NON-QUALIFIED STOCK OPTION AGREEMENT CANCELLATION AND REGRANT
NON-QUALIFIED STOCK OPTION AGREEMENT
CANCELLATION AND REGRANT
CANCELLATION AND REGRANT
This Agreement is made and entered into by and between APOLLO GROUP, INC., an Arizona
corporation (hereinafter referred to as the “Company”) and «Name» (hereinafter referred to as
“Employee”), on this day of July 2007 (which date is hereinafter referred to as the “Date of
Grant”). If Employee is presently or subsequently becomes employed by a subsidiary of the Company,
the term “Company” shall be deemed to refer collectively to Apollo Group, Inc. and the subsidiary
or subsidiaries, which employ the Employee.
For purposes of this Agreement, the term “Committee” shall the Compensation Committee of the
Company’s Board of Directors.
RECITALS
A. The Company previously granted Employee an option to acquire shares of the Company’s Class
A common stock under either the Apollo Group, Inc. Long-Term Incentive Plan or the Apollo Group,
Inc. 2000 Stock Incentive Plan (the “Applicable Plan”). The recorded grant date of that option, the
grant number and the Applicable Plan under which such option was granted are indicated on attached
Schedule I.
B. It has been determined that such option was misdated in that the recorded grant date for
that option is earlier than the date on which that option was actually granted for financial
accounting purposes. As a result, the exercise price established for that option, as set forth in
attached Schedule I, is less than the fair market value of the underlying shares of the Company’s
Class A common stock on the date now determined to be the actual grant date for financial
accounting purposes.
C. Such exercise price may be deemed to result in a below-market option grant subject to
adverse tax consequences under Section 409A of the Internal Revenue Code (the “Code”), to the
extent the option was not vested and exercisable on December 31, 2004.
D. In order to avoid such adverse tax consequences, the Company implemented a tender offer
which allowed Employee and other holders of options to purchase shares of the Company’s Class A
common stock which may be subject to Section 409A the opportunity to submit those options to the
Company for amendment or cancellation and replacement (the “Offer”).
E. The portion of Employee’s option which was not vested as of December 31, 2004 was tendered
pursuant to the Offer, and that portion of the option was accordingly canceled, and a new option
evidenced by this Agreement was immediately granted in replacement of that portion.
NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Employee agree as follows:
1. Cancellation and Regrant of Option.
(a) The option evidenced by this Agreement (the “Option”) is hereby granted to Employee in
cancellation and replacement of the option identified as the Prior Option in attached Schedule I,
which represents the portion of a previous option grant made to Employee under the Applicable Plan
which was not vested as of December 31, 2004. This Option is granted under the same Applicable
Plan under which the Prior Option was granted. Employee hereby acknowledges and agrees that
Employee has no further right, title or interest in or to the Prior Option hereby canceled and that
Employee no longer has any right or entitlement to purchase any shares of the Company’s Class A
common stock or other capital stock of the Company under the canceled Prior Option.
(b) The number of shares of the Company’s Class A common stock subject to this Option (the
“Stock”), the exercise price payable per share and the expiration date of the term of this Option
are as set forth in the New Option section of attached Schedule I. Such elements of this Option
are exactly the same as in effect for the Prior Option at the time of its cancellation pursuant to
this Agreement.
(c) The vesting schedule pursuant to which this Option shall become exercisable for the Stock
in one or more periodic installments over the Employee’s period of employment with the Company
and/or upon the Company’s attainment of certain specified performance goals shall be the same as
the vesting schedule in effect for the Prior Option at the time of its cancellation pursuant to
this Agreement.
(d) Accordingly, it is the intent of the Company that the Option evidenced by this Agreement
shall have exactly the same terms and conditions as the canceled Prior Option, including (without
limitation), the exercise price payable per share of Stock, the vesting provisions and expiration
date, but with the new Date of Grant and new capital adjustment provisions as set forth in
paragraph 10 hereof. The cancellation and regrant is effected solely to evidence the cancellation
and regrant procedure required under Code Section 409A for any option (or portion thereof) which
was not vested as of December 31, 2004 and which may be deemed to have been granted with an
exercise price below the fair market value of the option shares on the grant date.
