AMERICANPUBLIC EDUCATION, INC. AMERICANPUBLIC UNIVERSITY SYSTEM, INC. EXECUTIVEEMPLOYMENT AGREEMENT

Employment. On the terms and conditions set forth in this Agreement, the Parent agrees to cause the Company to, and the Company agrees to, employ the Executive, and the Executive agrees to be employed by the Company, for the term set forth in Section 2 hereof and in the position and with the duties set forth in Section 3 hereof.

Term. The employment of the Executive by the Company as provided in Section 1 hereof shall commence on August 3, 2009 and, unless sooner terminated as hereinafter set forth, shall end three (3) years thereafter; provided, however, that this Agreement will automatically renew for additional one (1) year periods (each a “Renewal Term”) on each anniversary thereof unless the Company and Parent deliver to the Executive written notice of intent not to renew at least thirty (30) days prior to the expiration of the Term or any Renewal Term. If this Agreement is renewed for one or more Renewal Terms, such Renewal Term shall be on the basis stated herein.

Position and Duties. The Executive shall serve as the Executive Vice President and Chief Operations Officer of the Company, or in another position of equal or greater title, authority and responsibility, as assigned by the board of directors of the Parent (the “Board”), with duties and responsibilities as the Chief Executive Officer of the Company may from time to time determine and assign to the Executive. The Executive shall devote the Executive’s best efforts and full business time to the performance of the Executive’s duties and the advancement of the business and affairs of the Company.

Place of Performance. In connection with the Executive’s employment by the Company, the Executive shall be based at the principal executive offices of the Company, which the Company retains the right to change in its discretion, or such other place as the Company and the Executive mutually agree.

Compensation.

 

Base Salary. The Company shall pay to the Executive an annual base salary (the “Base Salary”) at the rate of $275,000 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Compensation Committee (the “Compensation Committee”) of the Board. If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the employment term hereunder, except that the Company may reduce the Executive’s Base Salary at any time as part of a general salary reduction applied to all employees of the Company with annual salaries in excess of $150,000 (the “Senior Executive Group”) in which case the Executive’s reduced Base Salary shall be the Base Salary for the remainder of the employment term hereunder. Any such reduction in the Executive’s Base Salary shall be no more than the lesser of the median percentage salary reduction applied to the Senior Executive Group or 20%. The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

 

Annual Bonus. The Executive shall be eligible to receive a bonus of up to 50% of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion (the “Annual Bonus”), based upon the achievement of certain performance goals established by the Compensation Committee for each year, which shall be prorated in the first year for the portion of the year the Executive is employed. Under the Company’s 2009 Annual Incentive Compensation Plan, the Executive will also be eligible to receive an additional percentage of up to 20% of the Executive’s Base Salary for 2009 as determined by the Compensation Committee in its sole discretion, based upon the achievement of certain performance goals established by the Compensation Committee for 2009, which percentage shall be prorated for the portion of the year the Executive is employed.

 

Other Benefits. The Executive shall be entitled to receive such other benefits approved by the Compensation Committee and made available to senior executives of the Company. The Executive also shall be entitled to participate in such plans and to receive such bonuses, incentive compensation and fringe benefits as may be granted or established by the Company from time to time. Nothing contained in this Agreement shall prevent the Company from changing carriers or from effecting modifications in insurance coverage for the Executive.

 

Vacation; Holidays. The Executive shall be entitled to all public holidays observed by the Company and vacation days in accordance with the applicable vacation policies for senior executives of the Company, which shall be taken at a reasonable time or times.

 

Stock Options. The Executive shall be granted a stock option (the “Option”) for the purchase of 12,500 shares of American Public Education, Inc. common stock pursuant to the terms of the American Public Education, Inc. 2007 Omnibus Incentive Plan. The Option shall vest one-third on the first anniversary of the date of grant and shall vest an additional one-third on each of the next two anniversaries of the date of grant thereafter. The Option exercise price shall be the fair market value of the shares on the date of grant. The Option shall be granted effective as of the Executive’s first date of employment with an exercise price equivalent to the closing price of the Parent’s common stock on the NASDAQ Stock Market and subject to the form of award agreement approved by the Compensation Committee of the Board of Directors.

 

Restricted Stock. The Executive shall be granted restricted stock (the “Restricted Stock”) of 2,500 shares of American Public Education, Inc. common stock pursuant to the terms of the American Public Education, Inc. 2007 Omnibus Incentive Plan. The Restricted Stock shall vest one-third on the first anniversary of the date of grant and shall vest an additional one-third on each of the next two anniversaries of the date of grant thereafter. The Restricted Stock shall be granted effective as of the Executive’s first date of employment and subject to the form of award agreement approved by the Compensation Committee of the Board of Directors.

 

Withholding Taxes and Other Deductions. To the extent required by law, the Company shall withhold from any payments due Executive under this Agreement any applicable federal, state or local taxes and such other deductions as are prescribed by law or Company policy.

Expenses. The Company shall reimburse the Executive for all reasonable expenses incurred by the Executive (in accordance with the policies and procedures in effect for senior executives of the Company) in connection with the Executive’s services under this Agreement. The Executive shall account to the Company for expenses in accordance with policies and procedures established by the Company.

Relocation Expenses. The Company will pay or reimburse the Executive for the customary and reasonable moving expenses incurred by the Executive in connection with Executive’s initial employment; provided, however, that such expenses in the aggregate shall not exceed $100,000 (the “Initial Reimbursement”). If the Internal Revenue Service or any state or local taxing authority takes the position that the relocation expenses paid or reimbursed subject to this Section 7 results in the receipt of taxable income to Executive, such expenses shall include an additional amount equal to the aggregate Federal, state and local income and employment taxes imposed on Executive as a direct result of the payment or reimbursement of the Initial Reimbursement.

Confidential Information.

 

Obligation of Confidentiality. The Executive covenants and agrees that the Executive will not ever, without the prior written consent of the Board or a person authorized by the Board or except as may be ordered by a court of competent jurisdiction, publish or disclose to any unaffiliated third party or use for the Executive’s personal benefit or advantage any confidential information with respect to the Company’s or Parent’s past, present, or planned business, including but not limited to all information and materials related to any Company or Parent business, business plan, product, service, procedure, strategy, method, technique, technology, research, strategy, plan, customer or supplier information, customer or supplier list, financial data, technical data, computer files, and computer software, including any of the foregoing that is in any stage of research, development, or planning, and any other information which the Executive obtained while employed by, or otherwise serving or acting on behalf of, the Company or the Executive or which the Executive may possess or have under her control, that is not generally known (except for unauthorized disclosures) to the public or within the industry in which the Company or Parent does business.

 

Reasonable Restrictions. The Executive acknowledges that the restrictions contained in Section 8(a) hereof are reasonable and necessary, in view of the nature of the Company’s or Parent business, in order to protect the legitimate interests of the Company or Parent, and that any violation thereof would result in irreparable injury to the Company or Parent. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 8(a) hereof, the Company or Parent shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any confidential information. Nothing herein shall be construed as prohibiting the Company or Parent from pursuing any other remedies available to it for breach or threatened breach, including, without limitation, recovery of damages from the Executive.

 

Return of Materials. The Executive shall deliver promptly to the Company or Parent on termination of employment, or at any other time the Company or Parent may so request, all confidential materials, memoranda, notes, records, reports and other documents and materials (and all copies thereof), in whatever form or medium, that contain any of the foregoing, including but not limited to computer data, files, software, and hardware, relating to the Company’s, Parents or their respective affiliates’ respective businesses that the Executive obtained while employed by, or otherwise serving or acting on behalf of, the Company or Parent or which the Executive may then possess or have under her control.

Non-Competition.

 

Non-Competition. The Executive covenants and agrees that the Executive will not, during the Executive’s employment and for a period of one (1) year thereafter (to the extent permitted by law), in the United States or any other jurisdiction in which the Company or Parent is engaged or has reasonably firm plans to engage in business, (i) compete with the Company or the Parent on behalf of the Executive or any third party; (ii) participate as a director, agent, representative, stockholder or partner or have any direct or indirect financial interest in any enterprise which engages in any business in which the Company or the Parent is engaged; or (iii) participate as an employee or officer in any enterprise in which the Executive’s responsibility relates to any business in which the Company or the Parent is engaged; provided, however, that after the occurrence of both a Change of Control and the termination of the Executive’s employment, the foregoing will not prohibit the Executive from being employed by (1) a campus-based institution of higher education that derives no more than 20% of its revenues from online education, provided that, the Executive is not predominantly engaged in supporting the online education, or (2) an online learning company that does not provide higher education. The ownership by the Executive of less than one percent (1%) of the outstanding stock of any corporation listed on a national securities exchange shall not be deemed a violation of this Section 9(a).  For purposes of this Section 9(a), “Change of Control” means (i) the dissolution or liquidation of the Parent or a merger, consolidation, or reorganization of the Parent with one or more other entities in which the Parent is not the surviving entity, (ii) a sale of substantially all of the assets of the Parent to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Parent is the surviving entity) which results in any person or entity owning 50% or more of the combined voting power of all classes of stock of the Parent.

 

Injunctive Relief. In the event the restrictions against engaging in a competitive activity contained in Section 9(a) hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, Section 9(a) hereof shall be interpreted to extend only over the maximum period of time for which it may be enforceable and over the maximum geographical area as to which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, all as determined by the court in the action.

 

Non-Solicitation. The Executive covenants and agrees that the Executive will not, during the Executive’s employment and for a period of one (1) year thereafter solicit, induce, entice, or encourage or attempt to solicit, induce, entice, or encourage any employee of the Company or Parent or any of the Company’s or Parents respective affiliates to render services for any other person, firm, entity, or corporation or to terminate her employment with the Company, Parent or their respective affiliates.

Termination of Employment.

 

Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.

 

By the Executive. The Executive may terminate the Executive’s employment hereunder for “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean:

Notice of Termination. Any termination of the Executive’s employment by the Company, the Parent or the Executive (other than pursuant to Section 10(a) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

Date of Termination. For purposes of this Agreement, the “Date of Termination” shall mean (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated pursuant to Section 10(b)(i) hereof, thirty (30) days after Notice of Termination, provided that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during this 30-day period; (iii) if the Executive’s employment is terminated pursuant to Section 10(b)(ii) or 10(b)(iii) hereof, the date specified in the Notice of Termination; (iv) if the Executive terminates the Executive’s employment for Good Reason pursuant to Section 10(c) hereof, the date specified in the Notice of Termination, provided however that such date must occur after the cure period provided in Section 10(c); and (v) if the Executive’s employment is terminated for any other reason, the date on which Notice of Termination is given. Notwithstanding the foregoing, the Executive will be deemed to have a Date of Termination for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Code Section 409A.

Compensation Upon Termination.

 

If the Executive’s employment is terminated by the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of the estate, (i) the Executive’s full Base Salary through the Date of Termination and (ii) all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(b) “Annual Bonus” and Section 5(c) “Other Benefits” hereof, at the time these payments are due and the Company shall have no further obligations to the Executive under this Agreement.

If the Company terminates the Executive’s employment for Disability as provided in Section 10(b)(i) hereof, the Company shall pay the Executive her full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, at the time these payments are due, and the Company shall have no further obligations to the Executive under this Agreement; provided, that payments made to the Executive during the Disability Period shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any payment.

 

If the Company terminates the Executive’s employment for Cause as provided in Section 10(b)(ii) hereof, the Company shall pay the Executive the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(c) hereof, and the Company shall have no further obligations to the Executive under this Agreement.

If the Executive terminates the Executive’s employment other than for Good Reason, the Company shall pay the Executive the Executive’s full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, and the Company shall have no further obligations to the Executive under this agreement.

 

If the Company or Parent terminates the Executive’s employment with the Company other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 10(c) hereof, at any time prior to the expiration of this Agreement or within the 12 month period following the expiration of this Agreement, upon execution of a general release by the Executive in favor of the Company and Parent in a form reasonably acceptable to and approved by the Company or Parent, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive:

 

No Duty to Mitigate. The Executive shall not be required to mitigate amounts payable pursuant to Section 11 hereof by seeking other employment.

 

No Additional Payments. Notwithstanding anything to the contrary in this Agreement, the Executive acknowledges and agrees that in the event of the termination of her employment, even if in breach of this Agreement, she will be entitled only to those payments specified herein for the circumstances of her termination, and not to any other payments by way of damages or claims of any nature, whether under this Agreement or under any other agreements between the Executive and the Company.

Notices. All notices, demands, requests or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied or mailed by first class registered or certified mail, postage prepaid, addressed as follows:

(a)

If to the Company:

American Public University System, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

(b)

If to the Parent:

American Public Education, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

(c)

If to the Executive, to the Executive’s address set forth on the signature page to this Agreement, or to the home address of the executive in the official records of the Company;

Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.

Survival. It is the express intention and agreement of the parties hereto that the provisions of Sections 8 and 9 hereof shall survive the termination of employment of the Executive and the expiration of this Agreement.  It is the express intention and agreement of the parties hereto that the provisions of Section 11(e) shall survive the expiration of this Agreement for a period of twelve (12) months.  In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

 

 

This Agreement is personal to the Executive and without the prior written consent of the Company and the Parent shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

This Agreement shall inure to the benefit of and be binding upon the Company and the Parent and their successors and assigns.

 

The Company and the Parent will require any successor or any party that acquires control of the Company and the Parent (whether direct or indirect, by purchase, merger, consolidation or otherwise) or all or substantially all of the business and/or assets of the Company or the Parent to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company and the Parent would be required to perform it if no succession had taken place. As used in this Agreement, “Company” and “Parent” shall mean the Company or Parent, respectively, as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

Binding Effect. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors and assigns.

Amendment; Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder.

Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.

Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of West Virginia (but not including the choice of law rules thereof).

Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein.

Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

Limitations Under Code Section 409A. Anything in this Agreement to the contrary notwithstanding, if (A) on the date of termination of Executive’s employment with the Company or a Subsidiary, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) if Executive is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code as a result of such termination, the Executive would receive any payment that, absent the application of this Section 22, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (1) 6 months after the Executive’s termination date, (2) the Executive’s death or (3) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment).