the Executive related to her travel to the Company’s other offices and on business missions for the Company), entertainment and miscellaneous expenses incurred in connection with the performance of her duties under this Agreement, provided that the Executive properly provides a written accounting of such expenses to the Company in accordance with the Company’s practices. Such reimbursement or advances will be made in accordance with policies and procedures of the Company in effect from time to time relating to reimbursement of, or advances to, its executive officers, except that no policy shall change the terms of this Agreement.

5.

Benefits .

(a)

Paid Time Off .  For each 12-month period during the Term, the Executive shall be entitled to three weeks of Paid Time Off without loss of compensation or other benefits to which he is entitled under this Agreement, to be taken at such times as the Executive may select and the affairs of the Company may permit. Any unused days will be carried over to the next 12 month period.  

 

(b)

Employee Benefit Programs .  The Executive is entitled to participate in any pension, 401(k), insurance or other employee benefit plan that is maintained by the Company for its executives, including programs of life insurance and reimbursement of membership fees in professional organizations. The Company will also provide health insurance covering the Executive and family dependents. The benefits provided to the Executive may not be less than the Company or the Parent entity provides to any of its executive employees.

 

6.

Termination .

(a)

Death or Disability .  Except as otherwise provided in this Agreement, this Agreement shall automatically terminate upon the death or disability of the Executive.  For purposes of this Section 6(a), “disability” shall mean (i) the Executive is unable to engage in her customary duties by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) the Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (iii) the Executive is determined to be totally disabled by the Social Security Administration.  Any question as to the existence of a disability shall be determined by the written opinion of the Executive’s regularly attending physician (or her guardian) (or the Social Security Administration, where applicable). In the event that the Executive’s employment is terminated by reason of Executive’s death or

 

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disability, the Company shall pay the following to the Executive or her personal representative: (i) any accrued but unpaid Base Salary for services rendered to the date of termination, (ii) any accrued but unpaid expenses required to be reimbursed under this Agreement, (iii) any earned but unpaid bonuses,  and (iv) all equity awards previously granted to the Executive under the Incentive Plan or similar plan shall thereupon become fully vested, and the Executive or her legally appointed guardian, as the case may be, shall have up to three months from the date of termination (or one year from the date of death) to exercise all such previously granted options, provided that in no event shall any option be exercisable beyond its term.

(b)

Termination by the Company for Cause or by the Executive Without Good Reason .  The Company may terminate the Executive’s employment pursuant to the terms of this Agreement at any time for Cause (as defined below) by giving the Executive written notice of termination.  Such termination shall become effective upon the giving of such notice.  Upon any such termination for Cause, or in the event the Executive terminates her employment with the Company without Good Reason (as defined in Section 6(c)), then the Executive shall have no right to compensation, or reimbursement under Section 4, or to participate in any Executive benefit programs under Section 5, except for payments and benefits accrued up to the time of the termination and except as may otherwise be provided for by law, for any period subsequent to the effective date of termination.  For purposes of this Agreement, “Cause” shall mean: (i) the Executive is convicted of, or pleads guilty or nolo contendere to, a felony related to the business of the Company; (ii) the Executive, in carrying out her duties hereunder, has acted with gross negligence or intentional misconduct resulting, in any case, in harm to the Company; (iii) the Executive misappropriates Company funds or otherwise defrauds the Company; (iv) the Executive breaches her fiduciary duty to the Company resulting in profit to him, directly or indirectly; (v) the Executive materially breaches any written agreement with the Company; (vi) the Executive breaches any provision of Section 8 or Section 9; (vii) the Executive becomes subject to a preliminary or permanent injunction issued by a United States District Court enjoining the Executive from violating any securities law administered or regulated by the Securities and Exchange Commission, unless caused by the acts or omissions of the Company; (viii) the Executive becomes subject to a cease and desist order or other order issued by the Securities and Exchange Commission after an opportunity for a hearing, unless caused by the acts or omissions of the Company; (ix) the Executive refuses to carry out a resolution adopted by the Company’s Board at a meeting in which the Executive was offered a reasonable opportunity to argue that the resolution should not be adopted, provided that the resolution did not direct the Executive to act or refrain from acting in a manner which is contrary to this Agreement, is  unlawful or would expose the Executive to regulatory, civil or criminal liability; or (x) the Executive abuses alcohol or drugs in a manner that interferes with the successful performance of her duties.

(c)

Other Termination.

(1)

This Agreement may be terminated: (i) by the Executive for Good Reason (as defined below), (ii) by the Company without Cause, (iii) automatically upon any Change of Control event as defined in Treasury Regulation Section 1.409A-3(i)(5) or (iv) at the end of a Term after the Company provides the Executive with notice of non-renewal.

 

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(2)

In the event this Agreement is terminated by the Executive for Good Reason or by the Company “without Cause”, the Executive shall be entitled to the following:

(A)

any accrued but unpaid Base Salary for services rendered to the date of termination;

(B)

any accrued but unpaid expenses required to be reimbursed under this Agreement;

(C)

a payment equal to three months of the then Base Salary (“Severance Amount”);

(D)

the Executive or her legally appointed guardian, as the case may be, shall have up to three months  from the date of termination to exercise all such previously granted options, provided that in no event shall any option be exercisable beyond its Term;

(E)

 any benefits (except perquisites) to which the Executive was entitled pursuant to Section 5(b) hereof shall continue to be paid or provided by the Company, as the case may be, for three months, subject to the terms of any applicable plan or insurance contract and applicable law provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits to which the Executive was entitled pursuant to Section 5(b) hereof are subject to 409A of the Code, the Executive shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 ½ month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).  

(3)

In the event of a Change of Control during the Term, the Executive shall be entitled to receive each of the provisions of Section 6(c)(2)(A) – (F) above except the Severance Amount shall equal to three months of the then Base Salary and the benefits under Section 6(c)(2)(F) shall continue for a three month period provided that such benefits are exempt from Section 409A of the Code by reason of Treasury Regulation 1.409A-1(a)(5) or otherwise.  In the event all or a portion of the benefits under Section 6(c)(2)(F) are subject to 409A of the Code, the Executive shall not be entitled to the benefits that are subject to Section 409A of the Code subsequent to the “applicable 2 ½ month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)).

(4)

In the event this Agreement is terminated at the end of a Term after the Company provides the Executive with notice of non-renewal and the Executive remains employed until the end of the Term, the Executive shall be entitled to the following:

(A)

any accrued but unpaid Base Salary for services rendered to the date of termination;

 

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(B)

any accrued but unpaid expenses required to be reimbursed under this Agreement;

(C)

the Executive or her legally appointed guardian, as the case may be, shall have up to three months from the date of termination to exercise all such previously granted options, provided that in no event shall any option be exercisable beyond its Term; and

(5)

In the event of a termination for Good Reason or without Cause, the payment of the Severance Amount shall be made at the same times as the Company pays compensation to its employees over the applicable monthly period and any other payments owed under Section 6(c) shall be promptly paid.   Provided , however , that any balance of the Severance Amount remaining due on the “applicable 2 ½ month period” (as such term is defined under Treasury Regulation Section 1.409A-1(b)(4)(i)(A)) after the end of the tax year in which the Executive’s employment is terminated or the Term ends shall be paid on the last day of the applicable 2 ½ month period.  The payment of the Severance Amount shall be conditioned on the Executive signing an Agreement and General Release (in the form which is attached as Exhibit B ) which releases the Company or any of its affiliates (including its officers, directors and their affiliates) from any liability under this Agreement or related to the Executive’s employment with the Company provided that (x) the payment of the Severance Amount is made on or before the 90 th day following the Executive’s termination of employment; (y) such Agreement and General Release is executed by the Executive, submitted to the Company, and the statutory period during which the Executive is entitled to revoke the Agreement and General Release under applicable law has expired on or before that 90 th day; and (z) in the event that the 90 day period begins in one taxable year and ends in a second taxable year, then the payment of the Severance Amount shall be made in the second taxable year.  Upon any Change of Control event, all payments owed under Section 6(c)(3) shall be paid immediately.  

The term “Good Reason” shall mean: (i) a material diminution in the Executive’s authority, duties or responsibilities due to no fault of the Executive (unless the Executive has agreed to such diminution); or (ii) any other action or inaction that constitutes a material breach by the Company under this Agreement.  Prior to the Executive terminating her employment with the Company for Good Reason, the Executive must provide written notice to the Company, within 30 days following the Executive’s initial awareness of the existence of such condition, that such Good Reason exists and setting forth in detail the grounds the Executive believes constitutes Good Reason.  If the Company does not cure the condition(s) constituting Good Reason within 30 days following receipt of such notice, then the Executive’s employment shall be deemed terminated for Good Reason. Any termination made by the Company under this Agreement shall be approved by the Board.

(d)

Upon (1) voluntary or involuntary termination of the Executive’s employment or (2) at the Company’s request at any time during the Executive's employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, manuals, work product, thumb drives or other removable information storage devices, and hard drives, and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that

 

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constitute or contain any Confidential Information or work product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with her employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive’s possession or control.

7.

Indemnification .  The Company shall indemnify the Executive, to the maximum extent permitted by applicable law against all costs,


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