2. Term of Option. The Option hereby granted shall remain in force and effect until
the Expiration Date specified for this option in attached Schedule I, subject to earlier
termination as provided in paragraphs 6 and 7 hereof.
3. Exercise of Option. This Option may be exercised by Employee, at any time and from
time to time on or after the six (6) month and one day period measured from the Recorded Grant Date
of the Prior Option specified in attached Schedule I and through the Expiration Date, as to all or
any part of the Stock then vested by delivery to the Company of written notice of exercise and
payment of the exercise price as provided in paragraph 4 hereof and satisfaction of the applicable
withholding taxes in accordance with paragraph 13. Notwithstanding the preceding provisions of
this paragraph 2, in the event of a Change of Control (as such term is defined in the Applicable
Plan) the Option shall become 100% vested and fully exercisable. As this Option vests and becomes
exercisable for one or more shares of Stock pursuant to the applicable vesting schedule for this
Option, this Option shall remain exercisable for such shares until the Expiration Date or any
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earlier termination of the Option under paragraph 6 or 7 hereof.
4. Method of Exercising Option. Subject to the terms and conditions of this Option
Agreement, the Option may be exercised by timely delivery to the Company of written notice, which
notice shall be effective on the date received by the Company (the “Effective Date”). The notice
shall state Employee’s election to exercise the Option, the number of shares of Stock in respect of
which the election to exercise has been made, the method of payment elected (see paragraph 5
hereof), the
exact name or names in which the purchased shares of Stock will be registered and the Social
Security Number of Employee. Such notice shall be signed by the Employee and shall be accompanied
by payment of the exercise price for such shares. In the event the Option shall be exercised by a
person or persons other than Employee pursuant to paragraph 7 hereof, such notice shall be signed
by such other person or persons and shall be accompanied by proof acceptable to the Company of the
legal right of such person or persons to exercise the Option. All shares delivered by the Company
upon exercise of the Option as provided herein shall be fully paid and nonassessable upon delivery.
5. Method of Payment. Payment of the exercise price for the shares purchased upon the
exercise of this Option shall be made by Employee (i) in cash, (ii) through a broker-assisted same
day exercise and sale procedure pursuant to which the broker shall immediately sell, on behalf of
the Employee or such other person exercising the Option, all or a portion of the shares of Stock
acquired upon exercise of the Option and remit to the Company, on the settlement date for such
sale, a sufficient amount of the sale proceeds to cover the exercise price payable for all the
shares acquired through such exercise and the applicable withholding taxes, (iii) through such
other method permitted by the Committee or (iv) through any combination of the above.
6. Termination of Employment. In the event that Employee terminates employment on
account of retirement or for any other reason than for cause, then Employee may at any time within
three (3) months next succeeding the effective date of termination of employment exercise the
Option to the extent that Employee was entitled to exercise the Option at the date of termination,
provided that in no event shall the Option, or any part thereof, be exercisable after the
Expiration Date. If Employee terminates employment for cause, the Option shall lapse at the time
of the Employee’s termination of employment. If the recorded date of grant specified for the Prior
Grant in attached Schedule I is after January 2, 2002 and Employee received the Prior Grant in an
employment capacity other than (or in addition to) a faculty member, then the Employee shall be
deemed for purposes of this paragraph 6 to have terminated employment upon the earlier of (i) the
date he or she ceases for any reason to be employed by the Company or any Subsidiary or (ii) the
first date on which Employee remains employed by the Company or any Subsidiary solely in the
capacity of a faculty member.
7. Death of Employee. In the event of the death of Employee within a period during
which the Option, or any part thereof, could have been exercised by Employee, including three (3)
months after termination of employment other than for cause, this Option shall remain exercisable
for an additional period (the Post-Death Period) ending upon the earlier of (i) the expiration of
the fifteen (15) month period measured from the date of Employee’s death or (ii) the Expiration
Date. During the Post-Death Period, this Option may be exercised by the Employee’s legal
representative or representatives or by the person or persons entitled to do so under Employee’s
last will and
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testament or if the Employee fails to make a testamentary disposition of this Option
or shall die in testate, by the person or persons entitled to receive this Option under the
applicable laws of descent and distribution. However, this Option may be exercised during the
Post-Death Period only to the extent the Option was exercisable by Employee immediately prior to
his or her death. The Company shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this paragraph 7 to exercise
the Option.
8. Transfer of Employee. Except as otherwise provided in the last sentence of
paragraph 6 hereof, in the event Employee ceases to be an employee of the Company and becomes an
employee of one of the Company’s subsidiaries as the result of a transfer, promotion or otherwise,
the Option shall remain unchanged.
9. Nontransferability. The Option evidenced by this Agreement shall be exercisable
only during the term of the Option provided in paragraph 2 hereof and, except as provided in
paragraph 6 or 7 above, only by Employee during his lifetime and while an Employee of the Company.
The Option granted by this Option Agreement shall be subject to the restrictions on transfer as set
forth in section 13. 5 of the Applicable Plan.
10. Adjustments in Number of Shares and Exercise Price. In the event a stock dividend
is declared upon the Stock after the Date of Grant, the remaining shares of Stock then subject to
this Option shall be increased proportionately and the exercise price per share of Stock shall be
equitably adjusted to reflect such stock dividend without any change in the aggregate exercise
price therefor. Should any change be made to the Class A Common Stock by reason of any stock
split, recapitalization, combination of shares, exchange of shares, spin-off transaction,
extraordinary dividend or distribution or other change affecting the outstanding Class A Common
Stock as a class without the Company’s receipt of consideration, or should the value of the
outstanding shares of Class A Common Stock be substantially reduced as a result of a spin-off
transaction or an extraordinary dividend or distribution, or should there occur any merger,
consolidation or other reorganization, then equitable adjustments shall be made by the Committee to
(i) the total number and/or class of securities subject to this Option and (ii) the exercise price
payable per share, but without any change in the aggregate exercise price therefor. The adjustments
shall be made in such manner as the Committee deems appropriate in order to reflect such change and
thereby prevent the dilution or enlargement of benefits hereunder, and those adjustments shall be
final, binding and conclusive upon Employee and any other person or persons having an interest in
this Option. In the event of any Change in Control transaction, the adjustment provisions of the
Applicable Plan shall be controlling.
11. Delivery of Shares. No shares of Stock shall be delivered upon exercise of the
Option until (i) the exercise price for those shares shall have been paid in full in the manner
herein provided; (ii) all applicable taxes required to be withheld have been paid or withheld in
full; (iii) the approval of any governmental authority required in connection with the Option, or
the issuance of shares hereunder, has been received by the Company; and (iv) if required by the
Committee, Employee has delivered to the Committee an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 12 hereof.
12. Securities Act. The Company shall not be required to deliver any shares of Stock
pursuant to the exercise of all or any part of the Option if, in the opinion of counsel for the
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Company, such issuance would violate the Securities Act of 1933 or any other applicable federal or
state securities laws or regulations. The Committee may require that Employee, prior to the
issuance of any such shares pursuant to exercise of the Option, sign and deliver to the Company a
written statement (“Investment Letter”) stating (i) that Employee is purchasing the shares for
investment and not with a view to the sale or distribution thereof; (ii) that Employee will not
sell any shares acquired upon exercise of the Option or any other shares of the Company that
Employee may then own or thereafter acquire except either (a) through a broker on a national
securities exchange or (b) with the prior written approval of the Company; and (iii) containing
such other terms and conditions as counsel for the Company may reasonably require to assure
compliance with the Securities Act of 1933 or other applicable federal or state securities laws and
regulations. Such Investment Letter shall be in form and content acceptable to the Committee in
its sole discretion.
13. Federal and State Taxes. Upon exercise of this Option, or any part thereof,
Employee may incur certain liabilities for federal, state or local taxes and the Company may be
required by law to withhold such taxes for payment to the applicable taxing authorities. Employee
may satisfy the payment of any federal, state, or local tax withholding amounts due as a result of
the exercise of this Option by (i) delivering to the Company that number of shares of Stock then
owned by the Employee, duly endorsed for transfer to the Company and free and clear of any liens,
claims, security interests, or encumbrances (based on the fair market value of the Common Stock on
the date this Option is exercised), that are required to satisfy such tax withholding amount, (ii)
delivering to the Company cash, a check or other form of payment permitted by the Committee in the
aggregate amount required to satisfy such tax withholding amount or (iii) using a portion of the
sale proceeds of the purchased shares to satisfy such tax withholding amount, to the extent Employee exercises the Option
pursuant to the sale and remittance procedure set forth in paragraph 5 hereof.
14. Definitions; Copy of Applicable Plan. To the extent not specifically provided
herein, all capitalized terms used in this Agreement shall have the same meanings ascribed to them
in the Applicable Plan under which this Option is granted. By the execution of this Agreement,
Employee acknowledges receipt of a copy of the Applicable Plan.
15. Administration. This Agreement shall at all times be subject to the terms and
conditions of the Applicable under this Option is granted and such Applicable Plan shall in all
respects be administered by the Committee in accordance with the terms of and as provided in the
Applicable Plan. The Committee shall have the sole and complete discretion with respect to all
matters reserved to it by the Applicable Plan and decisions of the Committee with respect thereto
and to this Agreement shall be final and binding upon Employee and the Company. In the event of
any conflict between the terms and conditions of this Agreement and the Applicable Plan under which
this Option is granted, the provisions of such Applicable Plan shall control.
16. Continuation of Employment. This Agreement shall not be construed to confer upon
Employee any right to continue in the employ of the Company and shall not limit the right of the
Company, in its sole discretion, to terminate the employment of Employee at any time.
17. Obligation to Exercise. Employee shall have no obligation to exercise this Option
in whole or in part.
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18. Governing Law. This Agreement shall be interpreted and administered under the
laws of the State of Arizona.
19. Amendments. This Agreement may be amended only by a written agreement executed by
the Company and Employee. The Company and Employee acknowledge that changes in federal tax laws
enacted subsequent to the Date of Grant, and applicable to stock options, may provide for tax
benefits to the Company or Employee. In any such event, the Company and Employee agree that this
Agreement may be amended as necessary to secure for the Company and Employee any benefits that may
result from such legislation. Any such amendment shall be made only upon the mutual consent of the
parties, which consent (of either party) may be withheld for any reason.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers
thereunto duly authorized and Employee has hereunto set his or her hand as of the date first
written above.
| APOLLO GROUP, INC. | EMPLOYEE | |||||||
| «Name» | ||||||||
Title: |
||||||||
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SCHEDULE I
OPTION INFORMATION
PRIOR OPTION:
GRANT NUMBER
RECORDED DATE OF GRANT:
NUMBER OF CURRENTLY UNEXERCISED
SHARES VESTING AFTER 12/31/2004:
SHARES VESTING AFTER 12/31/2004:
EXPIRATION DATE:
PLAN UNDER WHICH GRANTED:
NEW OPTION:
GRANT NUMBER:
DATE OF GRANT: JULY , 2007
NUMBER OF SHARES SUBJECT
TO OPTION ON GRANT DATE:
TO OPTION ON GRANT DATE:
EXPIRATION DATE:
PLAN UNDER WHICH GRANTED:
