10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: November 30, 2015
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______ to ______

Commission File Number: 0-25232

APOLLO EDUCATION GROUP, INC.

(Exact name of registrant as specified in its charter)

ARIZONA (State or other jurisdiction of incorporation or organization) 86-0419443 (I.R.S. Employer Identification No.)

4025 S. RIVERPOINT PARKWAY, PHOENIX, ARIZONA 85040

(Address of principal executive offices)

(480) 966-5394

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ     NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES þ     NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO þ

As of January 4, 2016, there were 108,064,797 shares of Apollo’s Class A common stock outstanding and 475,149 shares of Apollo’s Class B common stock outstanding.

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED NOVEMBER 30, 2015

TABLE OF CONTENTS

		Page
Note Regarding Forward-Looking Statements		3
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income	6
	Condensed Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	45
SIGNATURES		46

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 2

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact may be forward-looking statements. Such forward-looking statements include, among others, those statements regarding future events and future results of Apollo Education Group, Inc. that are based on current expectations, estimates, forecasts, and the beliefs and assumptions of us and our management, and speak only as of the date made and are not guarantees of future performance or results. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “predict,” “target,” “potential,” “continue,” “objectives,” or the negative of these terms or other comparable terminology. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Such statements should be viewed with caution. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to:

• Changes in regulation of the U.S. education industry and eligibility of proprietary schools to participate in U.S. federal student financial aid programs, including the factors discussed in Item 1, Business, of our Annual Report on Form 10-K for the year ended August 31, 2015, under “Accreditation and Jurisdictional Authorizations,” “Financial Aid Programs” and “Regulatory Environment;”

• The impact and effectiveness of the initiative to transform University of Phoenix into a more focused, higher retaining and less complex institution, as discussed in Item 1, Business, of our Annual Report on Form 10-K for the year ended August 31, 2015, under “University of Phoenix;”

• Each of the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended August 31, 2015; and

• Those factors set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended August 31, 2015 and Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Form 10-Q.

The cautionary statements referred to above also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no obligation to publicly update or revise any forward-looking statements for any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

In this report, we refer to Apollo Education Group, Inc. as “the Company,” “Apollo Education Group,” “Apollo,” “APOL,” “we,” “us” or “our.”

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 3

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of
($ in thousands)	November 30, 2015			August 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	419,766		$	503,705
Restricted cash and cash equivalents	209,480			198,369
Marketable securities	257,012			194,676
Accounts receivable, net	214,379			198,459
Prepaid taxes	26,795			38,371
Other current assets	57,559			48,823
Assets of business held for sale	—			40,897
Total current assets	1,184,991			1,223,300
Marketable securities	78,874			95,815
Property and equipment, net	351,602			370,281
Goodwill	173,012			247,190
Intangible assets, net	137,452			143,244
Deferred taxes	89,190			92,105
Other assets	31,457			29,129
Total assets	$	2,046,578		$	2,201,064
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt	$	22,485		$	14,080
Accounts payable	49,282			64,100
Student deposits	239,946			245,470
Deferred revenue	187,830			186,950
Accrued and other current liabilities	251,948			280,847
Liabilities of business held for sale	—			40,897
Total current liabilities	751,491			832,344
Long-term debt	20,782			31,566
Deferred taxes	7,928			7,729
Other long-term liabilities	169,661			172,452
Total liabilities	949,862			1,044,091
Commitments and contingencies
Redeemable noncontrolling interests	9,702			11,915
Shareholders’ equity:
Preferred stock, no par value	—			—
Apollo Class A nonvoting common stock, no par value	103			103
Apollo Class B voting common stock, no par value	1			1
Additional paid-in capital	—			—
Apollo Class A treasury stock, at cost	(3,923,029		)	(3,928,419		)
Retained earnings	5,092,995			5,153,452
Accumulated other comprehensive loss	(83,575		)	(80,579		)
Total Apollo shareholders’ equity	1,086,495			1,144,558
Noncontrolling interests	519			500
Total equity	1,087,014			1,145,058
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	2,046,578		$	2,201,064

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 4

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended November 30,
(In thousands, except per share data)	2015			2014
Net revenue	$	586,021		$	714,525
Costs and expenses:
Instructional and student advisory	291,327			321,574
Marketing	93,802			126,883
Admissions advisory	34,188			57,085
General and administrative	70,326			71,823
Depreciation and amortization	27,394			33,631
Provision for uncollectible accounts receivable	15,313			17,398
Restructuring and impairment charges	97,823			18,748
Acquisition and other related costs	1,097			3,219
Total costs and expenses	631,270			650,361
Operating (loss) income	(45,249		)	64,164
Interest income	919			589
Interest expense	(1,456		)	(1,662		)
Other loss, net	(843		)	(1,290		)
(Loss) income from continuing operations before income taxes	(46,629		)	61,801
Provision for income taxes	(12,239		)	(27,054		)
(Loss) income from continuing operations	(58,868		)	34,747
Loss from discontinued operations, net of tax	(3,259		)	(2,278		)
Net (loss) income	(62,127		)	32,469
Net loss attributable to noncontrolling interests	1,362			1,316
Net (loss) income attributable to Apollo	$	(60,765	)	$	33,785
Earnings (loss) per share - Basic:
Continuing operations attributable to Apollo	$	(0.53	)	$	0.33
Discontinued operations attributable to Apollo	(0.03		)	(0.02		)
Basic (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Earnings (loss) per share - Diluted:
Continuing operations attributable to Apollo	$	(0.53	)	$	0.33
Discontinued operations attributable to Apollo	(0.03		)	(0.02		)
Diluted (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Basic weighted average shares outstanding	108,446			108,581
Diluted weighted average shares outstanding	108,446			109,378

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 5

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net (loss) income	$	(62,127	)	$	32,469
Other comprehensive (loss) income (net of tax):
Currency translation loss(1)	(3,564		)	(17,780		)
Change in fair value of available-for-sale securities(1)	(99		)	(74		)
Comprehensive (loss) income	(65,790		)	14,615
Comprehensive loss attributable to noncontrolling interests	2,029			5,872
Comprehensive (loss) income attributable to Apollo	$	(63,761	)	$	20,487

⁽¹⁾ The tax effect on each component of other comprehensive (loss) income during the three months ended November 30, 2015 and 2014, respectively, was not significant.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 6

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

	Common Stock						Additional Paid-in Capital			Apollo Class A Treasury Stock					Retained Earnings			Accumulated Other Comprehensive Loss			Total Apollo Shareholders’ Equity			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
	Class A Nonvoting			Class B Voting
	Shares	Stated Value		Shares	Stated Value
(In thousands)										Shares		Cost
Balance as of August 31, 2015	188,007	$	103	475	$	1	$	—		80,082		$	(3,928,419	)	$	5,153,452		$	(80,579	)	$	1,144,558		$	500		$	1,145,058		$	11,915
Share repurchases	—	—		—	—		—			64		(517		)	—			—			(517		)	—			(517		)	—
Share reissuances	—	—		—	—		(6,050		)	(174	)	5,907			143			—			—			—			—			—
Net tax effect for stock incentive plans	—	—		—	—		(3,470		)	—		—			—			—			(3,470		)	—			(3,470		)	—
Share-based compensation	—	—		—	—		9,520			—		—			—			—			9,520			—			9,520			—
Currency translation adjustment, net of tax	—	—		—	—		—			—		—			—			(2,897		)	(2,897		)	(25		)	(2,922		)	(642		)
Available-for-sale securities adjustment, net of tax	—	—		—	—		—			—		—			—			(99		)	(99		)	—			(99		)	—
Redemption value adjustments	—	—		—	—		—			—		—			165			—			165			—			165			(165		)
Net (loss) income	—	—		—	—		—			—		—			(60,765		)	—			(60,765		)	44			(60,721		)	(1,406		)
Balance as of November 30, 2015	188,007	$	103	475	$	1	$	—		79,972		$	(3,923,029	)	$	5,092,995		$	(83,575	)	$	1,086,495		$	519		$	1,087,014		$	9,702
Balance as of August 31, 2014	188,007	$	103	475	$	1	$	—		79,585		$	(3,936,607	)	$	5,143,949		$	(27,320	)	$	1,180,126		$	676		$	1,180,802		$	64,527
Share repurchases	—	—		—	—		—			755		(20,064		)	—			—			(20,064		)	—			(20,064		)	—
Share reissuances	—	—		—	—		(10,308		)	(227	)	9,319			1,206			—			217			—			217			—
Net tax effect for stock incentive plans	—	—		—	—		(2,067		)	—		—			—			—			(2,067		)	—			(2,067		)	—
Share-based compensation	—	—		—	—		10,711			—		—			—			—			10,711			—			10,711			—
Currency translation adjustment, net of tax	—	—		—	—		—			—		—			—			(13,224		)	(13,224		)	(90		)	(13,314		)	(4,466		)
Available-for-sale securities adjustment, net of tax	—	—		—	—		—			—		—			—			(74		)	(74		)	—			(74		)	—
Redemption value adjustments	—	—		—	—		—			—		—			472			—			472			—			472			(472		)
Net income (loss)	—	—		—	—		—			—		—			33,785			—			33,785			44			33,829			(1,360		)
Other	—	—		—	—		1,664			—		—			—			—			1,664			—			1,664			—
Balance as of November 30, 2014	188,007	$	103	475	$	1	$	—		80,113		$	(3,947,352	)	$	5,179,412		$	(40,618	)	$	1,191,546		$	630		$	1,192,176		$	58,229

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 7

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended November 30,
($ in thousands)	2015			2014
Operating activities:
Net (loss) income	$	(62,127	)	$	32,469
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Share-based compensation	9,520			10,711
Excess tax benefits from share-based compensation	—			(229		)
Depreciation and amortization	27,394			36,404
Accelerated depreciation included in restructuring	2,953			3,086
Impairment charges and loss on asset dispositions	73,393			972
Non-cash foreign currency loss, net	352			535
Provision for uncollectible accounts receivable	15,313			17,398
Deferred income taxes	3			2,938
Changes in assets and liabilities:
Restricted cash and cash equivalents	(10,973		)	(3,298		)
Accounts receivable	(32,899		)	(50,331		)
Prepaid taxes	11,612			19,989
Other assets	(9,915		)	(13,032		)
Accounts payable	(14,690		)	5,156
Student deposits	(4,880		)	(26,138		)
Deferred revenue	2,087			29,822
Accrued and other liabilities	(26,010		)	(48,153		)
Net cash (used in) provided by operating activities	(18,867		)	18,299
Investing activities:
Purchases of property and equipment	(14,456		)	(20,337		)
Purchases of marketable securities	(109,715		)	(59,490		)
Maturities and sales of marketable securities	62,776			53,974
Other investing activities	(196		)	405
Net cash used in investing activities	(61,591		)	(25,448		)
Financing activities:
Payments on borrowings	(3,448		)	(596,789		)
Proceeds from borrowings	926			3,563
Share repurchases	(517		)	(20,064		)
Share reissuances	—			217
Excess tax benefits from share-based compensation	—			229
Payment for contingent consideration	—			(21,371		)
Net cash used in financing activities	(3,039		)	(634,215		)
Exchange rate effect on cash and cash equivalents	(442		)	(2,473		)
Net decrease in cash and cash equivalents	(83,939		)	(643,837		)
Cash and cash equivalents, beginning of period	503,705			1,228,813
Cash and cash equivalents, end of period	$	419,766		$	584,976
Supplemental disclosure of cash flow and non-cash information:
Cash paid for income taxes, net of refunds	$	—		$	3,214
Cash paid for interest	1,392			1,701
Restricted stock units vested and released	1,430			5,499

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 8

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page
Note 1.	Nature of Operations and Significant Accounting Policies	10
Note 2.	Restructuring and Impairment Charges	12
Note 3.	Discontinued Operations	13
Note 4.	Acquisitions	14
Note 5.	Financial Instruments	15
Note 6.	Accounts Receivable, Net	16
Note 7.	Goodwill and Intangibles	16
Note 8.	Fair Value Measurements	17
Note 9.	Accrued and Other Liabilities	18
Note 10.	Debt	19
Note 11.	Income Taxes	19
Note 12.	Shareholders’ Equity and Redeemable Noncontrolling Interests	20
Note 13.	Earnings Per Share	21
Note 14.	Share-Based Compensation	21
Note 15.	Commitments and Contingencies	22
Note 16.	Regulatory Matters	25
Note 17.	Segment Reporting	27

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 9

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations and Significant Accounting Policies

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We offer undergraduate, graduate, certificate andnondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad. Refer toNote 17,Segment Reporting, for further information regarding our institutions and operating segments.

Our fiscal year is from September 1 to August 31.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Seasonality

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• University of Phoenix - University of Phoenix generally has lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to holiday breaks.

• Apollo Global - Our Apollo Global subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower net revenue in our second and fourth fiscal quarters, particularly for BPP, which also results in substantially lower operating results during these quarters due to BPP’s relatively fixed cost structure.

Because of the seasonal nature of our business and other factors, the results of operations for the three months ended November 30, 2015 are not necessarily indicative of the results to be expected for the fiscal year ending August 31, 2016.

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• During the fourth quarter of fiscal year 2015, we began presenting Carnegie Learning, Inc.’s operating results as discontinued operations on our Condensed Consolidated Statements of Operations. Refer to Note 3, Discontinued Operations.

• During the first quarter of fiscal year 2016, we began presenting all deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets as discussed further in Recent Accounting Pronouncements below.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 10

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our first quarter of fiscal year 2016 on a retrospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our August 31, 2015 Condensed Consolidated Balance Sheet, which increased noncurrent deferred tax assets $64.7 million and decreased noncurrent deferred tax liabilities $3.7 million.

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”(“ASU 2015-16”). The standard requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is permitted. We early adopted ASU 2015-16 during our first quarter of fiscal year 2016, which had no impact on our financial statements, and we will apply the new guidance to future adjustments to provisional amounts.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. We adopted ASU 2014-08 during our first quarter of fiscal year 2016, which had no impact on our financial statements, and we will apply the new guidance to applicable components that are determined to be held for sale or disposed in future periods.

Future Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”(“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective dateof ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. Accordingly, the new revenue recognition standard is effective for us on September 1, 2018 using either a full retrospective or a modified retrospective approach. We are currently evaluating which transition approach to use and the impact that the standard will have on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on September 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

Subsequent Events

On December 10, 2015, we acquired all of the outstanding shares of Career Partner GmbH (“Career Partner”) for an initial cash payment of €96 million (equivalent to approximately $105 million on the transaction date), plus a future contingent payment of up to €11 million (equivalent to approximately $12 million on the transaction date) calculated principally based on Career Partner’s operating results for calendar year 2016. Career Partner is a provider of education and training programs in Germany, and this acquisition supports our strategy to diversify and expand our global operations. The transaction will be accounted for as a business combination and Career Partner’s operating results will be included in our consolidated financial statements from the acquisition date. Career Partner’s operating results are not material to our consolidated financial statements, and we have not yet completed the related purchase price allocation principally due to the recent acquisition date.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 11

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Restructuring charges	$	24,430	$	18,748
Goodwill impairments(1)	73,393		—
Restructuring and impairment charges	$	97,823	$	18,748

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during the first quarter of fiscal year 2016.

Restructuring Charges

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
University of Phoenix	$	19,090	$	10,223
Apollo Global	404		58
Other	4,936		8,467
Restructuring charges	$	24,430	$	18,748

The following details the changes in our restructuring liabilities during the three months ended November 30, 2015:

	Lease and Related Costs, Net					Severance and Other Employee Separation Costs						Other Restructuring Related Costs					Total
($ in thousands)	2016 Restructuring		Prior Year Restructuring(1)			2016 Restructuring			Prior Year Restructuring(1)			2016 Restructuring		Prior Year Restructuring(1)
August 31, 2015	$	—	$	74,990		$	—		$	8,210		$	—	$	90		$	83,290
Expense	—		10,479			10,380			1,058			210		2,303			24,430
Other	—		(387		)	(53		)	—			—		(1,211		)	(1,651		)
Payments	—		(12,662		)	(3,158		)	(5,257		)	—		(813		)	(21,890		)
November 30, 2015(2)	$	—	$	72,420		$	7,169		$	4,011		$	210	$	369		$	84,179

⁽¹⁾ We have incurred $430 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $267 million, $114 million and $49 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $319 million in University of Phoenix, $19 million in Apollo Global, and $92 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of November 30, 2015 was approximately $147 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally include rationalizing our leased administrative office facilities, closing approximately 150 University of Phoenix ground locations, and workforce reductions. During the three months ended November 30, 2015, we incurred $13.8 million of expense for these prior year activities. The substantial majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 12

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-6% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of November 30, 2015, we had approximately $66 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Activities Initiated in Fiscal Year 2016

During the three months ended November 30, 2015, we incurred $10.6 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 700 positions. The expense associated with these activities for the three months ended November 30, 2015 is reflected in our segment reporting as follows: $8.2 million in University of Phoenix, $0.2 million in Apollo Global and $2.2 million in Other.

Note 3. Discontinued Operations

During the first quarter of fiscal year 2016, we completed the sale of Carnegie Learning for a nominal amount resulting in a $2.8 million loss on sale. We do not have significant continuing involvement with Carnegie Learning after the sale.

During fiscal year 2015, we began presenting Carnegie Learning’s assets and liabilities as held for sale on our Condensed Consolidated Balance Sheets and its operating results as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented. As discussed further in Note 17, Segment Reporting, Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment.

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ in thousands)	As of August 31, 2015
Cash	$	10,220
Accounts receivable, net	10,327
Property and equipment, net	15,912
Intangible assets, net	14,100
Other	3,972
Allowance for reduction of assets of business held for sale	(13,634		)
Total assets	$	40,897
Deferred revenue	$	35,602
Other	5,295
Total liabilities	$	40,897

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 13

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue	$	2,993		$	4,527
Costs and expenses:
Loss on sale	2,773			—
Other	4,519			8,192
Loss from discontinued operations before income taxes	(4,299		)	(3,665		)
Benefit from income taxes	1,040			1,387
Loss from discontinued operations, net of tax	$	(3,259	)	$	(2,278	)

The operating results of our discontinued operations only includes revenues and costs directly attributable to the discontinued operations. Accordingly, no interest expense or general corporate overhead has been allocated to Carnegie Learning. Additionally, we ceased depreciation on Carnegie Learning’s property and equipment when we determined it was held for sale.

Note 4. Acquisitions

During fiscal year 2015, we completed the following acquisitions to support our strategy to diversify and expand our professional development offerings and global operations:

• The Iron Yard - On June 11, 2015, we acquired a 62% interest in TIY Academy, LLC (“The Iron Yard”), a provider of nondegree information technology bootcamp programs in the United States, for $15.9 million.

• FAEL - On December 4, 2014, we acquired a 75% interest in Sociedade Técnica Educacional da Lapa S.A., a provider of postsecondary educational programs in Brazil under the name Faculdade da Educacional da Lapa (“FAEL”). We made an initial cash payment of R$73.8 million (equivalent to $28.9 million on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future that is principally based on FAEL’s calendar year 2018 net revenue. The contingent payment has a maximum of approximately R$34 million (equivalent to $9.1 million as of November 30, 2015), and its fair value on the acquisition date was insignificant based on our estimate of FAEL’s future revenue in relation to the contingent payment threshold as defined in the acquisition agreement.

We accounted for these acquisitions as business combinations, and the operating results of The Iron Yard and FAEL are included in our consolidated financial statements from respective acquisition dates. We have not provided pro forma information or the revenue and operating results of the acquired entities because their results of operations are not material, either individually or in the aggregate, to our consolidated results of operations in the respective periods of acquisition. The purchase price allocations are summarized below:

($ in thousands)	The Iron Yard			FAEL
Tangible assets (net of acquired liabilities)	$	5,262		$	(2,807	)
Indefinite-lived intangibles	—			15,163
Finite-lived intangibles	4,690			5,394
Goodwill	15,888			14,538
Total assets acquired and liabilities assumed, net	25,840			32,288
Less: Fair value of redeemable noncontrolling interests	(9,900		)	(3,437		)
Total fair value of consideration transferred	15,940			28,851
Less: Cash acquired	(5,401		)	(7,685		)
Cash paid for acquisition, net of cash acquired	$	10,539		$	21,166

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 14

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Financial Instruments

We invest our excess cash in a variety of marketable securities, which are all classified as available-for-sale. The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective periods:

	November 30, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	496,494	$	—	$	—		$	496,494	$	496,494	$	—	$	—
Level 1:
Money market funds	105,325		—		—			105,325		105,325		—		—
Level 2:
Corporate bonds	175,257		40		(437		)	174,860		954		128,158		45,748
Tax-exempt municipal bonds	99,267		61		(62		)	99,266		1,344		73,120		24,802
Time deposits	50,315		—		—			50,315		25,129		25,186		—
Other	38,917		4		(49		)	38,872		—		30,548		8,324
Total	$	965,575	$	105	$	(548	)	$	965,132	$	629,246	$	257,012	$	78,874

	August 31, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	564,225	$	—	$	—		$	564,225	$	564,225	$	—	$	—
Level 1:
Money market funds	107,408		—		—			107,408		107,408		—		—
Level 2:
Corporate bonds	137,283		16		(271		)	137,028		1,823		82,047		53,158
Tax-exempt municipal bonds	97,022		68		(60		)	97,030		2,408		61,530		33,092
Time deposits	50,267		—		—			50,267		25,110		25,157		—
Other	36,634		10		(37		)	36,607		1,100		25,942		9,565
Total	$	992,839	$	94	$	(368	)	$	992,565	$	702,074	$	194,676	$	95,815

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

We measure our financial instruments at fair value on a recurring basis as follows:

• Money market funds - We use Level 1 inputs that primarily consist of real-time quotes for transactions in active exchange markets involving identical assets.

• Other financial instruments - We use a market approach with Level 2 observable inputs for all other securities. The Level 2 inputs include quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.

Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 15

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Accounts Receivable, Net

Accounts receivable, net consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Student accounts receivable	$	254,244		$	234,204
Less allowance for doubtful accounts	(48,038		)	(42,259		)
Net student accounts receivable	206,206			191,945
Other receivables	8,173			6,514
Total accounts receivable, net	$	214,379		$	198,459

Student accounts receivable is composed primarily of amounts due related to tuition and educational services. The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Beginning allowance for doubtful accounts	$	42,259		$	50,145
Provision for uncollectible accounts receivable	15,313			17,398
Write-offs, net of recoveries	(9,491		)	(14,406		)
Currency translation adjustment	(43		)	(455		)
Ending allowance for doubtful accounts	$	48,038		$	52,682

Note 7. Goodwill and Intangibles

The following details changes in our goodwill by reportable segment during the three months ended November 30, 2015:

($ in thousands)	University of Phoenix			Apollo Global			Other			Total
Goodwill as of August 31, 2015	$	71,812		$	142,599		$	32,779		$	247,190
Impairment(1)	(71,812		)	—			(1,581		)	(73,393		)
Currency translation adjustment	—			(785		)	—			(785		)
Goodwill as of November 30, 2015	$	—		$	141,814		$	31,198		$	173,012

⁽¹⁾ During the first quarter of fiscal year 2016, we recorded impairment charges of $71.8 million and $1.6 million for our University of Phoenix and Western International University reporting units, respectively.

Intangibles consist of the following as of the respective periods:

	November 30, 2015										August 31, 2015
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount
Accreditations and designations	$	21,628	$	(7,850	)	$	(3,050	)	$	10,728	$	21,628	$	(6,972	)	$	(3,153	)	$	11,503
Trademarks	21,019		(3,380		)	(2,921		)	14,718		21,019		(2,942		)	(3,034		)	15,043
Curriculum	19,715		(8,424		)	(2,462		)	8,829		19,715		(7,361		)	(2,470		)	9,884
Student and customer relationships	5,437		(2,805		)	(2,026		)	606		5,517		(2,632		)	(1,975		)	910
Other	3,770		(768		)	(740		)	2,262		3,746		(597		)	(633		)	2,516
Total finite-lived intangibles	71,569		(23,227		)	(11,199		)	37,143		71,625		(20,504		)	(11,265		)	39,856
Trademarks	101,637		—			(12,559		)	89,078		101,637		—			(9,906		)	91,731
Accreditations and designations	14,470		—			(3,239		)	11,231		14,470		—			(2,813		)	11,657
Total indefinite-lived intangibles	116,107		—			(15,798		)	100,309		116,107		—			(12,719		)	103,388
Total intangible assets, net	$	187,676	$	(23,227	)	$	(26,997	)	$	137,452	$	187,732	$	(20,504	)	$	(23,984	)	$	143,244

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 16

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The estimated future amortization expense of our finite-lived intangibles as of November 30, 2015 is as follows:

($ in thousands)	Remainder of 2016		2017		2018		2019		2020		2021		Thereafter		Total
Estimated future amortization expense(1)	$	7,968	$	9,917	$	7,375	$	3,359	$	1,975	$	1,794	$	4,755	$	37,143

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

Goodwill Impairment

Our market capitalization declined significantly during the first quarter of fiscal year 2016 after we reported our fourth quarter fiscal year 2015 results and our business outlook for fiscal year 2016. We believe the decline in the first quarter of fiscal year 2016 was attributable to University of Phoenix’s lower enrollment, increasing risk associated with the proprietary education sector, and uncertainty associated with its strategy to transform into a more focused, higher retaining and less complex institution. Although we believe the University’s new strategy in the longer term will improve retention and graduation rates and help stabilize enrollment, the associated initiatives have accelerated the enrollment decline at the University and we expect they will negatively impact its cash flows in the short-term. Based on the decline in market capitalization, we performed an interim goodwill impairment analysis for University of Phoenix in the first quarter of fiscal year 2016.

University of Phoenix represents the substantial majority of our consolidated operating results and, as discussed above, we believe our market capitalization decline in the first quarter of fiscal year 2016 was attributable to the University. Accordingly, we estimated the fair value of our University of Phoenix reporting unit using a market-based valuation approach, which incorporated assumptions that we believe would be a reasonable market participant’s view of the increased risk and uncertainty associated with the University and its expected future cash flows. The market-based approach included multiples derived from comparable companies with consideration of the University’s current operating trends and transformational strategy in relation to the other companies. Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for University of Phoenix compared to its carrying value. Based on the University’s estimated fair value and a hypothetical purchase price allocation, we determined the University would have no implied goodwill. Accordingly, we recorded a $71.8 million impairment charge in the first quarter of fiscal year 2016 representing the University’s entire goodwill balance. We did not record an income tax benefit associated with this charge as the University’s goodwill is not deductible for tax purposes.

During the first quarter of fiscal year 2016, we also recorded a $1.6 million goodwill impairment charge representing the entire goodwill balance for our Western International University reporting unit. Western International University operates in the same sector of the U.S. proprietary education industry as University of Phoenix.

We did not record any impairment charges associated with our other reporting units as we do not believe there have been any events or changes in circumstances since their respective most recent annual impairment tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount. As part of this consideration, we compared the sum of the estimated fair values of our reporting units to our market capitalization in the first quarter of fiscal year 2016, plus an assumed control premium to acquire a controlling interest in Apollo. Apollo is a “Controlled Company” under Nasdaq listing rules and our market capitalization is based solely on our nonvoting publicly traded Class A common stock. Based on our evaluation, the fair values of our reporting units were reasonable in relation to our market capitalization. However, we may be required to record additional goodwill impairment charges in the future if our critical assumptions deteriorate or our market capitalization declines further.

Note 8. Fair Value Measurements

We measure and disclose certain financial instruments at fair value as described in Note 5, Financial Instruments.Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of November 30, 2015 and August 31, 2015:

			Fair Value Measurements at Reporting Dates Using
	Fair Value as of Respective Reporting Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
($ in thousands)
Contingent consideration as of November 30, 2015	$	7,542	$	—	$	—	$	7,542
Contingent consideration as of August 31, 2015	$	7,499	$	—	$	—	$	7,499

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 17

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Beginning balance	$	7,499	$	41,893
Change in fair value included in net income	43		(1,121		)
Payment for contingent consideration(1)	—		(34,480		)
Ending balance	$	7,542	$	6,292

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition, which was initially measured at $21.4 million based on information available as of the acquisition date.

As of November 30, 2015, we have a $7.5 million contingent consideration liability, which resulted from our purchase of the noncontrolling interest in Apollo Global during fiscal year 2013 and is based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017. The liability is measured at fair value using Level 3 inputs included in the valuation method. The inputs include estimated operating results scenarios for the applicable performance period, probability weightings assigned to operating results scenarios and the discount rates applied. We did not change our valuation techniques associated with recurring fair value measurements from prior periods.

Liabilities measured at fair value on a nonrecurring basis during the three months ended November 30, 2015 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			Fair Value Measurements at Measurement Date Using
($ in thousands)	Fair Value at Measurement Date		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for Three Months Ended November 30, 2015
Restructuring obligations	$	7,671	$	—	$	—	$	7,671	$	7,671

During the three months ended November 30, 2015, we recorded $7.7 million of aggregate initial lease obligations at fair value associated with our restructuring activities. We recorded obligation liabilities on the dates we ceased using the respective facilities, and we measured the liabilities at fair value using Level 3 inputs included in the valuation method. Refer to Note 2, Restructuring and Impairment Charges.

Note 9. Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Salaries, wages and benefits	$	55,036	$	74,454
Student discounts, grants and scholarships	49,009		44,682
Restructuring obligations	41,892		38,921
Legal and other professional obligations	27,190		23,961
Deferred rent and other lease liabilities	10,627		12,181
Curriculum materials	9,528		11,690
Advertising	8,850		21,931
Other	49,816		53,027
Total accrued and other current liabilities	$	251,948	$	280,847

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 18

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other long-term liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Deferred rent and other lease liabilities	$	47,980	$	49,745
Restructuring obligations	42,287		44,369
Deferred gains on sale-leasebacks	19,799		20,168
Deferred revenue	17,581		16,687
Other	42,014		41,483
Total other long-term liabilities	$	169,661	$	172,452

Note 10. Debt

Debt and short-term borrowings consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Revolving Credit Facility	$	—		$	—
Capital lease obligations	13,856			16,863
Other	29,411			28,783
Total debt	43,267			45,646
Less short-term borrowings and current portion of long-term debt	(22,485		)	(14,080		)
Long-term debt	$	20,782		$	31,566

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of November 30, 2015 and August 31, 2015, but we had approximately $59 million and $41 million of outstanding letters of credit as of the respective periods. Subsequent to November 30, 2015, we borrowed $50 million under the Revolving Credit Facility to use in our acquisition of Career Partner. Refer to Note 1, Nature of Operations and Significant Accounting Policies.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and U.S. Department of Education financial responsibility composite score requirements. We were in compliance with all applicable covenants related to the Revolving Credit Facility at November 30, 2015 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at both November 30, 2015 and August 31, 2015 was 5.6%.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

Note 11. Income Taxes

We have historically determined our interim income tax provision by applying our estimated effective income tax rate expected to be applicable for the full fiscal year to our income before income taxes for the period. Our effective income tax rate is dependent upon several factors, such as tax rates in state and foreign jurisdictions and the relative amount of income we earn in such jurisdictions. In determining our full year estimate, we do not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes. We exercise significant judgment in determining our income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 19

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As further discussed in Note 7, Goodwill and Intangibles, there is significant uncertainty associated with University of Phoenix’s future operating results due to competitive factors and its initiatives to transform itself into a more focused, higher retaining and less complex institution. Based primarily on this uncertainty, we used the discrete method to calculate our interim tax provision for the first quarter of fiscal year 2016. Under the discrete method, we determined our tax expense for the interim period based on actual results as if the interim period were an annual period, which we believe provides a more reasonable interim income tax provision than the continued use of the estimated annual effective tax rate method. Our first quarter fiscal year 2016 effective income tax rate for continuing operations was also significantly impacted by the goodwill impairment charge for our University of Phoenix reporting unit, which was not deductible for tax purposes. Refer to Note 7, Goodwill and Intangibles.

During fiscal year 2015, the Internal Revenue Service (“IRS”) completed its review of our United States federal income tax return for fiscal year 2014. Our United States federal income tax return for fiscal year 2013 is currently open for review by the IRS and we are also participating in the IRS’s Compliance Assurance Process for fiscal years 2015 and 2016, which is a voluntary program in which taxpayers seek to resolve all or most issues with the IRS prior to or soon after filing their United States federal income tax returns. Additionally, we are subject to numerous ongoing audits by state, local and foreign tax authorities with various tax years as early as 2007 that remain subject to examination.

Although we believe our tax accruals are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from our historical income tax provisions and accruals.

Note 12. Shareholders’ Equity and Redeemable Noncontrolling Interests

Share Repurchases

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of November 30, 2015. There is no expiration date on the repurchase authorizations and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs.

We also repurchase shares in connection with tax withholding requirements associated with the release of vested share-based awards, which do not fall under the repurchase program described above.

The following summarizes our share repurchase activity for the respective periods:

	Three Months Ended November 30,
(In thousands, except per share data)	2015		2014
Share repurchases under share repurchase program:
Number of shares repurchased	—		677
Weighted average purchase price per share	$	—	$	26.72
Cost of share repurchases	$	—	$	18,092
Share repurchases related to vesting of share-based awards:
Number of shares repurchased	64		78
Cost of share repurchases	$	517	$	1,972

Share Reissuances

We reissue our Class A common stock from our treasury stock as a result of the release of shares associated with share-based awards and purchases under our employee stock purchase plan. Share reissuances were as follows for the respective periods:

	Three Months Ended November 30,
(In thousands)	2015	2014
Number of shares reissued	174	227

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 20

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13. Earnings Per Share

Our outstanding shares consist of Apollo Class A and Class B common stock. Our Articles of Incorporation treat the declaration of dividends on the Class A and Class B common stock in an identical manner. As such, both the Class A and Class B common stock are included in the calculation of our earnings per share.

Diluted weighted average shares outstanding includes the incremental effect of shares that would be issued upon the assumed exercise of stock options and the vesting and release of restricted stock units and performance share awards. The components of basic and diluted earnings per share are as follows:

	Three Months Ended November 30,
(In thousands, except per share data)	2015			2014
Numerator:
Net (loss) income attributable to Apollo (basic and diluted)	$	(60,765	)	$	33,785
Denominator:
Basic weighted average shares outstanding	108,446			108,581
Dilutive effect of restricted stock units and performance share awards(1)	—			618
Dilutive effect of stock options(1)	—			179
Diluted weighted average shares outstanding	108,446			109,378
Basic (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Diluted (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Anti-dilutive securities excluded from diluted (loss) income per share:
Anti-dilutive restricted stock units and performance share awards outstanding(1)	4,385			316
Anti-dilutive stock options outstanding(1)	3,716			2,476

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the three months ended November 30, 2015, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

Note 14. Share-Based Compensation

The following details share-based compensation expense for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Instructional and student advisory	$	2,784	$	2,982
Marketing	764		836
Admissions advisory	165		261
General and administrative	5,754		5,880
Restructuring and impairment charges	53		752
Share-based compensation expense	$	9,520	$	10,711

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted 568,000 restricted stock units and performance share awards during the three months ended November 30, 2015. The granted awards had a weighted average grant date fair value per share of $7.50. As of November 30, 2015, we had $61.6 million and $3.0 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested restricted stock units and performance share awards, respectively. This expense is expected to be recognized over a weighted average period of 2.7 years.

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted 4,000 stock options during the three months ended November 30, 2015. The weighted average grant date fair value and the weighted average exercise price of the options granted were $4.12 and $10.35, respectively. As of November 30, 2015, we had $8.9 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.8 years.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 21

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 15. Commitments and Contingencies

Surety Bonds

As part of our normal operations, our insurers issue surety bonds for us that are required by various states where we operate. We are obligated to reimburse our insurers for any surety bonds that are paid. As of November 30, 2015, the face amount of these surety bonds was approximately $11 million.

Letters of Credit

As of November 30, 2015, we had approximately $59 million of outstanding letters of credit, which support certain of our obligations and guarantees provided by our subsidiaries as part of our normal operations for which fair value is not material.

Litigation and Other Matters

We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. We do not believe any of these are material for separate disclosure.

The following is a description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business.

Class Action Alleging Violations of Kentucky Wage and Hour Laws

On June 9, 2015, two former University of Phoenix employees filed an action in the Circuit Court of Jefferson County Kentucky alleging that they were wrongfully terminated from their positions with the University in violation of Kentucky and federal law. In this action, which is captioned Aldrich et al. v. The University of Phoenix, 15-C-2839 (Jefferson Cty. Circuit Court), plaintiffs also allege that the University violated Kentucky wage and hour law by failing to pay plaintiffs overtime and other required wages, and in connection with these wage and hour claims, they seek to represent a class of plaintiffs consisting of all individuals employed by the University within the past five years who performed a substantial part of their job duties in Kentucky. Plaintiffs seek to recover damages on their own behalf in connection with their alleged wrongful termination and past due wages, overtime compensation and other relief on behalf of the class in connection with the wage and hour claims.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Incentive Compensation False Claims Act Lawsuit

On May 25, 2011, we were notified that a qui tam complaint had been filed against us in the U.S. District Court, Eastern District of California, by private relators under the Federal False Claims Act and California False Claims Act, entitled USA and State of California ex rel. Hoggett and Good v. University of Phoenix, et al, Case Number 2:10-CV-02478-MCE-KJN. When the federal government declines to intervene in a qui tam action, as it has done in this case, the relators may elect to pursue the litigation on behalf of the federal government and, if successful, they are entitled to receive a portion of the federal government’s recovery.

The complaint alleges, among other things, that University of Phoenix has violated the Federal False Claims Act since December 12, 2009 and the California False Claims Act for the preceding ten years by falsely certifying to the U.S. Department of Education and the State of California that University of Phoenix was in compliance with various regulations that require compliance with federal rules regarding the payment of incentive compensation to admissions personnel, in connection with University of Phoenix’s participation in student financial aid programs. In addition to injunctive relief and fines, the relators seek significant damages on behalf of the Department of Education and the State of California, including all student financial aid disbursed by the Department to our students since December 2009 and by the State of California to our students during the preceding ten years. On July 24, 2014, the Court granted our motion to dismiss for lack of jurisdiction and dismissed relators’ complaint with prejudice. On December 14, 2014, relators filed a Notice of Appeal with the U.S. Court of Appeals for the Ninth Circuit, and their appeal remains pending before that court.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

K.K. Modi Investment and Financial Services Pvt. Ltd.

On November 8, 2010, a suit was filed by K.K. Modi Investment and Financial Services Pvt. Ltd. (“Modi”) in the High Court of Delhi at New Delhi against defendants Apollo, Western International University, Inc., University of Phoenix, Inc., Apollo Global,

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 22

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Inc., Modi Apollo International Group Pvt. Ltd., Apollo International, Inc., John G. Sperling, Peter V. Sperling and Jorge Klor De Alva, seeking to permanently enjoin the defendants from making investments in the education industry in the Indian market in breach of an exclusivity and noncompete provision which plaintiff alleges is applicable to Apollo and its subsidiaries. The case is entitled, K.K. Modi Investment and Financial Services Pvt. Ltd. v. Apollo International, et. al. We believe that the relevant exclusivity and noncompete provision is inapplicable to us and our affiliates. On October 31, 2014, the Court denied the Apollo defendants’ initial applications to have the case dismissed, concluding that plaintiffs’ complaint raised factual issues that needed to be resolved through the submission of evidence. Defendants appealed that ruling to the Division Bench of the High Court, and that appeal was denied by the Division Bench on August 17, 2015. We then filed a Special Leave Petition before the India Supreme Court on November 21, 2015, seeking leave to appeal the decision of the Division Bench. If plaintiff ultimately obtains the requested injunctive relief, our ability to conduct business in India, including through our joint venture with HT Media Limited, may be adversely affected. It is also possible that in the future K.K. Modi may seek to expand existing litigation in India or commence litigation in the U.S. in which it may assert a significant damage claim against us.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Attorney General Investigations

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present. We are cooperating with the Attorney General in this matter. We cannot predict the eventual scope, duration or outcome of this matter at this time, but we expect to provide to the Attorney General’s office information relating to aspects of our operations that is not limited to military students.

In May 2011 and January 2013, University of Phoenix received Civil Investigative Demands from the State of Massachusetts Office of the Attorney General. The Demands relate to an investigation of possible unfair or deceptive methods, acts, or practices by proprietary educational institutions in connection with the recruitment of students and the financing of education. The Demands seek documents, information and testimony regarding a broad spectrum of the University’s business for the time period of January 1, 2002 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

On October 22, 2010, University of Phoenix received notice that the State of Florida Office of the Attorney General in Fort Lauderdale, Florida had commenced an investigation into possible unfair and deceptive trade practices associated with certain alleged practices of the University. The notice included a subpoena to produce documents and detailed information for the time period of January 1, 2006 to the present about a broad spectrum of the University’s business. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of these state Attorneys General investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

In addition, from time to time, we receive requests for information from state Attorneys General, accrediting bodies, state higher education regulatory bodies and other federal and state government agencies relating to investigations or inquiries being conducted by other state or federal agencies, pending litigation or specific complaints received from students or former students. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices. We have received such a request from the Wisconsin Department of Justice for information relating to programs offered by University of Phoenix to Wisconsin residents.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 23

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

UNIACC Investigations

UNIACC was advised by the National Accreditation Commission of Chile in November 2011 that its institutional accreditation would not be renewed and therefore had lapsed. Subsequently, in June 2012, a prosecutor’s office in Santiago, Chile requested that UNIACC provide documents relating to UNIACC’s relationship with a former employee and consultant who served as a member of the National Accreditation Commission until March 2012, and we received requests for additional information in connection with this investigation. Furthermore, in August 2012, the prosecutor’s office began requesting that UNIACC provide information about UNIACC’s business structure and operations and its relationship with other Apollo entities, in connection with an additional investigation regarding UNIACC’s compliance with applicable laws concerning the generation of profit by universities such as UNIACC. The prosecutor’s office has also requested additional information from UNIACC regarding certain government funding received by the institution. UNIACC is cooperating with these investigations. At this time, we cannot predict the eventual scope, duration or outcome of these investigations.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

In addition, in August 2015, we received a notice from the FTC that it had commenced an inquiry into University of Phoenix’s practices and procedures for safeguarding student and staff personal information, which inquiry has since been closed without any adverse action.

Because of the many questions of fact and law that may arise, the outcome of the FTC investigation is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this matter and, accordingly, we have not accrued any liability associated with this matter.

Open Colleges Investigations

In September 2015, Open Colleges received a Notice from the Australian Competition and Consumer Commission (“ACCC”) requiring Open Colleges to produce information about student refunds upon withdrawal and related matters for the period of time since July 2014. In addition, Open Colleges receives inquiries from time to time from governmental regulatory authorities regarding student complaints, including an inquiry in October 2015 from the Australian Skills Quality Authority regarding student complaints about marketing practices, refund policies and other matters. Open Colleges is cooperating with the relevant authorities in these matters, but we cannot at this time predict their eventual scope, duration or outcome.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Office of the Inspector General of the U.S. Department of Education (“OIG”) Subpoena

On March 21, 2014, University of Phoenix received a subpoena from the Mid-Atlantic Region of the OIG. The subpoena seeks the production by the University of documents and detailed information regarding a broad spectrum of the activities conducted in the University’s Centralized Service Center for the Northeast Region located in Columbia, Maryland, for the time period of January 1, 2007 to the present, including information relating to marketing, recruitment, enrollment, financial aid processing, fraud prevention, student retention, personnel training, attendance, academic grading and other matters. We are cooperating with these requests, but we cannot at this time predict the eventual scope, duration or outcome of this matter.

Because of the many questions of fact and law that may arise, the outcome of this matter is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss and, accordingly, we have not accrued any liability associated with this matter.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 24

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Securities Class Action (Teamsters Local 617 Pensions and Welfare Funds)

On November 2, 2006, the Teamsters Local 617 Pension and Welfare Funds filed a class action complaint alleging that we and certain of our current and former directors and officers violated the Securities Exchange Act of 1934. The complaint is entitled Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc. et al., Case Number 06-cv-02674-RCB.

The parties reached an agreement in principle to settle this matter for an immaterial amount and, on July 29, 2015, the district court entered an order approving the settlement and dismissing with prejudice the claims against defendants. Subsequent to the approval, an individual non-class member filed an untimely objection to the settlement with the district court. On December 7, 2015, the district court struck the objection.

Note 16. Regulatory Matters

All U.S. federal student financial aid programs are established by Title IV of the Higher Education Act and regulations promulgated thereunder. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in Higher Education Act reauthorization hearings, but the timing and terms of any eventual reauthorization cannot be predicted.

The Higher Education Act, as reauthorized, specifies the manner in which the U.S. Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification, which is granted in a Program Participation Agreement with the institution.

University of Phoenix’s Title IV Program Participation Agreement expired on December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

Additionally, in August 2014, the Department commenced an ordinary course program review of University of Phoenix’s administration of Title IV programs covering federal financial aid years 2012-2013 and 2013-2014, as well as compliance with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, the Drug-Free Schools and Communities Act and related regulations. During fiscal year 2015, the University received a Final Program Review Determination Letter with regard to this program review. All administrative matters are deemed by the Department to be resolved and/or closed, with the exception of findings regarding compliance with the Clery Act, which have been referred to the Department’s Clery Team and to the Administrative Action and Appeals Division which is standard protocol in such matters. The outcome of this matter is uncertain at this point and, based on the information available to us at present, we have not accrued any liability associated with this matter.

Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet at least one of the minimum ratios for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet at least one of the minimum ratios for two years will immediately cease to be Title IV eligible for a period of not less than three years.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 25

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students enrolled in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

Higher Learning Commission Accreditation

University of Phoenix is regionally accredited by The Higher Learning Commission (“HLC”), which provides the following:

• Recognition and acceptance by employers, other higher education institutions and governmental entities of the degrees and credits earned by students;

• Qualification to participate in Title IV programs (in combination with state higher education operating and degree granting authority); and

• Qualification for authority to operate in certain states.

In July 2013, the accreditation of University of Phoenix was reaffirmed by HLC through the 2022-2023 academic year. The University is subject to the Standard Pathway reaffirmation process, pursuant to which the University will host a comprehensive evaluation visit in 2016-2017 and will undergo its next reaffirmation process in 2022-2023.

Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On October 7, 2015, University of Phoenix was placed on probationary status by the U.S. Department of Defense (“DoD”) in respect of the University’s participation in the DoD Tuition Assistance Program for active duty military personnel, while the DoD is considering whether to terminate the Voluntary Education Partnership Memorandum of Understanding with the University (“DoD MOU”). The DoD MOU is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program. While on probationary status, currently eligible enrolled students remain eligible to participate in the Tuition Assistance Program, but newly enrolled or transfer students of the University are not eligible. Additionally, the University is not permitted to sponsor activities at military installations, including job training and career events. The DoD cited various bases for its actions, including prior compliance issues relating to the use of “challenge coins” without proper trademark authorization, sponsorship of military morale, welfare and recreation events without the specific written authorization of the officer designated in the DoD MOU, and the pending investigations by the Federal Trade Commission and the California Attorney General’s office. The DoD has informed the University that the specified prior compliance issues have been appropriately addressed. The FTC and California Attorney General investigatory demands for information do not include any allegations of violations and no charges have been made. The University has timely responded to the DoD with relevant information for its consideration, and the DoD has subsequently requested additional information, including information unrelated to the subject matter of the original notice of probation. If the DoD MOU is terminated, currently enrolled active military students will no longer be eligible to participate in the DoD’s Tuition Assistance Program. In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of University of Phoenix’s net revenue.

U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation from the Department of Defense described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, as determined in the same manner prescribed in the 90/10 Rule.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 26

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 17. Segment Reporting

We operate in the education industry and our operating segments have been determined based on the method by which our chief operating decision maker evaluates performance and allocates resources. We have not aggregated any of our operating segments, which are presented in our segment reporting as follows:

• University of Phoenix, which offers undergraduate and graduate degrees through its nine colleges in a wide range of program areas as well as various nondegree programs. A significant majority of the University’s students attend classes exclusively online, and the University also offers its educational programs and services at ground locations throughout the United States.

• Apollo Global, which includes our institutions based outside the U.S., and its corporate operations. Apollo Global acquired FAEL during the second quarter of fiscal year 2015, and FAEL’s operating results are included in our Apollo Global operating segment from the date of acquisition.

• Other,which includes College for Financial Planning,Western International University, Apollo Professional Development, and Apollo corporate activities. Apollo acquired The Iron Yard during the fourth quarter of fiscal year 2015, and its operating results are included in Other in our segment reporting from the acquisition date.

During the fourth quarter of fiscal year 2015, we classified Carnegie Learning as held for sale and began presenting it as discontinued operations. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment. As Carnegie Learning’s operating results are presented as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented, we have revised our segment reporting to exclude Carnegie Learning’s operating results.

A summary of financial information by reportable segment is as follows:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue:
University of Phoenix	$	462,617		$	592,853
Apollo Global	115,332			115,140
Other	8,072			6,532
Net revenue	$	586,021		$	714,525
Operating (loss) income(1):
University of Phoenix	$	(17,504	)	$	96,614
Apollo Global(2)	(2,335		)	(4,842		)
Other(3)	(25,410		)	(27,608		)
Operating (loss) income	(45,249		)	64,164
Reconciling items:
Interest income	919			589
Interest expense	(1,456		)	(1,662		)
Other loss, net	(843		)	(1,290		)
(Loss) income from continuing operations before income taxes	$	(46,629	)	$	61,801

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges and Note 7, Goodwill and Intangibles.

⁽²⁾ Apollo Global includes $0.6 million and $1.7 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

⁽³⁾ Other includes $0.5 million and $1.5 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 27

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A summary of our consolidated assets by reportable segment is as follows:

($ in thousands)	November 30, 2015		August 31, 2015
University of Phoenix	$	602,873	$	648,755
Apollo Global	564,797		588,434
Other(1)	878,908		963,875
Total assets	$	2,046,578	$	2,201,064

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended August 31, 2015 and our financial statements included in Part I, Item 1, of this Form 10-Q.

Overview

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We believe that our success depends on providing high quality education and career-focused pathways, tools and services to students to maximize the benefits of their educational experience. We offer undergraduate, graduate, certificate and nondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad.

Substantially all of our net revenue is composed of tuition and fees for educational services. In fiscal year 2015, University of Phoenix represented 84% of our consolidated net revenue, and generated more than 100% of our consolidated operating income.

Key Trends, Developments and Challenges

The following developments and trends present opportunities, challenges and risks relating to our business:

Rapidly Evolving and Highly Competitive Education Industry

The higher education industry is changing at an increasing pace due to technological developments, evolving needs and objectives of students and employers, economic constraints affecting educational institutions and students, price competition, increased focus on affordability and value, uneven quality of secondary education in the U.S. and other factors that challenge many of the core principles underlying the industry. In addition, one of our primary competitive advantages has been materially diminished as a significant and increasing number of traditional four-year and community colleges offer an increasing array of distance learning and other online education programs, including programs that are geared towards the needs of working learners. Already, this type of competition is significant and has contributed to the substantial decline in University of Phoenix enrollment that began in late 2010. See further discussion of enrollment in Results of Operations below.

Furthermore, as discussed below, University of Phoenix expects to implement enhanced minimum admissions criteria to better ensure that newly enrolled students are adequately prepared for the rigors of higher education. Many of the students who do not meet these enhanced admissions criteria are not eligible for admission to traditional four-year colleges and universities. Accordingly, these new admissions standards will increase the proportion of University of Phoenix’s potential students for which the University competes directly with the traditional educational institutions, further intensifying competition.

University of Phoenix Transformation

The University’s vision is to be recognized as the most trusted provider of career-relevant higher education for working adults. In furtherance of this, the University offers career focused programs and an instructional model designed specifically to meet the educational needs of working adults. Due in part to the competitive factors described above, University of Phoenix Degreed Enrollment has decreased by more than 60% since late 2010. The University is working to stabilize enrollment in the longer term by transforming itself into a more focused, higher retaining and less complex institution through several initiatives, including:

• Continuing the development of a college-by-college approach to strategy, marketing, admissions, staffing, program development, planning and budgeting to more effectively address the specific needs of the students and employers served by each college;

• Piloting diagnostic tools for development of enhanced admissions criteria expected to be implemented beginning in fiscal year 2016 to increase the proportion of newly enrolled students who are better prepared for the rigors of college level coursework, and tailoring initial course sequences to match the academic capabilities of students when they first enroll;

• Eliminating associate degree programs which have lower retention rates and are less career relevant, and adding more career-focused pathways that offer certificates and four-year bachelor’s degrees in key growth areas of the employment market;

• Concentrating on fewer ground locations in selected major metropolitan areas throughout the United States in order to establish a stronger regional presence for both on-ground and online students;

• Reducing the number of student cohort start dates from approximately every week to approximately every five weeks for most programs in order to reduce complexity and improve the online classroom experience through more consistent class sizes;

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 29

• Eliminating the use of third-party operated websites for marketing purposes in November 2015 in order to better manage the University’s marketing message, improve its ability to identify those students more likely to persist in its educational programs, and reduce cost;

• Transitioning technology systems from proprietary and legacy systems, including the University’s online classroom, to commercial software and software as a service providers to reduce costs, improve operations and facilitate future systems upgrades; and

• Developing increased student self-service capabilities, including in admissions, financial aid, academic planning and class scheduling.

There is no assurance that these initiatives will achieve the desired result, and the broad scope and number of simultaneous changes increases the risk of unintended consequences. These initiatives have accelerated the enrollment decline at University of Phoenix, and we expect new and total degreed enrollment to continue declining in the near term, but we believe these initiatives in the longer term will improve retention and graduation rates and help stabilize enrollment.

Cost Reductions

We are intensely focused on reengineering our business processes and educational delivery systems to improve efficiencies and reduce costs to align with our declining enrollment and revenue in a manner that does not adversely impact the quality of our services to students. As discussed above, we expect that our initiative to transform University of Phoenix will accelerate the near term rate of decline in the University’s enrollment and revenue, which increases the amount of necessary cost reductions we believe are needed. In furtherance of this, we are closing underutilized or unnecessary University of Phoenix campus locations, reducing our workforce as necessary, streamlining and, where appropriate, automating our administrative and student facing services, outsourcing administrative and other services, evaluating the scope of our academic programs and adjusting the timing of certain of the University of Phoenix transformation initiatives. Also, we have engaged outside advisors to assist us in identifying and effectuating these cost reduction initiatives. Although we intend to effect these changes in a manner that does not adversely impact the quality of our services to students, given the magnitude of these changes, they could result in near term disruption to our business and resulting decreases in our enrollment and revenues. Additionally, our fiscal year 2016 Department of Education financial responsibility composite score will be adversely impacted if we are not successful in reducing costs sufficiently during fiscal year 2016 or our enrollment and revenue decline more than anticipated. See further discussion under Regulatory Environment - Financial Responsibility Composite Score and Results of Operations below.

Expansion of Global Operations

We have operations on six continents and are working to expand our global operations, including exploring new opportunities for growth outside the U.S. in areas of non-traditional higher education, such as certificate programs and vocational education. The integration and operation of acquired businesses in foreign jurisdictions entails substantial regulatory, market and execution risks and, consistent with our experience to date, such acquisitions may not be accretive for an extended period of time.

Professional Development

Although degree programs represent the substantial majority of our revenue, we are increasing our professional development and other nondegree programs, both domestically at University of Phoenix and at other business units, and internationally through Apollo Global and the recently acquired The Iron Yard, to address the growing needs of employees and employers for specialized, nondegree education and training.

Regulatory Environment

In recent years, there has been substantial and increasing focus by various members of the U.S. Congress and federal agencies, including the Department of Education, the Consumer Financial Protection Bureau and the Federal Trade Commission, on the role that proprietary educational institutions play in higher education. Congressional hearings and roundtable discussions have been held regarding various aspects of the education industry, and reports have been issued that are highly critical of proprietary institutions and include a number of recommendations to be considered by Congress in connection with the upcoming reauthorization of the Higher Education Act. A group of influential U.S. senators has strongly and repeatedly encouraged the Departments of Education, Defense and Veterans Affairs to take action to limit or terminate the participation of proprietary educational institutions, including University of Phoenix, in existing tuition assistance programs.

In addition, the Department of Education has formed an inter-agency task force focused on the proprietary sector involving multiple federal agencies and departments including the Federal Trade Commission, the U.S. Departments of Justice, Treasury and Veterans Affairs, the Consumer Financial Protection Bureau, the Securities and Exchange Commission, and numerous state Attorneys General, to coordinate activities and share information to protect students from unfair, deceptive and abusive policies and practices. We believe that the recent actions by the U.S. Department of Defense, Federal Trade Commission and the California Attorney General’s office described below may be related to or coordinated with this task force. We expect that this

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 30

challenging regulatory environment will continue for proprietary educational institutions, including University of Phoenix, for the foreseeable future.

The following summarizes significant regulatory matters applicable to our business.

• Financial Responsibility Composite Score

To participate in Title IV programs, the U.S. Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and accept other conditions on its participation in Title IV programs. Pursuant to the Title IV program regulations, each eligible institution must satisfy a measure of financial responsibility that is based on a weighted average of the following three annual ratios which assess the financial condition of the institution:

◦ Primary Reserve Ratio - measure of an institution’s financial viability and liquidity;

◦ Equity Ratio - measure of an institution’s capital resources and its ability to borrow; and

◦ Net Income Ratio - measure of an institution’s profitability.

These ratios provide three individual scores which are converted into a single composite score. The maximum composite score is 3.0. If the institution achieves a composite score of at least 1.5, it is considered financially responsible. A composite score from 1.0 to 1.4 is also considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department’s “zone” alternative. The Department typically does not require an institution participating under the zone alternative to submit a letter of credit to the Department, but does subject the institution to additional requirements, which may include (i) being transferred from the “advance” method of payment of Title IV program funds to the Heightened Cash Monitoring 1 payment method under which the institution is required to make Title IV disbursements to eligible students and parents before it requests or receives funds from the Department for the amount of those disbursements (or being transferred to the more onerous Heightened Cash Monitoring 2 or reimbursement payment methods under which an institution must submit to the Department documentation demonstrating the eligibility for each Title IV disbursement and wait for the Department’s approval before drawing down Title IV funds); (ii) the imposition of additional reporting requirements regarding certain oversight and financial events; (iii) being required to submit to the Department its annual financial statements and Title IV compliance audits earlier than would otherwise be required; (iv) being required to submit information about current operations and future plans; and (v) the imposition of additional obligations imposed by the Department. If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in the Title IV programs, including (i) submitting to the Department of a letter of credit equal to at least ten percent of the Title IV funds received by the institution during its most recently completed fiscal year (although the Department could require the submission of a larger letter of credit), (ii) complying with the “zone” alternative requirements described above, (iii) being placed on provisional certification status, under which the institution must receive Department approval before implementing new locations or educational programs and comply with other restrictions (iv) demonstrating that it is current on its outstanding debt obligations, as defined by the Department, and (v) complying with other requirements imposed by the Department. In addition, under new regulations that take effect on July 1, 2016, institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit balances on behalf of students or parents. If any of these events were to occur, we would be unable to conduct our business as it is currently conducted.

The composite scores for Apollo Education Group and University of Phoenix were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

In addition, our principal revolving credit facility requires that we maintain composite scores of at least 1.5. If our composite scores fall below 1.5, it would be an event of default under the facility and the outstanding balance could be declared immediately due and payable. If in connection with composite scores below 1.5 the Department of Education required that we post a letter of credit, our revolving credit facility would not be available for that purpose and there is no assurance that other sources would be available on terms acceptable to us or at all.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 31

As discussed in Note 7, Goodwill and Intangibles, in Item 1, Financial Statements, we recorded $73.4 million of goodwill impairment charges relating to our University of Phoenix and Western International University reporting units during the first quarter of fiscal year 2016, which was primarily a result of the recent substantial decline in our market capitalization. These impairment charges increase our fiscal year 2016 total operating expenses, which will negatively impact our fiscal year 2016 composite scores to be calculated as of August 31, 2016. If our profitability declines further, including as a result of additional goodwill impairment charges in the future, which could result from further declines in our market capitalization or other changes in facts and circumstances, our fiscal year 2016 composite score would decline further and could fall below 1.5. We believe we could take remedial measures to bolster our composite scores, if needed, but these measures may require material modifications to our business and strategy and could adversely impact our future revenue and profitability.

• Financial Aid Funding Levels

The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in Higher Education Act reauthorization hearings, but the timing and terms of any eventual reauthorization cannot be predicted.

Title IV program funding is a potential target for reduction as Congress seeks to reduce the U.S. budget deficit. Because the majority of our revenue is derived from Title IV programs, any action by Congress that reduces Title IV program funding, or which alters the eligibility of our institutions or students to participate in Title IV programs could have a material adverse effect on our enrollment and financial condition. Action by Congress or federal agencies could also require us to modify our practices in ways that increase our administrative costs and reduce our operating income.

In addition to possible reductions in Title IV program funding, military benefit programs may be reduced as military branches address decreased funding. Reductions and/or changes in military benefit programs, or changes in our eligibility to participate in such programs could result in increased student borrowing, decreased enrollment and adverse impacts on our 90/10 Rule percentage.

• Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet at least one of the minimum ratios for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet at least one of the minimum ratios for two years will immediately cease to be Title IV eligible for a period of not less than three years.

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students enrolled in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 32

• U.S. Department of Education Program Participation Agreement

University of Phoenix’s Title IV Program Participation Agreement expired December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

Continued Title IV program eligibility is critical to the operation of our business. If University of Phoenix becomes ineligible to participate in Title IV programs, or participation is materially limited, we could not conduct our business as it is currently conducted and it would have a material adverse affect on our business and financial condition.

• Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

In addition, in August 2015, we received a notice from the FTC that it had commenced an inquiry into University of Phoenix’s practices and procedures for safeguarding student and staff personal information, which inquiry has since been closed without any adverse action.

• Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On October 7, 2015, University of Phoenix was placed on probationary status by the U.S. Department of Defense (“DoD”) in respect of the University’s participation in the DoD Tuition Assistance Program for active duty military personnel, while the DoD is considering whether to terminate the Voluntary Education Partnership Memorandum of Understanding with the University (“DoD MOU”). The DoD MOU is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program. While on probationary status, currently eligible enrolled students remain eligible to participate in the Tuition Assistance Program, but newly enrolled or transfer students of the University are not eligible. Additionally, the University is not permitted to sponsor activities at military installations, including job training and career events. The DoD cited various bases for its actions, including prior compliance issues relating to the use of “challenge coins” without proper trademark authorization, sponsorship of military morale, welfare and recreation events without the specific written authorization of the officer designated in the DoD MOU, and the pending investigations by the Federal Trade Commission and the California Attorney General’s office. The DoD has informed the University that the specified prior compliance issues have been appropriately addressed. The FTC and California Attorney General investigatory demands for information do not include any allegations of violations and no charges have been made. The University has timely responded to the DoD with relevant information for its consideration, and the DoD has subsequently requested additional information, including information unrelated to the subject matter of the original notice of probation. If the DoD MOU is terminated, currently enrolled active military students will no longer be eligible to participate in the DoD’s Tuition Assistance Program. In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of University of Phoenix’s net revenue.

U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation from the Department of Defense described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, as determined in the manner prescribed in the 90/10 Rule.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 33

• California Attorney General Investigation

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present. We are cooperating with the Attorney General in this matter. We cannot predict the eventual scope, duration or outcome of this matter at this time, but we expect to provide to the Attorney General’s office information relating to aspects of our operations that is not limited to military students.

For a more detailed discussion of our business, industry and risks, refer to our 2015 Annual Report on Form 10-K.

Other Events

In addition to the above items, we experienced the following other events during fiscal year 2016:

1. Executive Management Changes.Gregory J. Iverson was appointed as our Chief Financial Officer effective October 26, 2015. Joseph L. D’Amico, who served as our Interim Chief Financial Officer since May 2015, transitioned to the role of Senior Advisor to the Chief Executive Officer.

2. Career Partner GmbH.On December 10, 2015, we acquired all of the outstanding shares of Career Partner GmbH (“Career Partner”), a provider of education and training programs in Germany. Refer to Note 1, Nature of Operations and Significant Accounting Policies - Subsequent Events, in Item 1, Financial Statements.

Critical Accounting Policies and Estimates

Refer to our 2015 Annual Report on Form 10-K for our critical accounting policies and estimates and refer to the following in Item 1, Financial Statements:

• Note 7, Goodwill and Intangibles, for a discussion of goodwill impairment charges recorded during the first quarter of fiscal year 2016; and

• Note 11, Income Taxes, for a discussion of the calculation of our income tax provision during the first quarter of fiscal year 2016.

Recent Accounting Pronouncements

For discussion of recent accounting pronouncements, refer to Note 1, Nature of Operations and Significant Accounting Policies, in Item 1, Financial Statements.

Results of Operations

We have included below a discussion of our operating results and significant items explaining the material changes in our operating results during the three months ended November 30, 2015 compared to the prior year period.

As discussed in the Overview of this MD&A, the U.S. higher education industry continues to experience rapidly developing changes, including significant and increasing competition for the proprietary sector from public and private colleges and universities as these institutions continue to expand their online education programs. These developments have contributed to the substantial decline in University of Phoenix enrollment that began in late 2010. We are focused on adapting our business to address these rapidly evolving developments, which includes University of Phoenix’s initiatives to stabilize enrollment in the longer term by transforming itself into a more focused, higher retaining and less complex institution.

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• University of Phoenix - University of Phoenix generally has lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to holiday breaks.

• Apollo Global - Our Apollo Global subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower net revenue in our second and fourth fiscal quarters, particularly for BPP, which also results in substantially lower operating results during these quarters due to BPP’s relatively fixed cost structure.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 34

Analysis of Condensed Consolidated Statements of Operations

The following details our consolidated results of operations. For a more detailed discussion of our operating results by reportable segment, refer to Analysis of Operating Results by Reportable Segment below.

	Three Months Ended November 30,
	2015			2014			% of Net Revenue
($ in thousands)							2015		2014
Net revenue	$	586,021		$	714,525		100.0	%	100.0	%
Costs and expenses:
Instructional and student advisory	291,327			321,574			49.7	%	45.0	%
Marketing	93,802			126,883			16.0	%	17.8	%
Admissions advisory	34,188			57,085			5.8	%	8.0	%
General and administrative	70,326			71,823			12.0	%	10.1	%
Depreciation and amortization	27,394			33,631			4.7	%	4.7	%
Provision for uncollectible accounts receivable	15,313			17,398			2.6	%	2.4	%
Restructuring and impairment charges	97,823			18,748			16.7	%	2.6	%
Acquisition and other related costs	1,097			3,219			0.2	%	0.4	%
Total costs and expenses	631,270			650,361			107.7	%	91.0	%
Operating (loss) income	(45,249		)	64,164			(7.7	)%	9.0	%
Interest income	919			589			0.2	%	0.1	%
Interest expense	(1,456		)	(1,662		)	(0.3	)%	(0.3	)%
Other loss, net	(843		)	(1,290		)	(0.2	)%	(0.2	)%
(Loss) income from continuing operations before income taxes	(46,629		)	61,801			(8.0	)%	8.6	%
Provision for income taxes	(12,239		)	(27,054		)	(2.0	)%	(3.7	)%
(Loss) income from continuing operations	(58,868		)	34,747			(10.0	)%	4.9	%
Loss from discontinued operations, net of tax	(3,259		)	(2,278		)	(0.6	)%	(0.4	)%
Net (loss) income	(62,127		)	32,469			(10.6	)%	4.5	%
Net loss attributable to noncontrolling interests	1,362			1,316			0.2	%	0.2	%
Net (loss) income attributable to Apollo	$	(60,765	)	$	33,785		(10.4	)%	4.7	%

Net Revenue

Our net revenue decreased $128.5 million, or 18.0%, in the three months ended November 30, 2015 compared to the prior year. The decrease was attributable to a 22.0% net revenue decline at University of Phoenix principally due to lower enrollment. See discussion of the enrollment decline in Analysis of Operating Results by Reportable Segment - University of Phoenix below.

Instructional and Student Advisory

Instructional and student advisory decreased $30.2 million, or 9.4%, in the three months ended November 30, 2015 compared to the prior year, which represented an increase as a percentage of net revenue of 470 basis points. The decrease in expense was primarily due to lower costs that are more variable in nature such as faculty and curriculum associated with University of Phoenix’s enrollment decline, and lower costs including rent and compensation attributable to our restructuring activities. This was partially offset by costs attributable to our acquisitions of FAEL and The Iron Yard, which occurred during the second and fourth quarters of fiscal year 2015, respectively.

Marketing

Marketing decreased $33.1 million, or 26.1%, in the three months ended November 30, 2015 compared to the prior year, which represented a decrease as a percentage of net revenue of 180 basis points. The decrease in expense and decline as a percentage of revenue were principally attributable to lower advertising and related costs associated with University of Phoenix eliminating the use of third-party operated websites for marketing purposes in November 2015, which is discussed further in the overview of this MD&A. The decrease was also attributable to lower headcount as a result of our restructuring activities.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 35

Admissions Advisory

Admissions advisory decreased $22.9 million, or 40.1%, in the three months ended November 30, 2015 compared to the prior year, which represented a decrease as a percentage of net revenue of 220 basis points. The decrease in expense and decline as a percentage of net revenue were principally attributable to lower University of Phoenix headcount as a result of our restructuring activities.

General and Administrative

General and administrative decreased$1.5 million, or 2.1%, in the three months ended November 30, 2015 compared to the prior year, which represented an increase as a percentage of net revenue of 190 basis points. The decrease in expense was principally attributable to lower compensation due in part to our restructuring activities. This was partially offset by increased litigation costs in connection with legal and regulatory matters, and costs attributable to our acquisitions of FAEL and The Iron Yard.

Depreciation and Amortization

Depreciation and amortization decreased $6.2 million, or 18.5%, in the three months ended November 30, 2015 compared to the prior year, which was consistent in both periods as a percentage of net revenue. The decrease in expense was principally attributable to lower depreciation expense resulting from a decline in depreciable assets due in part to our restructuring activities, and lower intangible asset amortization.

Provision for Uncollectible Accounts Receivable

Provision for uncollectible accounts receivable decreased $2.1 million, or 12.0%, in the three months ended November 30, 2015 compared to the prior year, which represented an increase as a percentage of net revenue of 20 basis points. The decrease in expense was primarily due to lower University of Phoenix enrollment and associated receivables.

Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Restructuring charges	$	24,430	$	18,748
Goodwill impairments(1)	73,393		—
Restructuring and impairment charges	$	97,823	$	18,748

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, in Item 1, Financial Statements, for a discussion of goodwill impairment charges recorded during the first quarter of fiscal year 2016.

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
University of Phoenix	$	19,090	$	10,223
Apollo Global	404		58
Other	4,936		8,467
Restructuring charges	$	24,430	$	18,748

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally include rationalizing our leased administrative office facilities, closing approximately 150 University of Phoenix ground locations, and workforce reductions. During the three months ended November 30, 2015, we incurred $13.8 million of expense for these prior year activities. The substantial majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 36

exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-6% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of November 30, 2015, we had approximately $66 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Activities Initiated in Fiscal Year 2016

During the three months ended November 30, 2015, we incurred $10.6 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 700 positions. The expense associated with these activities for the three months ended November 30, 2015 is reflected in our segment reporting as follows: $8.2 million in University of Phoenix, $0.2 million in Apollo Global and $2.2 million in Other.

Provision for Income Taxes

During the first quarter of fiscal year 2016, our effective income tax rate for continuing operations was significantly impacted by the $71.8 million goodwill impairment charge for our University of Phoenix reporting unit, which was not deductible for tax purposes. Additionally, the decrease in income before income taxes caused our nondeductible items, including foreign losses for which we cannot take a tax benefit, to have a more significant adverse impact on our effective income tax rate in the first quarter of fiscal year 2016 compared to the prior year.

Loss from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax represents Carnegie Learning, Inc. Refer to Note 3, Discontinued Operations, in Item 1, Financial Statements.

Analysis of Operating Results by Reportable Segment

The following details our operating results by reportable segment for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014			$ Change			% Change
Net revenue:
University of Phoenix	$	462,617		$	592,853		$	(130,236	)	(22.0	)%
Apollo Global	115,332			115,140			192			0.2	%
Other	8,072			6,532			1,540			23.6	%
Net revenue	$	586,021		$	714,525		$	(128,504	)	(18.0	)%
Operating (loss) income:
University of Phoenix	$	(17,504	)	$	96,614		$	(114,118	)	*
Apollo Global	(2,335		)	(4,842		)	2,507			51.8	%
Other	(25,410		)	(27,608		)	2,198			8.0	%
Operating (loss) income	$	(45,249	)	$	64,164		$	(109,413	)	*

* Not meaningful

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 37

University of Phoenix

University of Phoenix’s net revenue decreased$130.2 million, or 22.0%, during the three months ended November 30, 2015 compared to the prior year. The decrease was principally attributable to lower Average Degreed Enrollment as discussed below. The University’s revenue also decreased due to its transition to a reduced number of student cohort start dates, which resulted in students taking fewer courses during the quarter as the new start dates were phased in, and the University’s increased use of discounts, grants and scholarships.

The University’s future net revenue will be impacted by pricing changes, changes in enrollment and student mix within programs, and discounts, grants and scholarships.

The following details University of Phoenix student enrollment for the respective periods:

	Three Months Ended November 30,
(Rounded to the nearest hundred)	2015	2014	% Change
Degreed Enrollment(1)	176,900	227,400	(22.2	)%
New Degreed Enrollment(2)	24,500	39,600	(38.1	)%
Average Degreed Enrollment(3)	183,800	230,500	(20.3	)%

⁽¹⁾ Represents students enrolled in a degree program who attended a credit bearing course during the quarter and had not graduated as of the end of the quarter; students who previously graduated from one degree program and started a new degree program in the quarter (e.g., a graduate of an associate’s degree program returns for a bachelor’s degree); and students participating in certain certificate programs of at least 18 credits with some course applicability into a related degree program.

⁽²⁾ Represents new students and students who have been out of attendance for more than 12 months who enroll in a degree program and start a credit bearing course in the quarter; students who have previously graduated from a degree program and start a new degree program in the quarter; and students who commence participation in certain certificate programs of at least 18 credits with some course applicability into a related degree program.

⁽³⁾ Represents the average of quarterly Degreed Enrollment from the beginning to the end of the respective periods.

University of Phoenix Average Degreed Enrollment decreased 20.3% in the three months ended November 30, 2015 compared to the prior year period primarily due to the continued decline in New Degreed Enrollment. We believe the following factors, some of which are discussed in more detail in the Overview of this MD&A, contributed to the decrease:

• University of Phoenix enrollment continues to be adversely impacted by the rapidly evolving and highly competitive education industry, which includes adverse publicity associated with the challenging regulatory environment; and

• Recently launched initiatives as part of the University’s transformation strategy, including eliminating the use of third-party operated websites for marketing purposes. These initiatives have accelerated the enrollment decline at University of Phoenix, and we expect new and total degreed enrollment to continue declining in the near term, but we believe these initiatives in the longer term will improve retention and graduation rates and help stabilize enrollment.

University of Phoenix had an operating loss of $17.5 million and operating income of $96.6 million during the three months ended November 30, 2015 and November 30, 2014, respectively. The University’s operating results were impacted by $90.9 million and $10.2 million of restructuring and impairment charges during the respective periods. In addition, the University’s operating results declined in the first quarter of fiscal year 2016 compared to the prior year due to lower net revenue. This was partially offset by lower costs including compensation and rent attributable to our restructuring activities, lower advertising expense, and decreases in faculty and curriculum costs associated with lower enrollment.

Apollo Global

Apollo Global’s net revenue increased $0.2 million during the three months ended November 30, 2015 compared to the prior year. The increase was due to higher enrollment at international institutions and revenue from the FAEL acquisition, which was substantially offset by the impact of foreign exchange rates (approximately $13 million).

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 38

Apollo Global’s operating loss decreased $2.5 million in the first quarter of fiscal year 2016 compared to the prior year, primarily due to lower intangible asset amortization and reduced acquisition related costs. Apollo Global’s operating results include the following during the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Depreciation and amortization	$	8,701	$	10,471
Acquisition and other related costs	591		1,686
Restructuring and impairment charges	404		58

Other

Other net revenue increased $1.5 million during the three months ended November 30, 2015 compared to the prior year. The increase was primarily due to revenue from The Iron Yard, which we acquired during the fourth quarter of fiscal year 2015.

Other operating loss decreased $2.2 million during the three months ended November 30, 2015 compared to the prior year. This decrease was principally attributable to a decrease in restructuring charges and reduced operating costs resulting from our restructuring activities.

Liquidity, Capital Resources, and Financial Position

We believe that our cash and cash equivalents and available liquidity will be adequate to satisfy our working capital and other liquidity requirements associated with our existing operations through at least the next 12 months. We believe that the most strategic uses of our cash resources at this time include investments associated with University of Phoenix’s initiatives to transform itself into a more focused, higher retaining and less complex institution, as discussed in the Overview of this MD&A, expansion of our global operations through acquisitions or other initiatives and investments in opportunities for targeted growth through new education offerings or programs.

Although we currently have substantial available liquidity, our ability to deploy available liquidity is constrained by our need to maintain a U.S. Department of Education financial responsibility composite score of at least 1.5. If our composite score falls below 1.5, we would be in default under our Revolving Credit Facility and the Department could impose heightened cash monitoring, letter of credit and other requirements as a condition to our continued participation in Title IV student financial aid programs. See further discussion of our composite scores in the Overview of this MD&A.

Furthermore, access to the credit markets and other sources of liquidity, including utilization of our Revolving Credit Facility described below, may be adversely affected if we experience other regulatory compliance challenges, reduced availability of Title IV program funding, or other adverse effects on our business from regulatory or legislative changes. For a detailed discussion of the regulatory environment and related risks, refer to Part I, Item 1A, Risk Factors, in our 2015 Annual Report on Form 10-K.

Our existing syndicated $625 million credit facility expires in April 2017, and we are engaged in preliminary discussions regarding a subsequent facility. Due to the current challenging business and regulatory climate for the proprietary education sector and the continued decline in our operating performance, we expect that any subsequent credit facility will be substantially smaller and more expensive than our current facility. There is no assurance that we will be able to arrange a replacement credit facility on terms acceptable to us or at all, and much will depend on near-term developments in our business and the proprietary education sector generally.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 39

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents and Marketable Securities

The substantial majority of our cash and cash equivalents, including restricted cash and cash equivalents, are held by our domestic operations and placed with high-credit-quality financial institutions. The following provides a summary of these financial instruments as of the respective periods:

							% of Total Assets at
($ in thousands)	November 30, 2015		August 31, 2015		% Change		November 30, 2015		August 31, 2015
Cash and cash equivalents	$	419,766	$	503,705	(16.7	)%	20.5	%	22.9	%
Restricted cash and cash equivalents	209,480		198,369		5.6	%	10.2	%	9.0	%
Current marketable securities	257,012		194,676		32.0	%	12.6	%	8.8	%
Noncurrent marketable securities	78,874		95,815		(17.7	)%	3.9	%	4.4	%
Total	$	965,132	$	992,565	(2.8	)%	47.2	%	45.1	%

Cash and cash equivalents (excluding restricted cash) decreased $83.9 million primarily due to $46.9 million for purchases of marketable securities (net of maturities), $18.9 million used in operating activities, and $14.5 million for capital expenditures.

We consider the unremitted earnings attributable to certain of our foreign subsidiaries to be permanently reinvested. As of November 30, 2015, the unremitted earnings from these operations were not significant.

As of November 30, 2015, our cash and restricted cash equivalents included $105.3 million of money market funds that we measure at fair value. We determine fair value of these funds using a market approach with Level 1 inputs that primarily consist of real-time quotes for transactions in active exchange markets involving identical assets. Our remaining cash and cash equivalents approximate fair value because of the short-term nature of the financial instruments.

Our marketable securities, which principally include corporate bonds, tax-exempt municipal bonds, and time deposits, have original maturities to us greater than three months, and contractual maturities that will occur within three years. Our marketable securities are classified as available-for-sale and are measured at fair value. We determine the fair value of these investments using a market approach with Level 2 observable inputs including quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active. Refer to Note 5, Financial Instruments, in Item 1, Financial Statements.

Debt

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of November 30, 2015 and August 31, 2015, but we had approximately $59 million and $41 million of outstanding letters of credit as of the respective periods. Subsequent to November 30, 2015, we borrowed $50 million under the Revolving Credit Facility to use in our acquisition of Career Partner.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and a requirement that we maintain U.S. Department of Education financial responsibility composite scores of at least 1.5, which, along with the associated risk, is discussed further above. We were in compliance with all applicable covenants related to the Revolving Credit Facility at November 30, 2015 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at both November 30, 2015 and August 31, 2015 was 5.6%.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 40

Cash Flows

Operating Activities

The following provides a summary of our operating cash flows during the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net (loss) income	$	(62,127	)	$	32,469
Non-cash items	128,928			71,815
Changes in assets and liabilities	(85,668		)	(85,985		)
Net cash (used in) provided by operating activities	$	(18,867	)	$	18,299

Three Months Ended November 30, 2015 - Our non-cash items primarily consisted of $73.4 million of goodwill impairments,$27.4 million of depreciation and amortization, a $15.3 million provision for uncollectible accounts receivable, and $9.5 million of share-based compensation. The changes in assets and liabilities primarily consisted of the following:

• A $32.9 million use of cash related to the change in accounts receivable, excluding the provision for uncollectible accounts receivable;

• A $26.0 million decrease in accrued and other liabilities principally attributable to the timing of our payroll cycle and the payment of accrued bonuses; and

• A $14.7 million decrease in accounts payable.

We monitor University of Phoenix accounts receivable through a variety of metrics, including days sales outstanding. We calculate the University’s days sales outstanding by determining average daily student revenue based on a rolling twelve month analysis and divide it into its gross student accounts receivable balance as of the end of the period. As of November 30, 2015, University of Phoenix’s days sales outstanding was 21 days compared to 23 days as of November 30, 2014. The decrease in days sales outstanding was principally attributable to higher University of Phoenix gross student receivables as of November 30, 2014 in part due to the timing of Title IV funds received by the University at the end of the respective fiscal quarters.

Three Months Ended November 30, 2014 - Our non-cash items primarily consisted of $36.4 million of depreciation and amortization, a $17.4 million provision for uncollectible accounts receivable, and $10.7 million of share-based compensation. The changes in assets and liabilities primarily consisted of the following:

• A $50.3 million use of cash related to the change in accounts receivable, excluding the provision for uncollectible accounts receivable;

• A $48.2 million decrease in accrued and other liabilities principally attributable to the payment of accrued bonuses, and the timing of our payroll cycle; and

• A $26.1 million decrease in student deposits principally attributable to the timing of course starts at BPP.

The above changes were partially offset by a $29.8 million increase in deferred revenue principally attributable to the timing of course starts at BPP, and a $20.0 million decrease in prepaid taxes primarily due to the timing of our quarterly tax payments.

Investing Activities

The following provides a summary of our investing cash flows during the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Capital expenditures	$	(14,456	)	$	(20,337	)
Purchases of marketable securities, net	(46,939		)	(5,516		)
Other	(196		)	405
Net cash used in investing activities	$	(61,591	)	$	(25,448	)

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 41

Financing Activities

The following provides a summary of our financing cash flows during the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Payments on borrowings, net	$	(2,522	)	$	(593,226	)
Share repurchases	(517		)	(20,064		)
Payment for contingent consideration	—			(21,371		)
Other	—			446
Net cash used in financing activities	$	(3,039	)	$	(634,215	)

Three Months Ended November 30, 2015 - The share repurchases during the first quarter of fiscal year 2016 related to tax withholding requirements on share-based awards. We did not repurchase shares under our share repurchase program during the three months ended November 30, 2015.

As of November 30, 2015, we had $52.2 million available under our share repurchase authorization. There is no expiration date on the repurchase authorization and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs.

Three Months Ended November 30, 2014 - Cash used in financing activities primarily consisted of $593.2 million used for payments on borrowings (net of proceeds from borrowings), $21.4 million representing the financing portion of our Open Colleges contingent consideration payment, and $20.1 million used for share repurchases. Share repurchases consisted of $18.1 million used to repurchase 0.7 million shares at a weighted average purchase price of $26.72 per share, and additional repurchases related to tax withholding requirements on share-based awards.

Contractual Obligations and Other Commercial Commitments

There have been no material changes in our contractual obligations and other commercial commitments other than in the ordinary course of business since the end of fiscal year 2015 through November 30, 2015.

Subsequent to November 30, 2015, we borrowed approximately $50 million under our Revolving Credit Facility to use in our acquisition of Career Partner. Refer to Note 1, Nature of Operations and Significant Accounting Policies, in Item 1, Financial Statements.

Information regarding our contractual obligations and other commercial commitments is provided in our 2015 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes to our market risk since August 31, 2015. For a discussion of our exposure to market risk, refer to our 2015 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We intend to maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our Chief Executive Officer (“Principal Executive Officer”) and our Chief Financial Officer (“Principal Financial Officer”), as appropriate, to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. Our Disclosure Committee meets on a quarterly basis and more often if necessary.

Our management, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act), as of the end of the period covered by this report. Based on that evaluation, management concluded that, as of that date, our disclosure controls and procedures were effective at the reasonable assurance level.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 42

Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of our Principal Executive Officer and Principal Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and, as such, should be read in conjunction with the certifications of our Principal Executive Officer and Principal Financial Officer.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended November 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 43

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 15, Commitments and Contingencies, in Part I, Item 1, Financial Statements, for legal proceedings, which is incorporated into this Item 1 of Part II by this reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our 2015 Annual Report on Form 10-K. However, see the discussion in Key Trends, Developments and Challenges in Management’s Discussion and Analysis of Financial Condition and Results of Operations above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of November 30, 2015. There is no expiration date on the repurchase authorizations and repurchases occur at our discretion.

We did not repurchase shares of our Class A common stock during the three months ended November 30, 2015, and the following details changes in our treasury stock during the three months ended November 30, 2015:

(In thousands, except per share data)	Total Number of Shares Repurchased		Average Price Paid per Share		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs		Maximum Value of Shares Available for Repurchase Under the Plans or Programs
Treasury stock as of August 31, 2015	80,082		$	49.06	80,082		$	52,224
New authorizations	—		—		—		—
Share repurchases	—		—		—		—
Share reissuances	—		—		—		—
Treasury stock as of September 30, 2015	80,082		$	49.06	80,082		$	52,224
New authorizations	—		—		—		—
Share repurchases	—		—		—		—
Share reissuances	(96	)	49.06		(96	)	—
Treasury stock as of October 31, 2015	79,986		$	49.06	79,986		$	52,224
New authorizations	—		—		—		—
Share repurchases	—		—		—		—
Share reissuances	(14	)	49.06		(14	)	—
Treasury stock as of November 30, 2015	79,972		$	49.06	79,972		$	52,224

Resales by Directors and Officers

From time to time, our directors and officers enter into written trading plans under Securities and Exchange Commission Rule 10b5-1(c) for the resale of shares of our common stock, including shares to be acquired upon the vesting of restricted stock units and performance share awards, and shares to be acquired pursuant to the exercise of stock options. These plans, which must be entered into during an open trading window and at a time when the director or officer is not in possession of material nonpublic information, provide for sales in accordance with a formula, algorithm or other instructions such that the seller cannot exercise any influence over how, when or whether to effect sales. After adopted, sales may occur in accordance with the plans regardless of whether or not the seller subsequently possesses material nonpublic information or otherwise would then be permitted to trade in our securities. Our insider trading policy permits the adoption of these types of trading plans, and we encourage our directors and officers to utilize such plans, where practical. We do not announce, via Form 8-K or otherwise, the adoption or any termination of such trading plans, if any. Sales under these plans generally must be reported within two business days on Form 4 filed with the SEC, pursuant to Section 16 of the Securities Exchange Act of 1934, as amended.

Sales of Unregistered Securities

We did not have any sales of unregistered equity securities during the three months ended November 30, 2015.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 44

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Exhibit Description
2.1	Agreement on the Sale and Transfer of Shares in a German Limited Liability Company (GMBH), by and between the Sellers party thereto, Apollo Global Germany GmbH, Career Partner GmbH and BPP Holdings Limited, dated October 20, 2015
2.2	First Amendment Agreement to the Agreement on the Sale and Transfer of Shares in a German Limited Liability Company (GMBH), by and between the Sellers party thereto, Apollo Global Germany GmbH, Career Partner GmbH and BPP Holdings Limited, dated December 10, 2015
3.1	Amended and Restated Bylaws of Apollo Education Group, Inc., as amended through January 8, 2016(1)
10.1	Deferral Election Form for Non-Employee Board Members
10.2	Letter between Apollo Education Group and Joseph L. D’Amico, effective September 1, 2014 (extending until August 31, 2015 the term of the Consulting Agreement effective September 1, 2013)
10.3	Offer letter between Apollo Education Group and Joseph L. D’Amico, dated December 1, 2015 (for term ending May 31, 2016)
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

⁽¹⁾ Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2016.

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

APOLLO EDUCATION GROUP, INC.

An Arizona Corporation

Date: January 11, 2016

By:	/s/  Gregory J. Iverson
	Gregory J. Iverson Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer)

Apollo Education Group, Inc. | First Quarter 2016 Form 10-Q | 46

EX-2.1

Exhibit 2.1

Notarial Deed Nr. 6496/2015

ms / 12857

AGREEMENT
ON
THE SALE AND TRANSFER OF SHARES
IN A
GERMAN LIMITED LIABILITY COMPANY (GMBH)

Before me,

Dr. Bernhard Schaub
Notary in Munich

appeared on twentieth October two thousand fifteen

– 20. October 2015 –

in my offices at Tal 12, 80331 Munich, Germany:

1 Mr. Dr. Florian Schütz, born on 20. September 1969, resident 1751 Hawthorne St, Sarasota, FL 34239, USA,, identified by Identity-Card

acting

1.1 in his own name and

1.2 as Managing Director on behalf of Career Partner GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Welfenstraße 22, 81541 Munich, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 168017,

and on behalf of powers of attorney, the originals of which have been on hand while notarization and certified copies of which are attached to this deed for

1.3 Mr. Dr. Michael Weber, born on 18. October 1971, resident Liebigstr. 10b, 80538 Munich, Germany,

1.4 Mr. Prof. Dr. Peter Thuy, born on 9. March 1961, resident Germersreuth 41, 95234 Sparneck, Germany,

1.5 PROAKTIV Holding GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Säggasse 10, 83666 Waakirchen-Schaftlach, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 138075,

1.6 Mr. Dr. Sven Schütt, born on 18. August 1972, resident Kornblumenweg 14a, 81545 Munich, Germany,

1.7 Mr. Oliver Dange, born on 2. September 1965, resident Kapellenstraße 13, 61440 Oberursel, Germany.

2 Mr. Florian Buddemeier, born on 26. May 1984, business address: c/o AUCTUS Capital Partners AG, Prinzregentenstr. 18, 80538 Munich, identified by Identity-Card,

not acting in his own name but on behalf of powers of attorney, the originals of which have been on hand while notarization and certified copies of which are attached to this deed for

2.1 MFBay Mittelstandsfonds Bayern GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at An den Römerhügeln 1, 82031 Grünwald, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 149476,

2.2 AUCTUS II B GmbH & Co. KG, a limited partnership incorporated under the laws of the Federal Republic of Germany, with its registered offices at An den Römerhügeln 1, 82031 Grünwald, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRA 90454,

2.3 Career Partner Co-Investment GbR, a civil law association under the laws of the Federal Republic of Germany, whose shareholders are Attegia GmbH, Grünwald, Dr. Nicolas Himmelmann, Jörg Grüneisen, Dr. Daniel Meuthen, Georg Görlich, Christoph Blanke, Auctus Management GmbH & Co. KG, Grünwald, Dr. Ingo Krocke and Florian Buddemeier, business address: Prinzregentenstr. 18, 80538 Munich, Germany.

3 Mr. Sebastian Decker, born on 7. May 1983, business address: c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, identified by Identity-Card

not acting in his own name but on behalf of powers of attorney, the originals of which have been on hand while notarization and certified copies of which are attached to this deed for

3.1 Apollo Global Germany GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Hamburg, Germany, under docket no. HRB 135556,

3.2 BPP Holdings Limited, a corporation incorporated under the laws of England and Wales, with its business seat at BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA, registered with the Companies House under company number 01245304.

The persons appearing requested this deed to be recorded in the English language. The acting notary who is in sufficient command of the English language ascertained that the persons appearing are also in sufficient command of the English language.

As far as the Annexes to this deed are done in the German language, this deed has been recorded in the German language. The acting notary, who is in sufficient command of the German language, ascertained that the persons appearing are also in sufficient command of the German language.

After having been instructed by the acting notary, the persons appearing waived their rights to obtain the assistance of a sworn interpreter and to obtain a certified translation of this deed.

Seite 2 von 83

The persons appearing declared as follows requesting that it be notarized:

AGREEMENT
ON
THE SALE AND TRANSFER OF SHARES
IN A
GERMAN LIMITED LIABILITY COMPANY (GMBH)

by and between

1. MFBay Mittelstandsfonds Bayern GmbH,

- hereinafter also referred to as the “Seller 1”–

2. Auctus II B GmbH & Co. KG

- hereinafter also referred to as the “Seller 2”–

3. Career Partner Co-Investment GbR

- hereinafter also referred to as the “Seller 3” –

4. Dr. Florian Schütz

- hereinafter also referred to as the “Seller 4” –

5. Dr. Michael Weber

- hereinafter also referred to as the “Seller 5” –

6. Prof. Dr. Peter Thuy

- hereinafter also referred to as the “Seller 6” –

7. PROAKTIV Holding GmbH

- hereinafter also referred to as the “Seller 7” –

8. Dr. Sven Schütt

- hereinafter also referred to as the “Seller 8” –

9. Oliver Dange

Seite 3 von 83

- hereinafter also referred to as the “Seller 9” –

- Seller 1 through Seller 9 hereinafter also each individually referred to as a “Seller” and also collectively the “Sellers” -

10. Apollo Global Germany GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Hamburg, Germany, under docket no. HRB 135556

- hereinafter also referred to as the “Purchaser” -

11. Career Partner GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Welfenstraße 22, 81541 Munich, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 168017

- hereinafter also referred to as the “Company” -

- the Sellers, the Purchaser and the Company also each individually referred to as a “Party” and also collectively the “Parties” -

12. BPP Holdings Limited, a corporation incorporated under the laws of England and Wales, with its business seat at BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA, registered with the Companies House under company number 01245304

- hereinafter also referred to as the “Purchaser’s Guarantor” (becoming party to this Agreement in accordance with and for purposes of clause 22.2 only) –

Reference is made to the reference deed (Bezugsurkunde), notarial deed nr. 6495/2015, dated 19 and 20 October 2015, of the acting Notary, comprising the Annexes referred to in this deed. The reference deed, the original of which was on hand during the notarization, constitutes an integral part of this deed. The individuals present declare to have knowledge of the reference deed and each of them waived the right to have the reference deed read again aloud and to have it attached to this deed. The individuals present are informed that hereby the Annexes become an integral part of this deed. The individuals present approve the declarations that were made in the reference deed on their behalf.

Seite 4 von 83

Table of Contents

DEFINITIONS		6
LIST OF ANNEXES		10
1	Recitals and Introductory Provisions	14
2	Certain Rules of Construction and Interpretation	18
3	Sale (Verkauf) and Transfer (Abtretung) of Shares	19
4	Repayment of the Shareholder Loans	20
5	Effective Date, Signing Date	20
6	Consideration	20
7	Determination of Share Purchase Price	21
8	HSP Procedural Rules and HSP 2 Escrow	27
9	Earn-Out	34
10	General Rules for Payments / Default Interest	41
11	Closing	41
12	Independent Guarantee Undertakings of the Sellers	45
13	Rules of Conduct	59
14	Legal Consequences in Case of a Breach of Warranties; Violations of Rules of Conduct; Indemnity	60
15	Independent Guarantee Undertakings of the Purchaser	70
16	Indemnities and Covenants by Purchaser	70
17	Tax Indemnity	71
18	Non-Compete and Non-Solicit	75
19	Confidentiality	76
20	Delveo Carve-Out	77
21	Costs	79
22	Final Provisions	79

Seite 5 von 83

DEFINITIONS

2014 Financial Statements	47	Company	4
2016 EBITDA Calculation	37	CP 2. Beteiligungs	15
2016 Year-End Accounts	37	Debt	21
Actual Earn-Out Amount	34	Default	37
Actual HSP 2 Amount	17	Delveo Blocked Account	77
Additional HSP 2 Escrow Amount	33	Delveo Business	78
Affiliate(s)	43	Delveo Call Option	76
AktG	46	Delveo Call Option Withdrawal	77
ARFH Lender	15	Delveo Employees	76
ARFH Lender Redemption Amount	15	Delveo Exercise Period	76
Back Surety	16	Delveo GmbH	76
Bank Redemption Amount(s)	16	Disclosed Documents	63
BGB	19	Earn Out Holdback Amount	39
Blocked Third Party Claim Amount	31	Earn-Out	33
Business Day	40	Earn-Out Cap	34
Career Group	14	EBITDA	34
Cash	21	EFBH Financing	16
Closing	43	EFBH Financing Redemption Amount	16
Closing Actions	43	EFBH Lender	15
Closing Conditions	41	Effective Date	20
Closing Date	41	Effective Date Accounts	24
Closing Memorandum	44	Effective Date Cash	21

Seite 6 von 83

Effective Date Debt	21	First Release Date Claims	30
Effective Date NWC	21	German GAAP	25
Effective Date NWC Deviation	21	Group	14
Enterprise Value	21	Group Company/Companies	14
Escrow Account	22	HGB	20
Escrow Agent	22	HSP 1	17
Escrow Agreement	23	HSP 1 Amount	17
Escrow Amount	22	HSP 2	17
Estimated Cash Amount	22	HSP 2 1st Tranche Grant	17
Estimated Share Purchase Price	22	HSP 2 2nd Tranche Grant	17
Excluded Liquidity Needs Matters	39	HSP 2 2nd Tranche Grant Payments	17
Existing Bank Financing	15	HSP 2 2nd Tranche Grant Handling Costs	67
Existing Key Personnel Contracts	18	HSP 2 Escrow Account	28
Existing Lender(s)	15	HSP 2 Escrow Agreement	28
Existing Permits	48	HSP 2 Escrow Amount	22
Existing Security	15	HSP 2 Excess Event	33
Existing Vendor Loan	15	HSP 2 Indemnification Claims	67
Final Claims	23	HSP Matter	27
Final Effective Date Accounts	26	Indemnifiable Claim	62
Final Financial Statement	26	Indemnifiable Taxes	70
Financial Statement	25	InsO	47
First HSP 2 Escrow Pay Out Amount	30	Interim Period	58
First HSP 2 Release Base Amount	29, 31	IP Rights	49
First HSP 2 Release Date	29	IUBH	16

Seite 7 von 83

Joint Sellers' Account	40	Restated Guarantee Facility	16
Long Stop Date	43	Restricted Businesses	74
Material Agreements	50	Revised Accounts/Calculation	38
Neutral Auditor	26	Revised Effective Date Accounts	25
NWC	21	Revised Financial Statement	25
Overall Liability Cap	62	Second HSP 2 Escrow Pay Out Amount	30
Party/Parties	4	Second HSP 2 Release Base Amount	30
Post Closing Additional Liquidity Needs	39	Second HSP 2 Release Date	30
Pre- Closing Shareholder Redemption Amount	15	Second Release Date Claims	30
Professional Standards Of Duty And Care	63	Seller 1	3
Projected HSP 2 2nd Tranche Grant Payments	15	Seller 2	3
Purchase Price Adjustment	27	Seller 3	3
Purchaser	4	Seller 4	3
Purchaser’s Group	35	Seller 5	3
Purchaser’s Guarantor	4	Seller 6	3
Recoverable HSP 2 2nd Tranche Handling Costs	67	Seller 7	3
Rejected HSP 2 Indemnification Claims	32	Seller 8	3
Relevant Adjusted EBITDA 2016	34	Seller 9	3
Relevant Business Plan	68	Seller(s)	4
Relevant Tax Period	70	Seller`s Best Knowledge	57
Remaining Shareholder Redemption Amounts	15	Seller’s Knowledge	57
Repayment Claims	14	Sellers' Agent	81
		Share Purchase Price	21
		Share(s)	14

Seite 8 von 83

Shareholder Loan(s)	15	Taxes	54
Signing Date	20	Territories	74
Sold Shares	14	Third HSP 2 Release Date	30
Subsidiary/Subsidiaries	14	Third Party Claim	60
Tax	54	Transaction	18
Tax Burden	73	True and Fair Disclosures	63
Tax Indemnification Claims	70	VAT	22
Tax Indemnification Obligation	70	VD Lender	15
Tax Matters	71	VD Lender Redemption Amount	16
Tax Refund	73	ZPO	26
Tax Saving	71

Seite 9 von 83

LIST OF ANNEXES

Annex 1.2	Subsidiaries
Annex 1.3-1	Repayment Claims under Shareholder Loans as of Signing Date
Annex 1.3-2	Confirmation Letters re Repayment Claims
Annex 1.5-1	Existing Bank Financing
Annex 1.5-2	Release Letter and Release Agreement with Existing Lenders re Existing Security, Restated Guarantee Facility (Appendix 2), Back Surety (Appendix 3)
Annex 1.5-3	Confirmation Letter VD Lender
Annex 1.5-4	EFBH Financing / Confirmation Letter EFBH Lender
Annex 1.5-5	Confirmation Letter ARFH Lender
Annex 1.7.2	Payments under HSP 2 including 1st and 2nd tranche grant order
Annex 1.7.3	HSP Applications before Closing Date
Annex 1.8	Existing Key Personnel Contracts
Annex 3.4	Shareholders' Approval
Annex 7.1	Sample Calculation of Effective Date Cash, Effective Date Debt, Effective Date NWC
Annex 7.1.2	Cash
Annex 7.1.3	Debt
Annex 7.1.4-1	Net Working Capital
Annex 7.1.4-2	Calculation Methodologies
Annex 7.4.2	Escrow Agreement
Annex 8.1.1	Persons staying in charge handling HSP 2 Matter
Annex 8.2.2	HSP 2 Escrow Agreement
Annex 9.1	Calculation Examples
Annex 9.3 f	Disregarded Expenses

Seite 10 von 83

Annex 9.11	Example of information package
Annex 9.13.2	Cash flow generating tools
Annex 10.2-1	Joint Sellers’ Account
Annex 10.2-2	Purchaser’s Account
Annex 11.1.1	Form and content of HSP2 2nd Tranch Grant Order
Annex 11.4.1	Notification Letter
Annex 11.4.2-1	Draft Resignation Letter of Supervisory Body Member
Annex 11.4.2-2	Resigning Supervisory Body Members
Annex 11.6	Closing Memorandum
Annex 12.2.4	Company’s Articles of Association
Annex 12.2.5	Excerpt from Commercial Register
Annex 12.2.6	Shareholdings in and Ownership Rights with regard to other Companies or Enterprises
Annex 12.2.7	Subsidiaries
Annex 12.2.9	Subsidiaries' Articles of Association
Annex 12.2.10	Excerpts from Commercial Register of Subsidiaries
Annex 12.3.2	2014 Financial Statements
Annex 12.3.3	Assets
Annex 12.4.2	Existing Permits
Annex 12.4.4	IP Rights
Annex 12.4.5	Material Leases and Licenses
Annex 12.4.6	Insurances
Annex 12.4.7	Branch Offices, Business Operations, Business Units or Subsidiary Enterprises

Seite 11 von 83

Annex 12.4.8	Agreements between Group Companies and Sellers and/or their Affiliates
Annex 12.4.9	Business Conduct
Annex 12.4.10	Material Agreements
Annex 12.4.12	Agreements conflicting with the SPA
Annex 12.5.1	List of Employees
Annex 12.5.3	Service Contracts of Managing Directors
Annex 12.5.4	Bonus Plans or Programs
Annex 12.5.5	Offer of Employment or Engagement
Annex 12.5.6	Loans or Advances to Employees
Annex 12.5.7	Works Council
Annex 12.5.8	Reconciliation of Interests Agreements, Works Agreements, Collective Bargaining Agreements
Annex 12.5.9	List of Employees Subject to Old Age Part Time Agreements
Annex 12.5.15	List of Employees with Vested Entitlements and Pensioners with ongoing Pensions
Annex 12.5.18	Pension Commitments
Annex 12.6	Litigation
Annex 12.7.1	Public Subsidy Grant Orders and Agreements
Annex 12.8.2	Liabilities arising from acquisitions and disposals
Annex 12.8.2 (i)	List of acquisitions and disposals
Annex 12.9.2	Tax Returns
Annex 12.9.6	Taxing Authority Investigations
Annex 12.9.11	Holding Periods
Annex 12.9.13	Fiscal unities
Annex 12.10.2	Current or Former Government Officials

Seite 12 von 83

Annex 12.10.3	Persons interacting with Government Officials
Annex 12.10.4	Disclosed Acts
Annex 12.12.2	Other Contractual Claims
Annex 13.2.2	Approved CAPEX Budget
Annex 14.6.1	Actual Knowledge imputed to the Purchaser
Annex 14.6.2-1	Disclosed Documents
Annex 14.6.2-2	Data Room DVD
Annex 14.8.1.3	HSP 2 2nd Tranche handling costs
Annex 14.8.4	Relevant Business Plan
Annex 16.2	Indemnified Persons
Annex 17.4.2	Principles on Tax handling HSP matters
Annex 20.4	Delveo Business

Seite 13 von 83

1 Recitals and Introductory Provisions

1.1 The Company’s object is to acquire participations in operative companies as well as to directly run educational institutions. The Company is also entitled to enter into service agreements with its subsidiaries and to render services against consideration. The Company’s share capital registered with the commercial register amounts to EUR 118.589,00 (in words: one hundred eighteen thousand five hundred eighty nine euros) and is currently held as follows:

Share-holder	Nominal amount of shares in EUR	Number of shares	Sum of nominal amounts of shares	Serial number of shares
Seller 1	25,000	1	EUR 25,000	1
Seller 1	9,900	1	EUR 9,900	2
Seller 1	5,325	1	EUR 5,325	9
Seller 2	34,900	1	EUR 34,900	3
Seller 2	5,325	1	EUR 5,325	10
Seller 3	5,250	1	EUR 5,250	4
Seller 3	800	1	EUR 800	11
Seller 4	23,000	1	EUR 23,000	5
Seller 5	1,950	1	EUR 1,950	6
Seller 6	1,500	1	EUR 1,500	7
Seller 6	1,550	1	EUR 1,550	8
Seller 7	3,057	1	EUR 3,057	12
Seller 8	913	1	EUR 913	13
Seller 9	119	1	EUR 119	14
Total	118,589	14	EUR 118,589	1-14

(the abovementioned shares hereinafter each individually also referred to as a “Share” and collectively also referred to as the “Shares”, the Shares hereinafter also collectively referred to as the “Sold Shares”).

1.2 The Company directly and indirectly holds shares and participations in domestic companies as shown in more detail in Annex 1.2 (hereinafter collectively also referred to as the “Subsidiaries”, individually a “Subsidiary ”). The Company and the Subsidiaries individually or collectively the “Group Company(ies)”. The Subsidiaries are also predominantly engaged in the contact educational sector. The Company and the Subsidiaries are hereinafter also collectively referred to as the “Career Group” or the “Group”.

1.3 Certain Sellers have claims for repayment (Rückzahlungsansprüche) of the principal amount (Darlehensbetrag) and for payment of interest accrued (aufgelaufene Zinsen) against the

Seite 14 von 83

Company (including such interest until the respective date of redemption, collectively the “Repayment Claims”) under certain shareholder loans as specified and calculated as of the date hereof in Annex 1.3-1 (hereinafter each also individually referred to as a “Shareholder Loan” and collectively as the “Shareholder Loans”) (Gesellschafterdarlehen). The Shareholder Loans granted by Seller 2 shall be partly repaid by the Company in the amount of either (x) EUR 2,569,000.-- (in words: two million five hundred sixty nine thousand euros), if the actual HSP 2 2^nd Tranche Grant Payments amount to EUR 15,077,500 (in words: fifteen million seventy seven thousand five hundred euros, the “Projected HSP 2 2^nd Tranche Grant Payments” or more, or (y) the amount of EUR 2,569,000.-- (in words: two million five hundred sixty nine thousand euros) minus the amount by which the actual HSP 2 2^nd Tranche Grant Payments fall short of the Projected HSP 2 2^nd Tranche Grant Payments (the respective amount under (x) or (y) hereinafter the “Pre Closing Shareholder Redemption Amount”) to Seller 2 before the Closing Date, the remaining amounts of all Repayment Claims under the Shareholder Loans (i.e. less the Pre Closing Shareholder Redemption Amount), including interest accrued thereon until the respective redemption, as confirmed by the respective creditors in the respective confirmation letter substantially in the form attached hereto as Annex 1.3-2 (the “Remaining Shareholder Redemption Amounts”), shall be repaid on the Closing Date as set out in clause 4.1. Any repayment shall be confirmed in writing by the respective Sellers. The funds required to repay the Remaining Shareholder Redemption Amounts shall be injected by the Purchaser into the Company pursuant to clause 4.1.

1.4 The Purchaser´s Guarantor is the economic and legal owner of 100% of the registered share capital of the Purchaser.

1.5 The Group has been granted bank loans and other financial instruments by Norddeutsche Landesbank Girozentrale as arranger and security agent and NORD/LB Luxembourg S.A. Covered Bond Bank (formerly Norddeutsche Landesbank Luxemburg S.A.) as lead bank (hereinafter collectively also referred to as the "Existing Lender(s)") as exhaustively listed and detailed in Annex 1.5-1 (hereinafter also referred to as the "Existing Bank Financing"). The Existing Bank Financing is secured by pledges, and other security over assets of the Group and shares in the Company and certain other Subsidiaries as exhaustively listed and detailed in the recitals of the release agreement with the Existing Lenders substantially in the form attached hereto as Annex 1.5-2 (hereinafter also referred to as the "Existing Security").

Career Partner 2. Beteiligungsgesellschaft mbH, registered with the commercial register of Munich under docket number HRB 186424 (“CP 2. Beteiligungs”) and merged with the Company with effect as of September 23, 2015, had been granted an unsecured vendor loan by Proaktiv Holding GmbH, registered with the commercial register of the local court (Amtsgericht) Munich, Germany, under docket number 138075 (hereinafter the “VD Lender”) in the principal amount of EUR 3,900,000.00 (hereinafter the “Existing Vendor Loan”).

In addition to the Existing Vendor Loan, the Company has been granted an unsecured vendor loan by ARFH Beteiligungs GbR (hereinafter the “ARFH Lender”) in the principal amount of EUR 272,200 (in words: two hundred seventy two thousand two hundred euros) (together with any interest thereon until the date of its redemption the “ARFH Lender Redemption Amount” as confirmed by the ARFH Lender by confirmation letter substantially in the form attached hereto as Annex 1.5-5).

Seite 15 von 83

IUBH (as defined below) owes Career Partner Bildungsfonds GmbH, Bad Honnef (hereinafter the “EFBH Lender”) as of the date hereof an unsecured amount of EUR 1,050,809.05 (in words: one million fifty thousand eight hundred and nine euros and five cents) (the “EFBH Financing”) as specified in further detail in Annex 1.5-4.

(i) Subject to clause 1.6 the Existing Bank Financing (including any interest accrued thereon until the date of its redemption the “Bank Redemption Amount”) as well as (ii) the Existing Vendor Loan (including any interest accrued thereon until the date of its redemption) as confirmed by the VD Lender by confirmation letter substantially in the form attached hereto as Annex 1.5-3 (“VD Lender Redemption Amount”) as well as (iii) the EFBH Financing (including any interest accrued thereon until the date of its redemption) as confirmed by the EFBH Lender by confirmation letter substantially in the form attached hereto as Annex 1.5-4 (“EFBH Financing Redemption Amount”) and (iv) the ARFH Lender Redemption Amount as confirmed by the ARFH Lender by confirmation letter substantially in the form attached hereto as Annex 1.5-5 shall be redeemed (zurückgezahlt) between the date hereof and the Closing Date and the respective repayment shall be confirmed in writing by the Existing Lenders as well as the VD Lender, the EFBH Lender and the ARFH Lender, respectively. The Existing Security – subject to clause 1.6 – shall be released in accordance with and subject to the (i) release agreement with the Existing Lenders substantially in the form attached hereto as Annex 1.5-2 and (ii) release letter by the Existing Lenders substantially in the form attached hereto as Appendix 4 to Annex 1.5-2.

The confirmation letters regarding the Remaining Shareholder Redemption Amounts substantially in the form attached hereto as Annex 1.3-2,the release agreement with the Existing Lenders substantially in the form attached hereto as Annex 1.5-2, the release letter by the Existing Lenders substantially in the form attached hereto as Appendix 4 to Annex 1.5-2, the confirmation letter by the VD Lender substantially in the form attached hereto as Annex 1.5-3 and the confirmation letter by the EFBH Lender substantially in the form as attached as Annex 1.5-4 and the confirmation letter by the ARFH Lender substantially in the form attached hereto as Annex 1.5-5 as well as payment confirmations by each of such creditors (other than the Shareholders regarding the Remaining Shareholder Redemption Amounts) shall be Closing Conditions pursuant to clause 11.1 of this Agreement.

1.6 The Parties agree that the guarantee facility (Avalkreditlinie) granted by the Existing Lenders which has been drawn and is currently used as shown in more detail in Annex 1.5-2 shall in the context of the redemption of the Existing Bank Financing be restated by an agreement substantially in the form attached in Appendix 2 to Annex 1.5-2 (hereinafter the “Restated Guarantee Facility”) with the execution of such Restated Guarantee Facility being Closing Condition pursuant to clause 11.1 of this Agreement and shall remain in place after the Closing Date in an amount of EUR 2,000,000.-- (in words two million euros). The security still granted for the Restated Guarantee Facility shall – subject to the proper execution and/or proper waiver of the Closing Conditions and Closing Actions - be released and the Restated Guarantee Facility shall be secured by the back surety granted by JP Morgan (the “Back Surety”) as shown in more detail in Appendix 3 to Annex 1.5-2.

1.7 HSP

Seite 16 von 83

1.7.1 The Group Company Internationale Hochschule Bad Honnef Bonn GmbH, registered with the commercial register of the local court of Siegburg under docket number HRB 10025 (“IUBH” ), has received payments based on public subsidy grants and a public subsidy grant agreements, respectively under the Verwaltungsvereinbarung zwischen Bund und Ländern über den Hochschulpakt 2020 vom 20. August 2007 (Bundesanzeiger Nr. 171 vom 12. September 2007 pp. 7480 et seqq., hereinafter "HSP 1") as shown in more detail (including the respective grants) in Annex 1.7.1 (any such amounts received by the Company under HSP 1 hereinafter collectively “HSP 1 Amount”).

1.7.2 Furthermore, IUBH

(x) has received payments under public subsidy grants and public subsidy grant agreements, respectively, under Verwaltungsvereinbarung zwischen Bund und Ländern über den Hochschulpakt 2020, zweite Programmphase vom 24. Juni 2009 (Bundesanzeiger Nr. 103 vom 16.07.2009, pp 2419 et seqq.),as amended from time to time, hereinafter "HSP 2") based on the number of newly registered students in the study year 2013 (summer term 2013 and winter term 2013/ 2014) as attached (the “HSP 2 1^st Tranche Grant”) in Annex 1.7.2 and

(y) will receive payments based on the number of newly registered students in the study year 2014 (summer term 2014 and winter term 2014 / 2015) in accordance with the public subsidy grant yet to be issued (the “HSP 2 2^nd Tranche Grant”) (any such amounts actually received or yet to be received by the IUBH under HSP 2 until Closing Date hereinafter collectively referred to as “Actual HSP 2 Amount”).

The issuance of the HSP 2 2^nd Tranche Grant and the receipt of the payments granted under the HSP 2 2^nd Tranche Grant (“HSP 2 2^nd Tranche Grant Payments”) by IUBH shall be a Closing Condition pursuant to clause 11.1 hereof. IUBH shall further declare an unconditional waiver to obtain legal remedies (Rechtsmittelverzicht) with regard to the HSP 2 2^nd Tranche Grant, which shall also be a Closing Condition pursuant to clause 11.1 hereof.

1.7.3 For the avoidance of doubt, any subsidies received under any HSP programs based on applications filed after the Closing Date and referring to students enrolled after the Closing Date shall be for the (economic) benefit of IUBH and the Purchaser (“Purchaser HSP Event”).

It being understood, however, that any subsidies received under any HSP programs based on applications filed before the Closing Date regarding the budget years 2013 (corresponding to the calendar year 2013) and 2014 (corresponding to the calendar year 2014) (an exhaustive list of such applications is attached hereto as Annex 1.7.3)and referring to students enrolled before the 2015 university year (i.e. before April 1^st 2015 ) (less any tax effects resulting therefrom on the level of IUBH) shall be for the benefit of the Sellers and IUBH / Purchaser as follows: (x) any payments received within a period of 30 months commencing as of the Closing Date: 100% for the benefit of the Sellers, (y) any payments received within a period starting on the first calendar day of the 31^st month after Closing Date until expiry of the 60^th month after Closing Date: 50% for the benefit of Sellers and 50% for the benefit of IUBH and Purchaser; any payments received thereafter shall be 100% for the benefit of the Purchaser and IUBH (“Split HSP Event”). The respective amounts payable to Sellers, if any, shall be due and payable to the Joint Sellers Account ten (10) Business Days after the respective grant order which is the basis of the respective payment

Seite 17 von 83

has become materially no longer appealable (materiell bestandskräftig) (which shall be the case in particular by means of declaration of a waiver to obtain legal remedies (Rechtsmittelverzicht) or upon expiry of the period for appeal (Ablauf der Rechtsmittelfrist)).

1.8 Between the Company and certain other Group Companies and certain managing directors and certain other key employees are the service agreements and employment agreements in place as attached hereto as Annex 1.8("ExistingKey Personnel Contracts"). The Existing Key Personnel Contracts shall continue to be in place for certain periods after the Closing Date in accordance with their respective terms and conditions.

1.9 The Sellers are interested in disposing the Shares and the Purchaser intends to acquire such Shares in accordance with the terms of this Agreement (the "Transaction").

1.10 The Sellers each individually intend to sell and to transfer to the Purchaser their Shares in the Company. The Purchaser intends to purchase and acquire the Shares.

Now, therefore, the Parties agree as follows:

2 Certain Rules of Construction and Interpretation

2.1 The definitions set forth or referred to in the list of definitions above shall apply equally to both the singular and plural forms of the terms defined. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The words “herein”, “hereof” and “hereunder” and words of similar import shall be construed to refer to this Agreement (including the Schedules thereto) in its entirety and not to any part thereof, unless the context otherwise requires.

2.2 All references herein to Clauses, Articles, Paragraphs, Annexes and Schedules shall be deemed references to clauses, articles and paragraphs of, and annexes and schedules to, this Agreement unless the context otherwise requires.

2.3 Recitals of and Schedules or Annexes to this Agreement constitute an integral and essential part of this Agreement.

2.4 The table of contents and the descriptive headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

2.5 The obligation of a Party to use best efforts to accomplish an objective shall be construed as an obligation to timely take all reasonable actions that a diligent party would be expected to take in its own interest in order to achieve such objective, and not as an absolute obligation to ensure that such objective is, in fact, accomplished.

2.6 Any reference in this Agreement to a “day” or number of “days” (without the explicit qualification of Business Day) shall be interpreted as a reference to a calendar day or number of calendar days. If any action or notice is to be taken or given on or by a particular calendar day, and such calendar

Seite 18 von 83

day is not a Business Day, then such action or notice shall be deferred until, or may be taken or given on, the next Business Day.

2.7 Wherever English terms are included herein with respect to which German terms have been inserted in brackets and/or italics either immediately after the English term or elsewhere herein, the respective German terms alone rather than the English terms shall be decisive for the interpretation of such term in this Agreement.

3 Sale (Verkauf) and Transfer (Abtretung) of Shares

3.1 Sellers hereby each individually sell (verkaufen) their Sold Shares as set forth in clause 1.1 opposite their indication as shareholders to the Purchaser with economic effect (mitwirtschaftlicher Wirkung) as of the Effective Date (Stichtag) and, subject to the fulfilment of the conditions precedent set forth in clause 3.2 below, transfer (übereignen) such Sold Shares to the Purchaser. The Sold Shares are sold and transferred to the Purchaser including any and all rights pertaining thereto (Nebenrechte) (including but not limited to all special rights attached to the Sold Shares, in particular the profit participation rights regarding the undistributed profits of the current and previous fiscal years). The Purchaser hereby accepts the sale and transfer of the Sold Shares.

3.2 The transfers in-rem (dingliche Übereignung, Abtretung) set forth under clause 3.1 are each subject to the conditions precedent (Section 158 (1) of the German Civil Code (Bürgerliches Gesetzbuch, "BGB"; aufschiebende Bedingung) that (i) each of the Closing Conditions has either been fulfilled or waived, as the case may be, and (ii) the full and unconditional payment of the Estimated Share Purchase Price has been made by the Purchaser and the Estimated Cash Amount has been fully credited to the Joint Sellers’ Account and the Escrow Amount has been fully credited to the Escrow Account and the HSP 2 Escrow Amount has been fully credited to the HSP 2 Escrow Account pursuant to the provisions of clauses 7, 8 and 11.

3.3 The transfers in-rem (dingliche Übereignung, Abtretung) set forth under clause 3.1 shall automatically be reversed (i.e. the Sold Shares shall automatically be re-transferred to the Sellers) if full and unconditional payment of the Remaining Shareholder Redemption Amounts as confirmed by the confirmation letter issued pursuant to clause 11.1.10 have not been made and the Remaining Shareholder Redemption Amounts as confirmed by confirmation letter pursuant to clause 11.1.10 have not been fully credited to the Joint Sellers' Account within seven (7) Business Days after the Closing Date (condition subsequent pursuant to Section 158 (2) of the BGB; auflösende Bedingung). The Parties agree that the afore mentioned condition subsequent shall not apply in case the amount actually paid as Remaining Shareholder Redemption Amounts differs from the Remaining Shareholder Redemption Amounts confirmed by confirmation letter pursuant to clause 11.1.10 by less than EUR 1,000.-- (in words: one thousand euros). For the avoidance of doubt, latest with the confirmation in relation to the Remaining Shareholder Redemption Amount as set forth in clause 11.5.2, the above condition subsequent shall be deemed to have lapsed without substitute.

3.4 By shareholders’ approval attached hereto as Annex 3.4, the Sellers have approved the sale and transfer of the Sold Shares to the Purchaser and have waived any and all pre-emptive rights and rights of first refusal (Vorkaufs- und/oder Vorerwerbsrechte) they may be entitled to.

Seite 19 von 83

4 Repayment of the Shareholder Loans

4.1 The Sellers shall procure that the Company repays the Pre Closing Shareholder Redemption Amount to the Seller 2 prior to the Closing Date.

4.2 The Company shall be obliged to repay the Remaining Shareholder Redemption Amounts as confirmed by confirmation letter pursuant to clause 11.1.10 to the respective remaining Sellers as of the Closing Date.

4.3 To this end, the Purchaser shall procure that the Remaining Shareholder Redemption Amounts as confirmed by confirmation letter pursuant to clause 11.1.10 shall be settled as of the Closing Date as follows: subject to the occurrence of Closing and the Purchaser thus having become the sole shareholder of the Company the Purchaser shall without undue delay (i) resolve upon a payment into the free capital reserves of the Company (Section 272 para 2 no. 4 German Trade Code (Handelsgesetzbuch, “HGB”) of an amount equal to the Remaining Shareholder Redemption Amounts and (ii) pay the Remaining Shareholder Redemption Amounts directly to the Joint Sellers` Account whereas such payment shall have releasing effect (mit schuldbefreiender Wirkung) as regards the obligation of (x) the Purchaser to pay the respective amount into the free capital reserves of the Company as well (y) the Company to pay the Remaining Shareholder Redemption Amounts to the Sellers as set forth in Annex 1.3-2.

5 Effective Date, Signing Date

5.1 The economic transfer date with regard to the sale and transfer of the Sold Shares shall be the Closing Date (hereinafter also referred to as the “Effective Date”) (Wirtschaftlicher Stichtag).

5.2 The date on which this Agreement is executed is hereinafter also referred to as the “Signing Date”.

6 Consideration

6.1 As consideration for the sale and transfer of the Sold Shares the Purchaser shall pay the Share Purchase Price pursuant to clause 7 and to the extent applicable the Earn-Out pursuant to clause 9.

6.2 The Share Purchase Price and the Earn-Out shall be allocated to the Sellers in accordance with their internal agreement which has not been disclosed to the Purchaser, provided however that Sellers shall be obliged to disclose such allocation to Purchaser in writing upon Purchaser notifying Sellers of a potential claim of Purchaser against any Seller under this Agreement.

It is hereby clarified that Purchaser shall not be concerned with, or have any liability whatsoever with respect to, the allocation and/or attribution by the Sellers of the Share Purchase Price and the Earn-Out among the Sellers.

Seite 20 von 83

For the avoidance of doubt, subject to any Purchase Price Adjustment, any and all obligations of the Purchaser with respect to the payment of the Share Purchase Price are fully satisfied, complied with and settled and the Purchaser shall be fully discharged from any obligation in this regard upon (i) crediting of the Estimated Cash Amount to the Joint Sellers' Account, (ii) the Escrow Amount to the Escrow Account and (iii) the HSP 2 Escrow Amount to the HSP 2 Escrow Account. For the avoidance of doubt, any claims for (i) Earn Out payments pursuant to and in accordance with clause 9 and (ii) payments pursuant to and in accordance with clause 1.7.3 in case of a Split HSP Event shall remain unaffected.

7 Determination of Share Purchase Price

7.1 The purchase price for the Sold Shares (the "Share Purchase Price") shall be an amount to be determined as follows and in accordance with clause 7.5 (and on the basis of the Final Effective Date Accounts):

7.1.1 the Enterprise Value of the Group (in relation to 100 % of the Shares in the Company) which shall amount to EUR 96,000,000.-- (in words: Euro ninety six million) (the "Enterprise Value") (for the avoidance of doubt, the Parties agree and confirm that the calculation and determination of the Enterprise Value has been unanimously made by and among the Parties and the Parties therefore irrevocably waive any rights they may have to challenge or rescind or otherwise modify the calculation of the Enterprise Value irrespective of the legal and/or factual basis) (for the avoidance of doubt, clauses 12 et. seq. shall remain unaffected);

7.1.2 plus the aggregate of the cash and cash equivalents as defined in Annex 7.1.2 ("Cash") of the Group Companies as of the Effective Date as determined in the Final Effective Date Accounts (the "Effective Date Cash");

7.1.3 minus the aggregate debt as defined in Annex 7.1.3("Debt") of the Group Companies as of the Effective Date as determined in the Final Effective Date Accounts (the "Effective Date Debt");

7.1.4 plus / minus the amount by which the combined net working capital as defined in Annex 7.1.4-1 ("NWC") of the Group Companies as of the Effective Date as determined in the Final Effective Date Accounts (the “Effective Date NWC”) exceeds / falls short of the amount of EUR - 9,456,000 (in words: Euro minus nine million four hundred fifty six thousand) such shortfall or excess, as the case may be, the “Effective Date NWC Deviation”);

whereas Annex 7.1.4-2contains certain methodologies to be applied in the context of the calculation of the illustrative numbers in the aforementioned Annexes and such methodologies shall also be applied when determining the Effective Date Cash, the Effective Date Debt and the Effective Date NWC (on the basis of actual amounts as of the Effective Date, not on the basis of the illustrative numbers in the aforementioned Annexes).

Annex 7.1 contains a sample calculation of the Effective Date Cash, the Effective Date Debt as well as the Effective Date NWC Deviation. The Parties agree that any effects resulting from or connected with the receipt of the HSP 1 Amount and the HSP 2 Amount and the HSP Matter on the calculation of the Share Purchase Price as set forth in this clause 7.1 and its respective annexes

Seite 21 von 83

and the Effective Date Accounts shall only be taken into account as shown in the Annexes 7.1.3 and 7.1.4.

7.1.5 For the avoidance of doubt,

(i) in case the actual HSP 2 2^nd Tranche Grant Payments are in excess of the Projected HSP 2 2^nd Tranche Grant Payments such excess amount shall form part of the Effective Date Cash to be determined on the basis of the Final Effective Date Accounts;

(ii) the Remaining Shareholder Redemption Amount shall form part of the Effective Date Debt to be determined on the basis of the Final Effective Date Accounts.

7.2 VAT on Transaction

The Parties assume that all transactions contemplated in this Agreement are either out of scope or exempt from German value added tax (“VAT”). The Parties undertake not to waive any VAT-exemption and not to opt for a VAT-able treatment of any of the transactions contemplated in this Agreement. Consequently, VAT shall not be charged on top of the Share Purchase Price. Should the tax authorities come to a different view, the Share Purchase Price shall be deemed to include VAT.

7.3 Closing Day Payments / Estimated Share Purchase Price

On the basis of (i) the information available to the Parties as of the Signing Date as to the amounts of the Effective Date Cash, the Effective Date Debt and the Effective Date NWC and (ii) the Projected HSP 2^nd Tranche Grant Payments, the Parties estimate that the Share Purchase Price will amount to EUR 82,410,000 (in words: Euro eighty two million four hundred ten thousand) (the "Estimated Share Purchase Price") which consists of

(i) an amount of EUR 71,910,000 (in words: Euro seventy one million nine hundred ten thousand) ("Estimated Cash Amount"); and

(ii) an amount of EUR 3,000,000.-- (in words: Euro three Million) ("Escrow Amount"); and

(iii) an amount of EUR 7,500,000.-- (in words: Euro seven Million five hundred thousand) (“HSP 2 Escrow Amount”).

On the Closing Date, subject to the terms of this Agreement, the Purchaser shall pay (i) the Estimated Cash Amount to the Joint Sellers' Account (ii) the Escrow Amount to the Escrow Account and (iii) the HSP 2 Escrow Amount to the HSP 2 Escrow Account.

Clause 6.2 shall apply mutatis mutandis to the allocation and apportionment of the Estimated Share Purchase Price.

Seite 22 von 83

7.4 Escrow

7.4.1 Escrow Agent and Escrow Account

Sellers and Purchaser hereby appoint the acting notary public to serve as their joint agent to receive and hold on behalf of both Parties the Escrow Amount (the "Escrow Agent"). The Parties have instructed the Escrow Agent to open a bank account to receive payment by Purchaser of the Escrow Amount (the "Escrow Account").

The funds in the Escrow Account shall serve as collateral for Purchaser with respect to

(i) the payment claims of the Purchaser in relation to any Purchase Price Adjustment; and

(ii) any other claims of Purchaser against Sellers arising out of or in connection with this Agreement (in particular but not limited to claims on the basis of breaches of warranties), but excluding HSP 2 Indemnification Claims and Recoverable HSP 2 2^nd Tranche Handling Costs.

7.4.2 Escrow Agreement

The terms and conditions regarding the Escrow Account are set forth in an agreement executed between Sellers, Purchaser and the Escrow Agent as of the date hereof, attached as Annex 7.4.2 (the "Escrow Agreement").

7.4.3 Interest, Fees and Expenses

Interest accrued on the Escrow Account shall be added to, and considered to be part of, and fees and expenses of the Escrow Agent (to the extent not paid by the Parties) shall be deducted from, the Escrow Amount.

7.4.4 Releases from Escrow Account

7.4.4.1 The Escrow Agent shall be instructed to release any funds on the Escrow Account only

(i) in accordance with corresponding (übereinstimmenden) or joint written instructions from Sellers and Purchaser;

(ii) to Purchaser in such amounts in which payment claims of Purchaser against Sellers under or in connection with this Agreement have been (i) acknowledged in writing by the Sellers (Anerkenntnis) or settled in writing by mutual agreement (Vergleich) of Purchaser and Sellers, or (ii) adjudicated by final court judgment (rechtskräftiges gerichtliches Urteil) or final arbitral award (rechtskräftigerSchiedsspruch);

(iii) upon request of the Purchaser to the Purchaser if and to the extent that the Sellers are obliged to pay to Purchaser a Purchase Price Adjustment pursuant to clause 7.6;

Seite 23 von 83

(iv) pursuant to clause 7.4.4.2.

7.4.4.2 Final Release

Upon the lapse of a time period of 18 months after the Closing Date, the Escrow Agent shall release to Sellers the funds then remaining in the Escrow Account after deduction of

(i) the outstanding fees and expenses (if any) of the Escrow Agent; and

(ii) the amounts of any outstanding payment claims that Purchaser has asserted against any Sellers by way of a duly filed lawsuit or duly filed request for arbitration (the "Final Claims");

(iii) the amounts of any Third Party Claims that have been asserted by third parties against the Purchaser or any of the Group Companies in writing.

The funds remaining in the Escrow Account after such release shall be released by the Escrow Agent

(i) pursuant to clause 7.4.4.1 (i) or (ii), or

(ii) to Sellers in the amounts of

(x) any Final Claims that have been denied by final court judgment or final arbitral award or that have been abandoned (Klagerücknahme / Klageverzicht / Erledigterklärung) by Purchaser or jointly by Sellers and Purchaser; and

(y) any Third Party Claims to the extent successfully defended (i.e. finally held invalid by a competent court or irrevocably and unconditionally waived or abandoned (Klagerücknahme / Klageverzicht / Erledigterklärung) by the respective third party), upon presentation by Sellers of an original or certified copy (beglaubigte Abschrift) of the respective judgment or award or document evidencing the respective abandonment; and

(z) any Third Party Claims (pursuant to 7.4.4.2 (iii) above) that have been asserted by third parties against the Purchaser or any of the Group Companies in writing in relation to which the Purchaser has not asserted a duly filed lawsuit or duly filed request for arbitration against the relevant Sellers within a period of six months after assertion of the Third Party Claim by the respective third party against any of the Group Companies.

7.4.4.3 Replenishment of Escrow Account

If and to the extent that funds have been released from the Escrow Account pursuant to clause 7.4.4.1(iii) the Sellers shall be obliged to replenish the Escrow Account within

Seite 24 von 83

three Business Days of such release by the specific amount released pursuant to clause 7.4.4.1 (iii).

7.5 Effective Date Accounts and Final Determination of the Share Purchase Price

7.5.1 Sellers shall prepare and Purchaser shall procure that the Company fully assists Sellers in preparing the pro forma consolidated financial statement (Zwischenabschluss) of the Group for the period from 1 January 2015 until the Effective Date, consisting of a balance sheet (Bilanz) and a profit and loss statement (Gewinn- und Verlustrechnung) in accordance with past practice (the "Effective Date Accounts"), as well as a statement setting forth the calculation and value of the following items

(i) the Effective Date Cash;

(ii) the Effective Date Debt;

(iii) the Effective Date NWC;

(iv) the Effective Date NWC Deviation;

(v) the Share Purchase Price resulting from (i) through (iv); and

(vi) the Purchase Price Adjustment, if any;

(i) to (iii) each as shown in the Effective Date Accounts

consistent with the relevant format used in Annex 7.1.2, 7.1.3, 7.1.4, respectively (items (i) through and including (v) together the "Financial Statement").

The Effective Date Accounts shall be prepared in accordance with the provisions of the HGB and German generally accepted accounting principles ("German GAAP") and the same assumptions, policies, methodologies and rules shall be applied which have been applied in preparing the Group's financial statements for the last financial year as in particular set forth in the attachments and reports to the respective financial statements. The Effective Date Accounts and the Financial Statement shall not be audited and shall be delivered to the Purchaser (for review by Purchaser and/or an auditor selected by Purchaser) as soon as reasonably practical after the Closing Date, but in no event later than eighty (80) Business Days after the Closing Date.

Each Party shall bear its own costs and the costs of its respective advisors with respect to the preparation or review, as the case may be, of the Effective Date Accounts and Financial Statement.

7.5.2 Purchaser shall, after the Closing Date, ensure that Sellers and their advisors, accountants and representatives are (subject to customary release letters and hold harmless letters) granted all such access (however, only during business days and normal business hours) to records, premises and personnel of the Group as they may reasonably request for purposes of preparing and solving any disputes between the Parties regarding the Effective Date Accounts and the Financial Statement pursuant to and in accordance with clause 7.5.1. Purchaser shall instruct the management and staff of the Company and their advisors, accountants and representatives to co-operate with all such persons as reasonably requested by Sellers. The Parties shall endeavor that the auditor(s) acting or appointed in accordance with this Agreement with regard to the preparation

Seite 25 von 83

and/or review of the Effective Date Accounts and/or the Financial Statement grant each other access to their respective working papers.

7.5.3 The Effective Date Accounts and the Financial Statement become final and binding for purposes of this Agreement as between the Parties if and to the extent the Purchaser does not within thirty (30) Business Days after receipt of both, the Effective Date Accounts and the Financial Statement, object to the Effective Date Accounts and/or the Financial Statement by providing the Sellers with (i) a written statement of objections, specifying in reasonable detail the grounds for the objections, and (ii) a revised version of the Effective Date Accounts (the "Revised Effective Date Accounts") and a revised version of the Financial Statement (the "Revised Financial Statement") taking into account such objections and the changes which are necessary in Purchaser's view to comply with the requirements of this Agreement. Each Party shall bear its own costs and the costs of its respective advisors with respect to the preparation or review, as the case may be, of the Revised Effective Date Accounts and Revised Financial Statement.

7.5.4 If Purchaser properly objects in compliance with clause 7.5.3 to the Effective Date Accounts and/or the Financial Statement within thirty (30) Business Days after receipt of the Effective Date Accounts and the Financial Statement, the Parties shall endeavor in good faith to settle the disagreement. If Sellers and Purchaser reach an agreement, the Effective Date Accounts and the Financial Statement, as varied by such agreement, shall become final and binding on the Parties for purposes of this Agreement. If and to the extent Sellers and Purchaser fail to settle the disagreement within fifteen (15) Business Days (or such other time period as the Sellers and the Purchaser may agree upon in writing) after receipt by the Sellers of Purchaser's statement of objections, the Parties shall jointly appoint an auditor who shall resolve the dispute between the Parties (the "Neutral Auditor") unless otherwise agreed upon by the Parties. The Neutral Auditor shall belong to the service network of any of the “big four” other than Ernst & Young (i.e. PwC, KPMG, or Deloitte). If the Parties are unable to agree on a Neutral Auditor within ten (10) Business Days, each Party shall have the right to refer the matter to the German Institute of Chartered Accountants (Institut der Wirtschaftsprüfer in Deutschland e. V.) to determine the Neutral Auditor (such determination to be final and binding on the Parties). The Neutral Auditor shall act as an arbitral expert (Schiedsgutachter) within the meaning of Section 317 of the German Civil Code (Bürgerliches Gesetzbuch – "BGB") and its decision, which shall be made in accordance with the provisions of this clause 7.5, and the Effective Date Accounts and Financial Statement as amended by the Neutral Auditor, shall be binding and final upon the Parties (in the absence of manifest material error). Unless instructed otherwise by Sellers and Purchaser jointly, the items determined by the Neutral Auditor may not be above or below the figures proposed by Sellers and Purchaser, respectively. Any costs and expenses incurred by the Neutral Auditor and in relation to the dispute over the Effective Date Accounts and/or the Financial Statement shall be allocated and borne by the Parties in accordance with Section 91 et seq. of the German Civil Procedure Act (Zivilprozessordnung – "ZPO") which shall apply accordingly.

7.5.5 Sellers and Purchaser shall, within the subsequent five (5) Business Days after appointment of the Neutral Auditor, each prepare and deliver to the Neutral Auditor a written statement on the items in dispute, make available to the Neutral Auditor the Effective Date Accounts, the Revised Effective Date Accounts, the Financial Statement and the Revised Financial Statement and all other documentation and data reasonably required by the Neutral Auditor to make the required decisions and determination. The Neutral Auditor shall immediately submit copies of all

Seite 26 von 83

documents and other data made available by Sellers or Purchaser to the respective other Parties as well. The Parties shall be given the opportunity to present their views in English in writing and at an oral hearing in the presence of Sellers and Purchaser and their professional advisors. The Parties shall use their best efforts to obtain the written decision of the Neutral Auditor with reasons for the decisions as soon as reasonably practicable. The Neutral Auditor shall be asked to send his/her decision in writing to the Parties within forty-five (45) days of the confirmation and acknowledgment by the Neutral Auditor of its appointment hereunder.

7.5.6 The Effective Date Accounts and Financial Statement or Revised Effective Date Accounts and Revised Financial Statement, as the case may be, that have become final and binding upon the Parties for purposes of this Agreement pursuant to and in accordance with clauses 7.5.3 through 7.5.5 are referred to herein as the "Final Effective Date Accounts" and the "Final Financial Statement".

The Effective Date Cash, Effective Date Debt, Effective Date NWC, Effective Date NWC Deviation, Share Purchase Price and Purchase Price Adjustment, in each case, shall be as set out in the Final Financial Statement.

7.6 Adjustment Payments

7.6.1 If on the basis of the Final Financial Statement

(i) the Share Purchase Price exceeds the Estimated Share Purchase Price, Purchaser shall pay to Sellers an amount equal to such excess to the Joint Sellers` Account and/or to the HSP 2 Escrow Account as the case may be (pursuant to clause 8.2.6.2);

(ii) the Share Purchase Price falls short of the Estimated Share Purchase Price, Sellers shall pay to Purchaser an amount equal to such shortfall.

7.6.2 Any such amount pursuant to clause 7.6.1 (i) or clause 7.6.1 (ii) to be paid by either Purchaser or Sellers pursuant to and in accordance with clause 7.6.1 (each a "Purchase Price Adjustment") shall bear interest from the Closing Date until but excluding the date of payment at a rate of 5% (calculated daily on the basis of a year of three hundred sixty (360) days and payable at the same time as the payment to which it relates) and shall be paid within ten (10) Business Days after the Final Effective Date Accounts and Final Financial Statement have become final and binding upon Sellers and Purchaser in accordance with clause 7.5.

8 HSP Procedural Rules and HSP 2 Escrow

8.1 Procedural Rules

8.1.1 In relation to HSP 1 and/or HSP 2 matters in respect of time periods until the Closing Date, in particular the respective HSP 1^st Tranche Grant Order and 2^nd Tranche Grant Order(s) (the “HSP Matter”), any Third Party Claims (including for the avoidance of doubt any claims raised by authorities vis-à-vis any of the Group Companies in relation to the HSP Matter, including Split HSP Events) shall be dealt with in accordance with clause 14.3, whereas Purchaser shall use best

Seite 27 von 83

efforts that the persons listed in Annex 8.1.1shall remain responsible and in charge of handling the HSP Matter. For the avoidance of doubt, the proof of usage of funds (Kostenverwendungsnachweis) regarding any HSP Matter and any examinations, audits and proceedings with the court of audit (Landesrechnungshof) of North Rhine Westphalia in relation to the HSP Matter shall be treated as if they were Third Party Claims.

8.1.2 The Parties agree that Sellers shall have and retain until the date until which the respective Seller could receive any payments pursuant to clause 1.7.3 full control over any claims of any Group Company for receipt after the Closing Date of further funds under any HSP program based on applications filed before the Closing Date regarding the budget years 2013 (corresponding to the calendar year 2013) and 2014 (corresponding to the calendar year 2014) (an exhaustive list of such applications is attached hereto as Annex 1.7.3)and referring to students enrolled before the 2015 university year (i.e. before April 1^st 2015); in particular only Sellers shall be entitled to pursue any claims and institute, coordinate and control any and all respective proceedings (including the making of objections, filing of actions and declaring a waiver to obtain legal remedies), provided, however, that Sellers shall if exercising control pursuant to the foregoing sentence take the best interest of the relevant Group Company into account and that the participation rights for the benefit of Purchaser pursuant to clause 14.3.2.2 shall apply mutatis mutandis whereas the persons listed in Annex 8.1.1 provided and to the extent they are still in relevant functions with any of the Group Companies, otherwise the then current management of the relevant Group Company shall reasonably determine if and to what extent it is in the best interest of such relevant Group Company, to pursue the respective claim.

8.1.3 For the avoidance of doubt, in case of any claims, proceedings or other matters in relation to (i) a Purchaser HSP Event or (ii) the amounts received by the Group in case of a Split HSP Event in relation to HSP 1 and/or HSP 2 which are not or no longer partially or wholly payable to the Joint Sellers’ Account pursuant to and in accordance with clause 1.7.3, Purchaser shall have and retain full control over any such claims, proceedings or other matters without any participation rights for the benefit of the Sellers or any other restrictions.

To the extent Sellers have already taken over control over any such claims and it is not reasonably practicable or doable to divide the control between Sellers and Purchaser or to transfer the control to Purchaser in its entirety, Sellers shall continue to raise the respective claims (including such to which the Purchaser is entitled) and proceedings or other matters in the best interest of the relevant Group Company whereas Purchaser - acting reasonably - may direct Sellers not to pursue such claims to the extent the Purchaser is entitled to such claims. In case Seller do not wish to continue to raise such claims (i.e. claims they are entitled to and / or such claims the Purchaser is entitled to), Purchaser shall be entitled to assume control of all such claims.

8.2 HSP 2 Escrow

8.2.1 Escrow Agent and HSP 2 Escrow Account

Sellers and Purchaser hereby appoint the Escrow Agent to serve as their joint agent to receive and hold on behalf of both Parties the HSP 2 Escrow Amount. The Parties have instructed the Escrow Agent to open a bank account (different from the Escrow Account) to receive payment by Purchaser of the HSP 2 Escrow Amount (the "HSP 2Escrow Account").

Seite 28 von 83

8.2.2 HSP 2 Escrow Agreement

The terms and conditions regarding the HSP 2 Escrow Account are set forth in an agreement executed between Sellers, Purchaser and the Escrow Agent as of the date hereof, attached as Annex 8.2.2(the "HSP 2Escrow Agreement").

8.2.3 Interest, Additional Payment

Interest accrued on the HSP 2 Escrow Account shall be added to, and considered to be part of the HSP 2 Escrow Amount, and fees and expenses of the Escrow Agent (to the extent not paid by the Parties) shall be deducted from the HSP 2 Escrow Amount.

8.2.4 Releases from HSP 2 Escrow Account

8.2.4.1 The Escrow Agent shall release any funds on the HSP 2 Escrow Account only

(i) in accordance with corresponding (übereinstimmenden) or joint written instructions from Sellers and Purchaser;

(ii) to Purchaser in such amounts in which HSP 2 Indemnification Claims of Purchaser against Sellers have been (i) acknowledged in writing by the Sellers (Anerkenntnis) or settled in writing by mutual agreement (Vergleich) between Purchaser and Sellers, or (ii) adjudicated by final court judgment (rechtskräftiges gerichtliches Urteil) or final arbitral award (rechtskräftiger Schiedsspruch) in favour of the Purchaser upon presentation by Purchaser of an original or certified copy (beglaubigte Abschrift) of the respective judgment, award or document evidencing the acknowledgement or mutual agreement to the Escrow Agent;

(iii) to Purchaser in the amount of any Recoverable HSP 2 2^nd Tranche Handling Costs (as defined in clause 14.8.1.3);

(iv) to Purchaser in the amount of any interest due for payment and actually paid by IUBH to the Ministry pursuant to the HSP 2 2^nd Tranche Grant Order issued pursuant to clause 11.1.1 as specified in more detail in Annex 11.1.1 number 2 or any subsequent order relating to the interest payment under the HSP 2 2^nd Tranche Grant Order upon presentation of (x) the HSP 2 2^nd Tranche Grant Order or any subsequent order relating to the interest payment under the HSP 2 2^nd Tranche Grant Order and (y) respective documents evidencing such payment of such interest amount related to the HSP 2 2^nd Tranche Grant Order;

(v) to Purchaser in such amount corresponding to the monetary impact arising from any wording or statement and in particular any ancillary provisions (Nebenbestimmungen) of the HSP 2 2^nd Tranche Grant Order and as specified in more detail in Annex 11.1.1 no. 3, but in any case limited up to an amount of maximum EUR 2,000,000.00 and provided that the circumstances underlying the monetary impact have not already been reflected in the Relevant Business Plan, upon presentation of (x) a mutual written agreement of the Parties on the

Seite 29 von 83

respective amount or (y) in absence of such mutual agreement presentation of the original or a certified copy of the decision of the Neutral Auditor pursuant to clauses 7.5.4 and 7.5.5 which shall apply mutatis mutandis, and (z) in any case respective documents evidencing such relating payments by IUBH;

(vi) to Sellers in accordance with clause 8.2.4.2.

8.2.4.2 Releases to Sellers

The Escrow Agent shall release to Sellers the funds in the HSP 2 Escrow Account as follows

(i) on December 31, 2018 (the “First HSP 2 Release Date”)an amount equal to EUR 2,500,000.-- (in words: Euro two Million five hundred thousand) (the “First HSP 2 Release Base Amount”) shall be paid out to the Joint Sellers Account after deduction of

(x) the outstanding fees and expenses (if any) of the Escrow Agent until the First HSP 2 Release Date; and

(y) the amounts of: (xx) any outstanding Third Party Claims in relation to or in the context of the HSP Matter asserted in writing by any third party vis-à-vis any Group Company (for the avoidance of doubt, including but not limited to any claims asserted in writing by authorities vis-à-vis any Group Company in the context of the HSP Matter); and/or (yy) any outstanding HSP2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration (for the avoidance of doubt, to the extent claims have been deducted under item (xx) above such claims shall not be deducted again under this item (yy)) and/or (zz) any outstanding claims for Recoverable HSP 2 2^nd Tranche Handling Costs that Purchaser has asserted in writing against Sellers (the “First Release Date Claims”), (the amount resulting from such calculation the “First HSP 2 Escrow Pay Out Amount”);

(ii) on December 31, 2019 (the “Second HSP 2 Release Date”)an amount equal to the sum of EUR 2,500,000.-- (in words: Euro two Million five hundred thousand) (the “Second HSP 2 Release Base Amount”) shall be paid out to the Joint Sellers Account, after deduction of

(x) the outstanding fees and expenses (if any) of the Escrow Agent for the period from the First HSP 2 Release Date until the Second HSP 2 Release Date; and

Seite 30 von 83

(y) the amounts of (i) any outstanding Third Party Claims in relation to or in the context of the HSP Matter asserted in writing by any third party vis-à-vis any Group Company (for the avoidance of doubt, including but not limited to any claims asserted in writing by authorities vis-à-vis any Group Company in the context of the HSP Matter); and/or (ii) any outstanding HSP2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed law suit or duly filed request for arbitration other than the First Release Date Claims (for the avoidance of doubt, to the extent claims have been deducted under item (i) above such claims shall not be deducted again under this item (ii)) and/or (iii) any outstanding claims for Recoverable HSP 2 2^nd Tranche Handling Costs that Purchaser has asserted in writing against Sellers other than the First Release Date Claims (iv) and/or HSP 2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration before the First HSP 2 Release Date forming part of the First Release Date Claims to the extent such claims have in the aggregate exceeded the amount of the First HSP 2 Release Base Amount and are still pending (rechtshängig) at the Second HSP 2 Release Date (the “Second Release Date Claims”), (the amount resulting from such calculation the “Second HSP 2 Escrow Pay Out Amount”);

(iii) on December 31, 2021 (the “Third HSP 2 Release Date”)an amount equal to the sum of EUR 2,500,000.-- (in words: Euro two Million five hundred thousand) (the “Third HSP 2 Release Base Amount”) shall be paid out to the Joint Sellers Account, after deduction of

(x) the outstanding fees and expenses (if any) of the Escrow Agent for the period from the Second HSP 2 Release Date until the Third HSP 2 Release Date; and

(y) the amounts of (i) any outstanding Third Party Claims in relation to or in the context of the HSP Matter asserted in writing by any third party vis-à-vis any Group Company (for the avoidance of doubt, including but not limited to any claims asserted in writing by authorities vis-à-vis any Group Company in the context of the HSP Matter), and/or (ii) any outstanding HSP 2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration other than the First and/or Second Release Date Claims (for the avoidance of doubt, to the extent claims have been deducted under item (i) above such claims shall not be deducted again under this item (ii)) and/or (iii) any outstanding claims for Recoverable HSP 2 2^nd Tranche Handling Costs that Purchaser has asserted in writing against Sellers other than the First and/or Second Release Date Claims (iv) and/or HSP 2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration before the Second HSP 2 Release Date forming part of the First and/or Second Release Date Claims to the extent such claims have in the aggregate been in excess of the amount of the Second HSP 2 Release Base Amount and are still pending (rechtshängig).

Seite 31 von 83

(iv) Interim-Releases to Sellers: if and to the extent

(x) any Third Party Claims in relation to or in the context of the HSP Matter

(A) asserted in writing by any third party vis-à-vis any Group Company (for the avoidance of doubt, including but not limited to any claims asserted in writing by authorities vis-à-vis any Group Company in the context of the HSP Matter) have finally and bindingly been settled by a binding judgement, arbitral award, mutual agreement or abandonment (Klagerücknahme / Klageverzicht / Erledigterklärung) in favour of the respective Group Companies by and until the Third HSP 2 Release Date and/ or

(B) deducted in accordance with clauses 8.2.4.2(i)(y)(xx), 8.2.4.2(ii)(y)(i), 8.2.4.2(iii)(y)(i) (”Blocked Third Party Claim Amount”), in relation to which the Purchaser has not asserted a duly filed lawsuit or duly filed request for arbitration against the relevant Sellers within a period of six months after the respective Third Party Claim has been asserted in writing by the respective third party against any of the Group Companies; and/or

(y) any alleged HSP 2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration have finally and bindingly been settled by a binding judgement, arbitral award, mutual agreement or abandonment (Klagerücknahme / Klageverzicht / Erledigterklärung) in favour of any of the Sellers by and until the Third HSP 2 Release Date and/or

(z) any alleged claims for Recoverable HSP 2 2^nd Tranche Handling Costs that Purchaser has asserted in writing against Sellers have finally and bindingly been settled by a mutual agreement or pursuant to clause 14.8.1.3 in connection with clauses 7.5.4 and/or 7.5.5 in favour of any of the Sellers by and until the Third HSP 2 Release Date

(any or all of (x), (y) and (z) above the “Rejected HSP 2 Indemnification Claims”)

the Escrow Agent shall (for the avoidance of doubt, during the period between the First HSP 2 Release Date and the Third HSP 2 Release Date) pay out to the Joint Sellers Account any amounts having not been released pursuant clauses 8.2.4.2(i) through (and including) 8.2.4.2(iii) up to the amount by which the respective relevant First and/or Second HSP 2 Escrow Pay Out Amount has been reduced by the Rejected HSP 2 Indemnification Claims upon presentation of an original or certified copy (beglaubigte Abschrift) of the respective judgment, award, decision of the Neutral Auditor or other document evidencing the abandonment or mutual agreement by the Purchaser and the relevant Seller(s) to the Escrow Agent, provided, however, that in case of clause 8.2.4.2 (iv) (x) (B) the Escrow Agent shall pay out the respective Blocked Third Party Claim Amount upon expiry of the six months period in the absence of presentation by Purchaser of the original or certified copy of a respective duly filed lawsuit or duly filed request for arbitration.

Seite 32 von 83

The funds remaining in the HSP 2 Escrow Account as of the Third HSP 2 Release Date shall be released by the Escrow Agent pursuant to clause 8.2.4 (i) or (ii) or (iii), or to Sellers to the extent the HSP 2 Indemnification Claims that Purchaser has asserted against Sellers by way of a duly filed lawsuit or duly filed request for arbitration (x) have been denied by final court judgment or arbitral award upon presentation by Sellers of an original or certified copy (beglaubigte Abschrift) of the respective judgment or award or (y) have been abandoned (Klagerücknahme/ Klageverzicht / Erledigterklärung) by Purchaser or jointly by Sellers and Purchaser upon presentation of a document evidencing the respective abandonment (Klagerücknahme/ Klageverzicht / Erledigterklärung).

8.2.4.3 If and to the extent the Escrow Amount has either been (x) used up and/or (y) paid out to Purchaser and /or Sellers pursuant to the rules governing the Escrow Account the HSP 2 Escrow Account shall serve as additional collateral for any other claims of Purchaser against Sellers arising out of or in connection with this Agreement (in particular but not limited to claims on the basis of breaches of warranties). In this event, clause 8.2.4.2 shall apply mutatis mutandis (whereby claims of Purchaser against Sellers shall be treated like HSP 2 Indemnification Claims). For the avoidance of doubt, any restrictions, limitations, exclusions on liability and any other provisions of this Agreement governing such claims shall remain unaffected.

8.2.5 No Replenishment

For the avoidance of doubt, the Parties agree that there shall be no replenishment of the HSP 2 Escrow Account.

8.2.6 Additional HSP 2 Escrow Amount

8.2.6.1 If and to the extent that the amount of the HSP 2 2^nd Tranche Grant Payments received by IUBH pursuant to and in accordance with clause 11.1.3 exceeds an amount of EUR 17,000,000.-- (in words: Euro seventeen million) (“HSP 2 Excess Event”), 50% (fifty per cent) of the respective excess amount shall be paid into the HSP 2 Escrow Account (“Additional HSP 2 Escrow Amount” ) in addition to the HSP 2 Escrow Amount and any other funds contained in the HSP 2 Escrow Account, as set forth in more detail in clause 8.2.6.2 below.

The Additional HSP 2 Escrow Amount shall be added to, and considered to be part of the HSP 2 Escrow Amount.

8.2.6.2 The Additional HSP 2 Escrow Amount shall be paid to the HSP 2 Escrow Account in the context of the Purchase Price Adjustment pursuant to clause 7.6 as follows:

(i) In case of a Purchase Price Adjustment pursuant to clause 7.6.1(i):

Seite 33 von 83

a. Purchaser (x) shall pay the amount of the Additional HSP 2 Escrow Amount to the HSP 2 Escrow Account and (y) – in deviation of clause 7.6.1(i) – shall only pay the difference amount of the Purchase Price Adjustment less the Additional HSP 2 Escrow Amount to the Joint Sellers` Account; and

b. if and to the extent the Additional HSP 2 Escrow Amount exceeds the amount of the Purchase Price Adjustment, Sellers shall pay the respective excess amount to the HSP 2 Escrow Account.

(ii) In case of a Purchase Price Adjustment pursuant to clause 7.6.1(ii) Sellers shall – in addition to the payment of such Purchase Price Adjustment to the Purchaser in accordance clause 7.6.1(ii) - pay the Additional HSP 2 Escrow Amount to the HSP 2 Escrow Account.

8.2.6.3 In case of an HSP 2 Excess Event, upon payment of the Additional HSP 2 Escrow Amount to the HSP 2 Escrow Account in accordance with clause 8.2.6.2 above, each of the First HSP 2 Release Base Amount, the Second HSP 2 Release Base Amount and the Third HSP 2 Release Base Amount shall be increased by an amount equal to 1/3 (one third) of the Additional HSP 2 Escrow Amount.

9 Earn-Out

9.1 In addition to the Share Purchase Price and as part of the purchase price for the Sold Shares, the Sellers shall be entitled to an earn-out payment (“Earn-Out”) in a maximum amount of up to EUR 11,000,000.-- (in words: Euro eleven Million; “Earn-Out Cap”) based on the Group’s aggregate and consolidated EBITDA in the period from January 1, 2016 until December 31, 2016 as defined in clause 9.2 and as adjusted pursuant to clause 9.3 below (the “Relevant AdjustedEBITDA 2016”), which shall be calculated as follows:

(Relevant Adjusted EBITDA 2016 minus EUR 7,987,000.--) multiplied by factor 10 (the “Actual Earn Out Amount”)

For the avoidance of doubt, if the above calculation results in a negative amount, the Sellers shall not be obliged to repay such amount to the Purchaser (i.e. there shall be no negative Earn-Out). For the avoidance of doubt, if the above calculation results in an amount greater than the Earn-Out Cap, the Purchaser shall not be obliged to pay any amount exceeding the Earn-Out Cap to the Sellers. Annex 9.1contains calculation examples.

9.2 "EBITDA" shall mean for the purpose of this clause 9

a. earnings from ordinary operations (Ergebnis der gewöhnlichen Geschäftstätigkeit), Section 275 (2) no. 14 HGB a.F. (alte Fassung);

b. minus earnings from other securities and financial assets (Erträge aus anderen Wertpapieren und Ausleihungen des Finanzanlagevermögens), Section 275 (2) no. 10 HGB);

Seite 34 von 83

c. minus interest income and similar income (sonstige Zinsen und ähnliche Erträge), Section 275 (2) no. 11 HGB;

d. plus interest expenses and similar expenses (Zinsen und ähnliche Aufwendungen), Section 275 (2) no. 13 HGB;

e. plus depreciations (Abschreibungen), Section 275 (2) no. 7 HGB and amortizations (Firmenwertabschreibungen);

f. minus appreciations (Zuschreibungen zum Anlagevermögen),

g. plus expenses relating to other accounting periods (periodenfremde Aufwendungen);

h. plus non-operating expenses without recurring characteristic (außergewöhnliche Aufwendungen mit nicht wiederkehrendem Charakter);

i. minus income relating to other accounting periods (periodenfremde Erträge);

j. minus non- operating income without recurring characteristic (außergewöhnliche Aufwendungen mit nicht wiederkehrendem Charakter).

each on a consolidated basis of the Group and calculated in accordance with German GAAP and applying the same assumptions, policies, methodologies and rules which have been applied in preparing the Group`s financial statements for the past business years including the Effective Date Accounts. For the avoidance of doubt, the sections of the German Commercial Code (HGB) referred to in this clause 9.2 shall have the meaning as set forth in the German Commercial Code (HGB) as of the Signing Date (except as otherwise stated herein); future changes to the German Commercial Code (HGB), in particular the choice of applying future changes to the German Commercial Code (HGB) with retro-active effect, shall be disregarded for the purpose of the definition of EBITDA pursuant to this clause 9.2.

9.3 For purposes of calculating the Relevant Adjusted EBITDA 2016, the following adjustments shall be made to the EBITDA calculated in accordance with clause 9.2 above:

a. any Actual HSP 2 Amounts released to the profit and loss statement in 2016 shall be disregarded as well as any repayment of any HSP 1 Amount and Actual HSP 2 Amount as well as any costs related to HSP 1 and/or HSP 2 shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

b. any special or overhead costs resulting from the integration of companies of the Group into the Purchaser and its Affiliates (the “Purchaser’s Group”) and compliance with the Purchaser’s Group’s standards, including (i) any group charges, (ii) any increase of costs for management and personnel (including additional headcounts from the Purchaser’s Group) or (iii) costs of integration measures shall not be taken into account, i.e., such costs and expenses shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

Seite 35 von 83

c. should one of the Group Companies render services, in particular to members of the Purchaser’s Group, at prices below past practice or not at arms’ length, such prices shall be increased to prices equivalent to past practice or arm’s length for the purposes of determining the Relevant Adjusted EBITDA 2016;

d. any costs incurred by any of the Group Companies arising out of or in connection with the transactions contemplated under in this Agreement, in particular but not limited to travel costs, cost for (additional auditors) and fees of any kind of advisors; any costs incurred due to the change in business year of Group Companies after Closing Date (in particular advisor costs, costs of notarization and the like), as well as any cost, expense and lost turnover incurred in connection with measures and actions contemplated under clause 9.13.2 (and the respective Annex thereto) to the extent such measures and actions are within the maximum amount set forth in clause 9.13.2 shall not be taken into account, i.e., such costs and expenses shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

e. any additional special costs and expenses caused by the Purchaser´s Group, in particular but not limited to the appointment of new auditors after Closing, special audits (Sonderprüfungen) or similar measures or introduction of compliance programmes and any kind of management or monitoring fees, unless under Sellers' ownership the Company or any of the Group Companies would reasonably also have incurred such costs in the ordinary course of business, shall not be taken into account, i.e., such costs and expenses shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

f. any expenses (Aufwendungen) incurred by the Company or any of the Group Companies in the financial year 2016 and listed in Annex 9.3 fshall not be taken into account, i.e., such expenses shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

g. any special factors (Sondereinflüsse) to the Company or any Group Company, in particular expenses / costs and losses resulting from changes to depreciation periods (Abschreibungsdauer) or to the assessment basis for depreciations (Abschreibungsbemessungsgrundlage) or to the assessment basis for valuation (Wertberichtigungen), non-operative losses of non-recurrent nature (nicht operative Aufwendungen ohne wiederkehrenden Charakter) as well as expenses of extraordinary or unique nature (Aufwendungen mit außerordentlichem oder einmaligem Charakter), shall not be taken into account, i.e., any such additional costs, expenses, depreciations and the like caused by special factors shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

h. any amounts transferred by the Company or any Group Company to an entity other than a company of the Group in compliance with any kind of inter-company agreements (Unternehmensverträge) within the meaning of Sections 291 et seq. of the German Stock Corporations Act (Aktiengesetz, AktG) or any other economically comparable instrument shall not be taken into account, i.e., such amounts transferred shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

Seite 36 von 83

i. any losses and costs resulting from the (x) the opening, launch and development of the following locations / branch offices of the Group: (i) the Berlin Campus; and (ii) any new campus locations as contained in the Relevant Business Plan planned to be opened and/or opened and launched in 2016, but only up to the amount in which such losses and costs have already been reflected in the Relevant Business Plan (i.e. up to a total amount of EUR 634,000 (in words: six hundred thirty four thousand euros)) and (y) any new locations, new business lines and programs not foreseen in the Relevant Business Plan shall not be taken into account, i.e. such losses and costs shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

j. any costs and losses resulting from or connected with new acquisitions and other growth investments beyond the Relevant Business Plan and in particular any marketing and personnel costs beyond those reflected in the Relevant Business Plan shall not be taken into account, i.e. such losses and costs shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the respective amounts;

k. any agreed adjustments pursuant to clause 9.5 last para.

Should Purchaser violate its obligations under clause 9.6 below, the effects of such violation shall be neutralized by increasing the Relevant Adjusted EBITDA 2016 by the amounts of EBITDA lost by the Group as a consequence of any of the measures taken by Purchaser or Purchaser´s Group in violation of clause 9.6 below (including by any acquisitions).

9.4 No later than expiry of April 30, 2017 , the Company shall (x) establish and prepare the consolidated year-end accounts (konsolidierten Jahresabschluss) of the Group as of December 31, 2016, provided, however, that in case Purchaser has changed the fiscal year of the Company and/or any other Group Companies the 2016 Year- End Accounts shall be prepared on a pro forma basis as if the fiscal year(s) of Group Companies had not been changed (in each case: the “2016 Year-End Accounts”"). The 2016 Year-End Accounts shall be prepared on the same basis and in applying the same accounting principles, policies and practices that were used in preparing the Financial Statements and (y) deliver to Sellers and an auditor selected by Sellers for review (such review at Sellers’ cost) whereas the review period shall expire on June 30, 2017 24:00 p.m. CET. Together with the 2016 Year-End Accounts, Purchaser shall deliver a calculation of the Relevant Adjusted EBITDA 2016 after adjustments pursuant to clause 9.3 above (the “2016 EBITDA Calculation”). For the avoidance of doubt, the costs of the current bookkeeping shall be borne by the Group.

9.5 Without prejudice to the foregoing, the Sellers shall be entitled to the full Earn-Out in the full amount of EUR 11,000,000.-- (in words: Euro eleven million) which shall become payable immediately without any further requirements if, at any time between Closing Date and expiry of December 31, 2016 (except for lit g of this clause 9.5 and except if any of the measures set forth in lit a. through f. have retroactive effects, in which case the binding and conclusive determination of the 2016 EBITDA Calculation pursuant to clause 9.8 subsequent shall be the relevant date instead of December 31, 2016), one or more of the below events occur(s) without the prior written consent of the Sellers:

Seite 37 von 83

a. Mergers (Verschmelzungen) or any other corporate measures according to the German Transformation Act (Umwandlungsgesetz) involving any of the Group Companies having been initiated after the Closing Date and resulting in such company no longer belonging to the Group except for the measures permitted under the Delveo Carve Out pursuant to clause 20;

b. material changes of the scope of activities of the Group as compared to the activities carried out in the past;

c. transfer of the shares of the Company or of any of the Group Companies except within the Group;

d. liquidation of any of the Group Companies and/or shut-down of any of their respective businesses except for the Delveo Business if Seller 1 abstains from exercising the Delveo Call Option;

e. divestitures of material parts of its current business or material assets by any of the Group Companies except for the Delveo Business ;

f. material acquisitions of new businesses or assets;

g. dismissal (Abberufung), release (Freistellung) and/or termination (Kündigung) of the employment agreement of Sellers 6 and 8, respectively, as managing director of the Company and the respective Group Companies and/or dismissal (Abberufung) of Seller 4 as chairman of the advisory board of the Company, in each case except for cause (außer aus wichtigem Grund);

(each of the events under clause 9.5 a “Default”). Section 162 para 1 German Civil Code (BGB) shall remain unaffected.

In case Purchaser intends any measure or action which would constitute the occurrence of any of the events listed in lit e or lit g of this clause 9.5 the Purchaser shall without undelay inform Sellers thereof in writing providing reasonable detail of the planned or intended divestiture or acquisition and the potential effects on the Group and the Relevant Adjusted EBITDA 2016. Upon further written request by Purchaser which has to be provided together with the information notice (with such further request being at Purchaser` sole discretion) Purchaser and Sellers shall then within a period of 14 Business Days after Sellers having been notified by Purchaser try to reach an agreement on a good faith basis, in particular on the treatment of the effects of such event and the potential adjustments for purpose of clause 9.3 k. In case Purchaser and Sellers cannot reach an agreement the general rule of this clause 9.5 shall apply.

9.6 Purchaser shall procure (dafür einstehen) that the companies of the Group do not take any of the following actions until and including December 31, 2016:

a. accept any orders for services of any Group Company in deviation from past practice without prior approval of the Sellers in their reasonable discretion taking into account the interest of the Group in accordance with past practice;

Seite 38 von 83

b. render services outside the current distribution channels without prior approval of Sellers; and

c. divest of parts of the current business or fixed assets of its current business or acquire new businesses or fixed assets, in each case outside the ordinary course of business and not in accordance with past practice without prior approval of Sellers.

9.7 The Sellers shall have the right to dispute the 2016 Year-End Accounts and the 2016 EBITDA Calculation in accordance with the principles laid out in clause 9.8 to 9.9.

9.8 The 2016 Year-End Accounts and the 2016 EBITDA Calculation become binding as between the Parties if and to the extent Sellers do not (x) until expiry of June 30, 2017 or (y) within thirty (30) Business Days after receipt of the 2016 Year-End Accounts and the 2016 EBITDA Calculation object to the 2016 Year-End Accounts and/or the 2016 EBITDA Calculation whichever is later by providing Purchaser with (i) a written statement of objections, specifying in reasonable detail the grounds for the objections, and (ii) a revised version of the objected 2016 Year-End Accounts and the 2016 EBITDA Calculation (the “Revised Accounts/Calculation”). The costs of the preparation of the Revised Accounts/Calculation and of Sellers` auditor shall be borne by Sellers.

9.9 Clauses 7.5.4 through 7.5.5 shall apply mutatis mutandis.

9.10 The Earn-Out shall become due and payable ten (10) Business Days after (i) the 2016 Year-End Accounts and the 2016 EBITDA Calculation have become binding between the Sellers and the Purchaser pursuant to this Agreement, respectively, or (ii) upon occurrence of a Default ((i) and (ii) each the “Earn Out Due Date”). The Purchaser shall pay the Earn-Out by irrevocable bank transfer and credit entry on the same day free of any costs, charges and fees to the Joint Sellers` Account except otherwise set forth in clause 9.12.

9.11 After Closing and for the period until the final determination of the Actual Earn Out Amount and the final 2016 Year-End Accounts, the Company and the Purchaser shall provide the Sellers without undue delay with information packages in the format and frequency as set out in Annex 9.11.

9.12 The Purchaser shall be entitled to hold back an amount of at maximum 50% of the Actual Earn Out Amount. Such amount held back by the Purchaser shall (i) serve as additional collateral for any claims of Purchaser arising out of this Agreement except for claims under or in connection with HSP 2, in particular HSP 2 Indemnification Claims; (ii) correspond in its actual amount to the amount of claims of Purchaser arising out of this Agreement (except for claims under or in connection with HSP 2, in particular HSP 2 Indemnification Claims and claims for reimbursement of Recoverable HSP 2 2^nd Tranche Handling Costs) which have been asserted by Purchaser against Sellers by way of a duly filed lawsuit or a duly filed request for arbitration until the date which is the earlier of (i) expiry of June 30, 2017 or (ii) the Earn Out Due Date, provided, however, that the Escrow Amount has either been (x) used up and/or (y) paid out to Purchaser and /or Sellers pursuant to the rules governing the Escrow Account (the “Earn Out Holdback Amount”; any claims constituting or forming part of the Earn Out Holdback Amount in accordance with the above shall be referred to as the "Holdback Claims").

Seite 39 von 83

9.13 Furthermore, the Parties agree that if within a period of 12 months commencing as of the Closing Date the Group on its own (without any external funding) does not avail of sufficient funds to conduct its business on the basis of and in accordance with the Relevant Business Plan (i.e. not for any measures, actions, costs, losses and the like beyond the Relevant Business Plan and/or any extraordinary measures and actions, in particular not for any additional growth, acquisitions and the like where the same principles as set forth in clause 9.3 shall apply) (the delta between the available funds and funds required to conduct the business on the basis of and in accordance with the Relevant Business Plan the “Post Closing Additional Liquidity Needs) (whereas any fund required as security (x) under any existing or newly concluded lease agreements to the extent mandatorily constituting non cash security and (y) in case of an increase of the existing surety of the country of North- Rhine Westphalia (Landesbürgschaft) shall be collectively referred to as the “Excluded Liquidity Needs Matters”)) the Purchaser shall be entitled to hold back and in accordance with clause 9.14 set-off an amount of up to EUR 2,000,000.-- (in words: Euro two million) of any such Post Closing Additional Liquidity Needs from the Actual Earn Out Amount as sole remedy and recourse of the Purchaser in relation to such Post Closing Additional Liquidity Needs under this Agreement, provided, however, that the following liquid funds must have been made use of and used up before:

9.13.1 the liquid funds at the level of IUBH in the amount of EUR 2,356,000.-- which have been preserved for tax effects from the Actual HSP 2 Amount (with the underlying calculation assumption that the Actual HSP 2 Amount is immediately recognized for tax purposes) on the level of IUBH whereas the Parties agree that the Taxes shall be basically filed alongside the treatment of the existing tax advisor, i.e. release of earnings alongside study periods so that the relevant Taxes will be paid over the coming years with the final decision on such tax treatment to be taken end of October 2016; and

9.13.2 any funds up to an amount of EUR 2,500,000 (in words: two million five hundred thousand euros) which will at the time have been generated by management being allowed to make use and making use of those cash flow generating tools as specified in more detail in Annex 9.13.2.

For the avoidance of doubt, the Parties agree that no Group Company shall be obliged to obtain any external funding (be it through shareholders, banks or other third parties) in order to minimize or reduce the Post Closing Additional Liquidity Needs except for (for the avoidance of doubt) (i) i-Pad leasing regardless of whether as set out in the Relevant Business Plan or not and (ii) the Excluded Liquidity Needs Matters.

In case the Parties cannot agree on the relevant amounts or items of the Post Closing Additional Liquidity and or the further requirements as set forth in this clause 9.13 clauses 7.5.4 and 7.5.5 shall apply mutatis mutandis.

Any payments by Sellers under this clause 9.13 shall be treated as purchase price adjustments for tax purposes.

9.14 The Earn Out Holdback Amount shall become due and payable to the Sellers and shall be paid to the Joint Sellers´ Account in the amounts of any Holdback Claims that have been denied by final court judgment or arbitral award or that have been abandoned (Klagerücknahme/ Klageverzicht / Erledigterklärung) by Purchaser or jointly by Purchaser and Sellers. To the extent

Seite 40 von 83

Holdback Claims have been (i) acknowledged in writing by the Sellers (Anerkenntnis) or settled in writing by mutual agreement (Vergleich) between Purchaser and Sellers, or (ii) adjudicated by final court judgment (rechtskräftiges gerichtliches Urteil) or final arbitral award (rechtskräftiger Schiedsspruch) in favour of the Purchaser, Purchaser shall be entitled to set-off (aufrechnen) such Holdback Claims against the Sellers’ Earn-Out claims (up to the amount of the Earn Out Holdback Amount).

10 General Rules for Payments / Default Interest

10.1 Any payments under this Agreement shall be made in Euro by irrevocable wire transfer in immediately available funds, value as of the relevant due date set out in this Agreement or otherwise provided by law, free of bank and/or any other costs or charges, taxes or other deductions and the receipt of such payment on the recipient's bank account shall constitute discharge of the relevant obligation to pay.

10.2 Any payments under this Agreement shall be made

(i) in case of payments to any or all of the Sellers to the bank account specified in Annex 10.2-1 or to such bank account specified in writing by the jointly acting Sellers to the Purchaser at least five (5) Business Days prior to the due date of the respective payment (hereinafter referred to as the “Joint Sellers' Account ”) (for the purposes of this Agreement, a “Business Day”) shall be any day other than (i) a Saturday, Sunday or (ii) days on which banks in Munich, Germany and/or Phoenix, AZ, USA are generally closed);

(ii) in case of payments to the Purchaser to the bank account specified in Annex 10.2-2 or to such bank account of which the Purchaser has notified the Sellers in writing at least five (5) Business Days prior to the due date of the respective payment.

10.3 Any failure by a Party to make any payment pursuant to this Agreement when it is due shall result in such Party’s immediate default (Verzug) without any reminder being required.

10.4 Unless provided otherwise in this Agreement, the Parties owe default interest (Verzugszinsen) on any amounts becoming due and payable to any other Party under this Agreement as from the respective payment date, until, but not including, the day of actual payment at the rate of 8 (in words: eight) per cent per annum. Interest payable under any provision of this Agreement shall be calculated on the basis of 360/365. The right to claim compensation for higher damages in the event of default shall remain unaffected. In case of payments to be made pursuant to clause 4.1 default interest (Verzugszinsen) shall become due and payable only as of the third Business Day after the Closing Date, until, but not including, the day of actual payment.

11 Closing

11.1 The closing of this Agreement shall take place on the last Business Day of the calendar month of the occurrence or waiver of the last of the conditions precedent set forth below in clauses 11.1.1 through 11.1.15 (hereinafter also referred to as the “Closing Conditions”) (assuming that there

Seite 41 von 83

are at least three (3) Business Days between such date and the last Business Day of the calendar month or else on closing shall occur on the last Business Day of the following month) or on such other date that the Parties may agree upon in writing ("Closing Date”) at the offices of AFR Rechtsanwälte, Möhlstraße 2, 81675 München or at any other place which the Parties may mutually agree upon:

11.1.1 issuance of and receipt by IUBH of a HSP 2^nd Tranche Grant Order substantially in the form and with the content as set forth in more detail in Annex 11.1.1with the minimum amount of HSP 2 2^nd Tranche Grant Payments being the amount of EUR 13,000,000.-- (in words: thirteen million euros); and

11.1.2 declaration of a waiver to obtain legal remedies (Rechtsmittelverzicht) as regards the HSP 2^nd Tranche Grant Order by IUBH in accordance with clause 1.7.2 last sentence; and

11.1.3 receipt of the HSP 2 2^nd Tranche Grant Payments by IUBH, in the amount as set forth in the HSP 2^nd Tranche Grant Order as issued and received in accordance with clause 11.1.1; and

11.1.4 execution of the release agreement with the Existing Lenders in the form attached in Annex 1.5-2 and renewal of release agreement if its condition subsequent of receipt of the (Increased) Repayment Amount (as defined in the release agreement) on the Repayment Account (as defined in the release agreement) until 30 April 2016 has not been met; and

11.1.5 execution of the Restated Guarantee Facility in the form attached in Appendix 2 to Annex  1.5-2;

11.1.6 receipt by the Company of the release letter by the Existing Lenders in the form attached in Appendix 4 to Annex 1.5-2;

11.1.7 receipt by the Company of the confirmation letter by the VD Lender substantially in the form attached in Annex 1.5-3;

11.1.8 receipt by IUBH of the confirmation letter by the EFBH Lender substantially in the form attached in Annex 1.5-4;

11.1.9 receipt by the Company of confirmation letter by the ARFH Lender substantially in the form attached in Annex 1.5-5;

11.1.10 Seller 1 on behalf of all Sellers shall provide the Purchaser until three Business Days prior to the Closing Date with the confirmation letter substantially in the form attached hereto as Annex 1.3-2 stating the amounts of the Remaining Shareholder Redemption Amounts as of the envisaged Closing Date;

11.1.11 redemption of the Pre Closing Shareholder Redemption Amount, the Bank Redemption Amount, the VD Lender Redemption Amount, the EFBH Financing Redemption Amount and the ARFH Lender Redemption Amount to the relevant creditor;

Seite 42 von 83

11.1.12 receipt of payment confirmations by (i) the Seller 2 regarding receipt of Pre Closing Shareholder Redemption Amount, (ii) by the Existing Lenders regarding receipt of Bank Redemption Amount, (iii) by the EFBH Lender regarding receipt of the EFBH Financing Redemption Amount, (iv) by the VD Lender regarding receipt of VD Lender Redemption Amount and (v) by the ARFH Lender regarding receipt of the ARFH Lender Redemption Amount;

11.1.13 issuance of the Back Surety;

11.1.14 in the period between the date hereof and the Closing Date, Sellers shall procure that the management of IUBH approaches the competent state ministry of education of North Rhine Westphalia to inform them about the Transaction and measure their reaction to Purchaser becoming the new indirect owner of IUBH (whereas Purchaser shall have the right but not the obligation to designate a nominee reasonably acceptable to Sellers to participate in such approach and provided, however, that it shall be at the Sellers´ free discretion at what point of time before the Closing Date such approach shall be pursued); and

11.1.15 in the period between the date hereof and Closing Date the competent state ministry of education of North Rhine Westphalia shall not have indicated material concerns about the indirect change of ownership in IUBH with the Purchaser becoming new indirect shareholder of IUBH.

11.2 Waiver

Unless mutually agreed between the Parties, no Party shall be entitled to waive all or any of the Closing Conditions, except for (x) the Closing Conditions under clauses 11.1.7 through 11.1.10, 11.1.12 and 11.1.14 which may be waived by Purchaser in writing and (y) the Closing Condition under clause 11.1.9 and 11.1.12 (v) which may be waived by Sellers in writing whereas in such case Sellers as partial debtors shall indemnity and hold harmless Purchaser from any claims under the ARFH vendor loan to the extent such claims are not taken into account as Effective Date Debt in the Effective Date Accounts.

11.3 Termination

11.3.1 This Agreement may be terminated and the Transaction may be abandoned at any time prior to the Closing:

11.3.1.1 by mutual written agreement of the Parties;

11.3.1.2 by the Sellers, acting jointly, in the event that, by January 31, 2016, or - if Purchaser in its sole discretion notifies Sellers’ Agent in writing by 15 January 2016 of an extension of such date to April 30, 2016 - by April 30, 2016 (each hereinafter “Long Stop Date”), the Closing Condition pursuant to clause 11.1.13 has not occurred and has not been duly waived in accordance with clause 11.2.

11.3.1.3 by the Purchaser in the event that, by the Long Stop Date, any or all of the Closing Conditions pursuant to clause 11.1.4 through clause 11.1.9 have not occurred and have not been duly waived in accordance with clause 11.2.

Seite 43 von 83

11.3.2 In the event that, by the expiry of the Long Stop Date the Closing Conditions pursuant to clause 11.1.1 and/or clause 11.1.3 have not occurred and have not been duly waived in accordance with clause 11.2, the Parties shall try to reach an agreement on an amendment to this Agreement on a good faith basis reflecting that IUBH has not received the HSP 2 2^nd Tranche Grant Order and/ or HSP 2 2^nd Tranche Grant Payments prior to Closing. If the Parties do not reach an agreement pursuant to and in accordance with the foregoing sentence within one month after the Long Stop Date, both, the Sellers (acting jointly) and the Purchaser shall each have the right to terminate this Agreement and abandon the Transaction, unless the Closing Condition pursuant to clause 11.1.3 has in the meantime been fulfilled.

The termination of this Agreement shall be without prejudice to any claims or rights of action previously accrued to the Parties hereunder. In case of a rescission pursuant to this provision, any and all obligations between the Parties shall no longer be applicable except for the rights and obligations under this clause 11.3, clause 19 (Confidentiality), clause 21 (Costs), clause 22 (Final Provisions).

11.4 On the Closing Date the Parties shall take the following measures and actions (“Closing Actions”) in the following order, which shall be deemed to be undertaken simultaneously (Zug um Zug), and thereby effectuate the transactions contemplated by this Agreement (“Closing”):

11.4.1 Purchaser shall deliver copies of executed notification letter in the format as attached in Annex 11.4.1 and confirmation by J.P. Morgan AG of receipt of the notification letter with the Back Surety thus becoming unconditionally valid and the Existing Security thus being irrevocably released.

11.4.2 The Sellers shall deliver or procure the delivery of the duly signed resignation letters substantially in the form attached hereto as Annex 11.4.2-1 of the members of the controlling/supervisory bodies (if any) of each of the Group Companies who are employees of the Sellers and/or Sellers' affiliated entities (verbundene Unternehmen) within the meaning of sec. 15 et seq. of the AktG (“Affiliate” or “Affiliates”) and conclusively listed in Annex 11.4.2-2, setting out the resignation from their respective office with effect as of the Closing Date and confirming that they have no claims for compensation for termination, loss of office, or otherwise against any of the Group Companies.

11.4.3 The Sellers shall confirm that the Existing Key Personnel Contracts have not been amended, cancelled or terminated as of the Closing Date and that they have not received any indication in writing that such Key Personnel Contracts shall be terminated within a three months` period after Closing.

11.4.4 Sellers shall deliver to Purchaser evidence of the issuance of the Restated Guarantee Facility and of its receipt by Norddeutsche Landesbank Girozentrale.

11.4.5 The Sellers shall procure that the Existing Lenders provide the Company with a written confirmation that the total outstanding amount under the Existing Bank Financing as of the Closing Date as specified in the release agreement submitted pursuant to clause 11.1.4 has been paid to the Existing Lenders and Sellers shall deliver such confirmation to Purchaser without undue delay.

Seite 44 von 83

11.4.6 The Purchaser shall pay (i) the Estimated Cash Amount to the Joint Sellers’ Account (ii) the Escrow Amount to the Escrow Account and (iii) the HSP 2 Escrow Amount to the HSP 2 Escrow Account.

11.4.7 The Escrow Agent shall have confirmed receipt of (i) the Escrow Amount in the Escrow Account and (ii) the receipt of the HSP 2 Escrow Amount in the HSP 2 Escrow Account.

With respect to the payment to the Joint Sellers’ Account set out in clause 11.4.6 above, either (i) the Sellers shall have received a written confirmation from the Sellers’ bank of the receipt on the Joint Sellers’ Account of the respective payment or (ii) the Sellers shall have otherwise obtained knowledge of receipt of the respective funds on the Joint Sellers’ Account (including but not limited to Sellers being able to take from its online or other banking system that the respective funds have been credited to the Joint Sellers’ Account; it being understood that the Sellers have an obligation to permanently monitor such banking system or comparable sources on the day of Closing and until receipt of funds has been confirmed and confirm to Purchaser the receipt of funds once Seller has obtained respective knowledge).

11.5 Post Closing Covenants

11.5.1 On the Closing Date, the Purchaser shall procure payment of the Remaining Shareholder Redemption Amounts pursuant to and in accordance with clause 4.2.

11.5.2 Sellers’ Agent shall confirm in writing to the Purchaser without undue delay upon receipt of the respective funds, however assuming the payment under clause 11.5.1 is credited to Joint Sellers` Account on the Closing Date, in any event on the Closing Date, the receipt of payment of the Remaining Shareholder Redemption Amounts (as confirmed by confirmation letter issued pursuant to clause 11.1.10).

11.6 On the Closing Date, the Parties shall record and confirm in a closing memorandum substantially in the form as attached hereto as Annex 11.6, inter alia, (i) that all Closing Conditions have been satisfied or duly waived and (ii) the proper execution or duly waiver of the Closing Actions (the “Closing Memorandum”). The Closing Memorandum shall not have any constitutive effect (konstitutive Wirkung) with respect to the occurrence of any Closing Condition or Closing Action, but shall only have declaratory effect for evidentiary purposes.

11.7 The Parties undertake to take any and all measures and perform any and all actions required and/or appropriate to ensure the occurrence of the above-mentioned Closing Conditions and to execute the Closing Actions.

12 Independent Guarantee Undertakings of the Sellers

12.1 General Scope of Application

12.1.1 Each Seller, each individually as partial debtor (Teilschuldner) and in case of clause 12.2.1, 12.2.2 and 12.12.1 und 12.12.2 only with regard to and in view of itself and the Sold Shares held by the respective Seller and the respective Shareholder Loan and Vendor Loan, respectively, granted by such Seller, as the case may be, respectively, warrants to the Purchaser each by way of an

Seite 45 von 83

independent guarantee undertaking (selbständiges Garantieversprechen) pursuant to Section 311(1) BGB as well as in accordance with the provisions of clause 14 which form an inseparable and integral part of these warranties that the statements set forth below in this clause 12 are true and accurate as of the Signing Date and the Closing Date (whereas for the purposes of this clause 12 the terms Closing Date and Closing shall refer to the point of time of the transfer in rem (dingliche Übertragung) of the Sold Shares) (unless it is explicitly set out in an individual warranty that such individual warranty shall only be given as of the Signing Date).

12.1.2 The Sellers and the Purchaser agree that the warranties set forth below in this clause 12 do not constitute guarantees of quality (Beschaffenheitsgarantie) pursuant to Sections 443, 444 BGB and that the scope of the warranties set forth below in this clause 12 and clauses 14 and 16 are an inseparable and integral part of the independent guarantee undertakings (selbständiges Garantieversprechen) and do not constitute a limitation or exclusion of the liability pursuant to Sections 443, 444 BGB.

12.1.3 The Purchaser acknowledges the Existing Security to serve as security to secure the Existing Bank Financing (including the Restated Guarantee Facility to be executed prior to Closing) until the redemption of the Bank Redemption Amount in accordance with clause 11.1.11 and the issuance of the Back Surety and delivery of the executed notification letter pursuant to clause 11.4.1 with the Back Surety thus becoming unconditionally valid and replacing the Existing Security under the Restated Guarantee as security. The statements made and warranties given under this clause 12.2.1, 12.3.3, 12.2.7 shall thus as of the Signing Date be made subject to and limited by the Existing Security whereas such statements and warranties shall as of the Closing Date no longer be subject to such limitations.

12.2 Warranties with regard to the Corporate Situation of the Career Group

12.2.1 The information about the Group Companies and the shareholding in the Group Companies provided in clauses 1.1 and 1.2 is true and complete. The Sold Shares effectively exist and are as of the date hereof (with the exception of such security interests exhaustively listed in the recitals of the release agreement with the Existing Lenders in the form attached hereto as Annex 1.5-2 and to be released pursuant to the release agreement attached hereto as Annex 1.5-2) and the Closing free and clear of any encumbrance and other third party’s right of whatever nature . Furthermore, no one has been granted any other rights or options of any nature whatsoever in relation to shares in any of the Group Companies (including existing shares as well as shares to be newly issued), irrespective of whether or not such right or option would materialize before or after Closing. The capital contributions have been fully paid in and have not been repaid. In light of the shareholders’ resolution attached hereto as Annex 3.4, the Sellers may freely dispose of the Sold Shares held by them in the Company and there do not exist any pre-emptive, option, usufructuary or other purchase rights and/or security interests or similar rights of third parties with regard to the Sold Shares (as of the date hereof with the exception of such security interests exhaustively listed in in the recitals of the release agreement with the Existing Lenders in the form attached hereto as Annex 1.5-2and to be released pursuant to the release agreement attached hereto as Annex 1.5-2, but not as of the Closing). The above-mentioned warranties with regard to the Sellers’ participation in the Company shall be individually given by each Seller exclusively with regard to its own shareholding in the Company and expressly do not refer to the shareholdings of the other Sellers.

Seite 46 von 83

12.2.2 Each Seller that is an entity and the Group Companies are duly organized and validly existing under the laws of their jurisdiction and have the full corporate power and corporate authority to own or use their respective assets and properties and to carry on their respective business as being conducted as of the date hereof.

12.2.3 The execution and delivery of this Agreement and the consummation of the transactions contemplated thereby do not conflict with, or result in the breach of, or constitute a default under, the articles of association or the by-laws of any Group Company or Seller.

12.2.4 The Company’s articles of association dated 29.05.2012 attached hereto as Annex 12.2.4 represent the current and applicable version of the Company’s articles of association. They are true and complete. There are no collateral agreements to the relevant articles of association besides the existing shareholders` agreement on the level of the Company

12.2.5 The excerpt from the commercial register attached hereto as Annex 12.2.5 truly and completely reflects the legal situation of the Company as regards facts and circumstances which have to be registered with the commercial register. Except for the execution of measures in connection herewith or on the basis hereof, no applications for registration have been filed and no shareholders’ resolutions passed, which may require the registration with the commercial register and which are not shown in the excerpt from the commercial register.

12.2.6 Except as specified in Annex 12.2.6, the Company does neither have any shareholdings in or ownership rights with regard to other companies or enterprises nor is under any obligation to acquire such shareholdings or rights. Except as specified in Annex 12.2.6, neither the Company nor the other Group Companies are a party to inter-company agreements within the meaning of Sections 291 et seq. of the German Stock Corporations Act (Aktiengesetz, "AktG") nor has it entered into agreements on the establishment of silent partnerships or other profit-sharing agreements.

12.2.7 The Subsidiaries exist as specified in Annex 12.2.7, and areas of the date hereof not encumbered by third parties’ rights other than such security interests exhaustively listed in in the recitals of the release agreement with the Existing Lenders in the form attached hereto as Annex 1.5-2 and to be released pursuant to the release agreement attached hereto as Annex 1.5-2 and are as of the Closing not encumbered by third parties’ rights. As of Closing and the date hereof (on the date hereof with the exception of the pledges under the Existing Bank Financing exhaustively listed in in the recitals of the release agreement with the Existing Lenders in the form attached hereto as Annex 1.5-2 and to be released pursuant to the release agreement attached hereto as Annex 1.5-2) the relevant shares and interests of the Subsidiaries held by the Company have in particular neither been pledged nor seized and there do not exist any preemptive rights, options, or other rights or claims of third parties thereto.

12.2.8 The relevant share capital of the Subsidiaries has been truly stated. The share capital and/or the capital contribution has in each case been paid in and/or made in full and has/have not been paid back neither totally nor partially.

12.2.9 The articles of association of the Subsidiaries provided to the Purchaser and listed in Annex 12.2.9 represent the current and applicable version of such articles of association. They are each true

Seite 47 von 83

and complete. Except as listed in Annex 12.2.9there are no collateral agreements to such articles of associations.

12.2.10 The excerpts from the commercial register attached hereto as Annex 12.2.10truly and completely reflect the legal situation of the Subsidiaries as regards facts and circumstances which have to be registered with the commercial register. No applications for registration have been filed and no shareholders’ resolutions passed, which may require the registration with the commercial register and which are not shown in the excerpt from the commercial register.

12.2.11 The Sellers have the full corporate power and authority to carry out the Transaction contemplated hereby and such Transaction has been duly authorized by all necessary corporate actions on the part of the Sellers.

12.2.12 There are no actions, suits or proceedings pending or threatened to be filed or instituted against the Sellers or any of the Group Companies before any court or administrative board, agency or commission which involve a claim by a governmental or regulatory authority, or by a third party, which prohibits the consummation of the Transaction.

12.3 Warranties with regard to the Economic Situation of the Company and the Group Companies

12.3.1 Neither the Company nor any Group Company is insolvent (zahlungsunfähig) or overindebted (überschuldet) within the meaning of Section 19 German Insolvency Act (Insolvenzordnung, “InsO”). No application for the opening of insolvency proceedings against the assets of the Company or any Group Company has been filed or rejected because of a lack of assets. No shareholders’ resolution for liquidation or dissolution has been passed with regard to the Company or a Group Company. To the Sellers’ Best Knowledge, no third party has applied for admission to insolvency proceedings in relation to any Group Company.

12.3.2 The consolidated annual financial statements of the Group as of 31 December 2014 (the “2014 Financial Statements”) attached hereto as Annex 12.3.2 have been prepared with the diligence of a prudent businessman in accordance with the respective applicable statutory provisions of German GAAP and past practice. The 2014 Financial Statements give a true and fair view of the economic, financial and earning situation of the Group at the respective balance sheet date. This warranty is not granted in view of the tax treatment for subsidies received under HSP 2 1^st Tranche Grant.

12.3.3 Except for the assets specified in Annex 12.3.3, the Company and the other Group Companies hold full and unlimited title or effective usufructuary rights or – in case of leased and/or licensed assets – are entitled to use any and all of the fixed assets (Anlagevermögen) and current assets (Umlaufvermögen) which are currently used in the course of business of the Company and the other Group Companies except for customary reservations of title (Eigentumsvorbehalte) of suppliers or liens (Pfandrechte) of lessors or other third parties which may exist by virtue of law or contractual agreement with regard to the liabilities of the Company and the other Group Companies.

12.3.4 None of the Group Companies owns any real property or holds any rights equivalent to real property (Grundstücksgleiche Rechte).

Seite 48 von 83

12.4 Warranties with regard to the business of Group Companies

12.4.1 To the Sellers` Best Knowledge, each Group Company is and within the last three (3) years prior to the date of this Agreement has been in compliance in all material respects with (i) applicable laws and (ii) orders, decrees or rulings of, or restrictions imposed by, any court or authority. The afore warranty shall be subject to a special exemption amount of EUR 3,000,000.-- (in words: three million euros) (Freibetrag). This warranty is furthermore subject to the following general limitation and restriction: the specific compliance with law warranties contained in clauses 12.4.3 1^st sentence, 12.5.10, 12.7.2, 12.10, 12.4.13 1^st sentence with regard to the specific content or area governed thereby, meaning that the more general warranty contained in this clause 12.4.1 shall not be applicable to such specific content or area contained in the respective clauses. This clause 12.4.1 shall not apply to Taxes and Tax laws.

12.4.2 Annex 12.4.2 lists any and all existing public and private permits, permissions, licenses, and accreditation notes held by the Company and the Group Companies which are required for the management and the continuation of their current businesses of the Company and the Group Companies as conducted as of the date hereof (hereinafter the “Existing Permits”). The Existing Permits have as of the Signing Date and as of the Closing Date not been revoked or withdrawn and no circumstances exist which could – already before the Closing Date- lead to a revocation or withdrawal of Existing Permits the revocation or withdrawal of which would have a material adverse effect on the business of the respective Group Company. The execution and delivery of this Agreement and the consummation of the transactions contemplated thereby do not conflict with, or result in the breach, revocation or withdrawal of any Existing Permits material to the business of the respective Group Company or otherwise require any notice to or consent by any competent public authority in relation to any Existing Permits. This warranty is not given with respect to compliance with conditions (Auflagen, Nebenbestimmungen) and other obligations of the Existing Permits which are to be fulfilled after the Closing Date or the fulfillment date of which expires after the Closing Date whereas it is clarified that the compliance until Closing Date is not affected or limited thereby. The Company and other Group Companies have made all notifications to public authorities and other public entities stipulated by mandatory law required for the management and the continuation of their current businesses as conducted as of the date hereof the non-notification of which would have an adverse effect on the business of a Group Company. There are no regulatory or judicial proceedings pending (rechtshängig) or threatened in writing with regard to the existence or the contents of the Existing Permits. The Sellers have indicated that the country North- Rhine Westphalia has asked for an examination of the preconditions of the country surety (Landesbürgschaft) which thus may have to be amended or adjusted after the Closing Date.

12.4.3 The Company and the other Group Companies as well as their operations are and have been, at all times in all material respects in compliance with (i) environmental law as well as (ii) with all laws and regulations regarding safety and health and (iii) to the Sellers’ Knowledge all applicable data protection laws and regulations. They are under no legal or contractual obligation to remediate any soil or groundwater contaminations or any other environmental damages.

12.4.4 Annex 12.4.4contains a list of any and all material patents, trademarks, design or utility patents, domains, and other industrial property rights owned by the Group Companies (hereinafter also referred to as the “IP Rights”). To the Seller’s Best Knowledge, the IP Rights are - except as

Seite 49 von 83

specified in Annex 12.4.4 - not subject of any threatened or pending infringement, opposition, public opposition, cancellation, revocation or correction proceedings or of another impairment of the scope of protection. To the Sellers’ Best Knowledge, the current use of the IP Rights does not violate any material third parties’ rights. The IP Rights are to the Sellers` Knowledge sufficient to conduct the business of the Group as conducted as of the Signing Date.

12.4.5 Each Group Company either owns or holds valid leases and/or licenses to all computer hardware, software, networks and other information technology which is material for such Group Company to conduct its business as conducted on the Signing Date. Except as listed in Annex 12.4.5, such material leases or licenses are effective for, and cannot be terminated by the respective other party thereto due to the Transaction. Except as listed in Annex 12.4.5, such material leases or licenses will be maintained by the Company and the Group Companies until the Closing Date.

12.4.6 The insurances specified in Annex 12.4.6 exist with regard to the Group Companies and its business. The Group Companies maintain ongoing insurance coverage with regard to the insured risks. All premiums have been paid when due. There is no material claim outstanding under any of the insurance policies, all material claims have been settled in full and, to the Sellers’ Best Knowledge, there are no circumstances, which exist and are likely to give rise to such a claim. All incidents that occurred and became known before the Closing Date and that could result in a claim under any insurance policy have been or will be notified to the relevant insurers.

12.4.7 Except as specified in Annex 12.4.7, the Group Companies do not have branch offices, business operations, business units or subsidiary enterprises.

12.4.8 Except as disclosed in Annex 12.4.8 at Closing there are no agreements or arrangements entered into between the Group Companies and the Sellers and/or their Affiliates (other than the Group Companies). At Closing there will be no pending payments or other liabilities based on prior agreements or arrangements between the Group Companies and the Sellers and/or their Affiliates (other than the Group Companies) except as for such payments or other liabilities related to agreements or arrangements disclosed in Annex 12.4.8.

12.4.9 Except as disclosed in Annex 12.4.9, to the extent permissible under applicable law and except for any actions and measures contemplated under this Agreement, to the Sellers’ Best Knowledge from January 1, 2015 until the date of this Agreement, each Group Company’s business has been carried on in all material respects in the ordinary course of business and consistently with past practice. Any measures and actions contemplated in the Relevant Business Plan shall be deemed to be measures and actions within the ordinary course of business.

12.4.10 Annex 12.4.10contains a complete and true list of all material written agreements as described below (i) to which any Group Company is a party and (ii) the main obligations of which have not yet been completely fulfilled (noch nicht beidseitig vollständig erfüllte Verträge) on the Signing Date (the “Material Agreements”):

Seite 50 von 83

(i) (except for the Existing Bank Financing, the Existing Vendor Loan, the Shareholder Loans, the EFBH Financing and the ARFH Lender vendor loan) loan agreements, bonds, notes or any other debt instruments involving any third party (other than the Group Companies) including operating leases (except for standard day to day office equipment leases and car leases) exceeding an amount of EUR 50,000.-- (in words: fifty thousand euros);

(ii) (except for the Existing Security) guarantees, indemnities, and surety-ships, in each case issued for any debt of any third party (other than the Group Companies) amounting to EUR 50,000.-- (in words: fifty thousand euros) or more;

(iii) all agreements to which a Group Company is a party and which provide for a right of the party other than the respective Group Company to terminate the agreement as a result of the Transaction (“change of control”");

(iv) license agreements which the Group Companies have concluded either as licensor or licensee and which (x) (individually or collectively) provide for annual payments of at least EUR 50,000.-- (in words: fifty thousand euros) or (y) may be terminated by the relevant Group Company at the earliest effective or the term of which ends at the earliest 6 (six) months following the Signing Date (except for customary license agreements for standard application software purchased or licensed by the Group Companies);

(v) agreements on the lease of property exceeding a rent obligation per year in excess of EUR 50,000.-- (in words: fifty thousand euros);

(vi) any other agreements (x) with a value of at least EUR 100,000.-- (in words: one hundred thousand euros) per year, or (y) with a remaining term of longer than five years as of the date hereof which may only be terminated by a notice period of more than six months (except for enrolment contracts (Einschreibungsverträge) and student contracts (Studienverträge) entered into with students).

12.4.11 Each of the Material Agreements is, to the Sellers’ Best Knowledge, in full force and effect. Neither has any Group Company received a written notice of termination relating to a Material Agreement in writing, nor is, to the Sellers’ Best Knowledge, any Group Company in any breach of any material provision of the Material Agreements, the consequence being the right of the other party to terminate or request for amending or modifying the respective Material Agreement (whether for cause or otherwise).

12.4.12 Except as specified in Annex 12.4.12, the execution and delivery of this Agreement and the consummation of the transactions contemplated thereby do not conflict with, or result in the breach of, or constitute a default under (i) any Material Agreement and/or (ii) any enrolment contracts (Einschreibungsverträge) and/or student contracts (Studienverträge) entered into with students.

Seite 51 von 83

12.4.13 To the Sellers’ Best Knowledge, the enrolment contracts (Einschreibungsverträge) and student contracts (Studienverträge) entered into with students have been validly concluded on the part of the Group Companies and are in particular in compliance with the provisions on distance contracts (Fernabsatzgesetz) and distance education. This warranty is not given for contracts with non-paying students.

12.5 Warranties with regard to Employees and pensions

12.5.1 Annex 12.5.1 lists all employees (including managing directors) receiving a gross annual salary exceeding an amount of EUR 100,000.-- (in words: one hundred thousand euros) and the commencement of the employment agreements of such employees (including managing directors) employed with the Company and the other Group Companies as well as their age, salary, bonus, and other compensation paid or payable to each such employee/member of management by any of the Group Companies (including compensation or severance payment (including any termination indemnities) in case of a termination of employment/office to the extent such compensation is owed on the basis of a contractual arrangement. None of the listed employees/managing directors have terminated their employment nor have threatened in writing to terminate such employment as of the date hereof nor has the Company or any of its Subsidiaries given notice to any of these employees (including managing directors). Except within the ordinary course of business and except as specified otherwise in Annex 12.5.1, no increases in salaries have been agreed upon for the time after the Effective Date or with effect as of the Effective Date.

12.5.2 To the Seller’s Best Knowledge, no oral agreements are concluded with any of the employees listed in Annex 12.5.1.

12.5.3 Annex 12.5.3 contains all current service contracts of the managing directors of the Company or any of its Subsidiaries as well as all additional agreements concluded with or offered to them by any of the Group Companies.

12.5.4 There does not exist and has not existed any plan, program or other agreement in each case relating to bonus payments, company pensions, incentive payments, severance payments, health care or retirement pensions, in each case with regard to employees in general (including managing directors) of the Company or any of its Subsidiaries (other than those required by law), except as stated in Annex 12.5.4.

12.5.5 Except as set forth in Annex 12.5.5 at the Signing Date there does not exist any outstanding offer of employment or engagement by the Company or any of its Subsidiaries and no individual has accepted an offer of employment or engagement by the Company or any of its Subsidiaries who has not yet started his employment or engagement with an annual gross salary exceeding EUR 100,000.-- (in words: one hundred thousand euros).

12.5.6 Except as set forth in Annex 12.5.6 the Company or any of its Subsidiaries have not made any loans or advances or provided any financial assistance to any (former) employee (including managing directors and members of the board of directors) of the Company or any of its Subsidiaries.

Seite 52 von 83

12.5.7 Neither the Company nor any of its Subsidiaries have a works council or another or additional employees’ representation under an existing collective labor agreement except as listed in Annex 12.5.7.

12.5.8 Annex 12.5.8 contains for the Company and its Subsidiaries a correct and complete list of the following agreements that apply to Company or any of its Subsidiaries as of the Signing Date (including after-effect (Nachwirkung) after Signing Date): (A) all reconciliation of interests agreements (Interessenausgleiche) and social plans (Sozialpläne), (B) all works agreements (Betriebsvereinbarungen), (C) to the Sellers´ Best Knowledge all collective bargaining agreements (Tarifverträge).

12.5.9 Annex 12.5.9 contains for the Company and any of its Subsidiaries a correct and complete list of all employees who have entered into an old age part time agreement (Altersteilzeitvertrag) with such company. The Company and any of its Subsidiaries have taken all measures legally required to ensure protection of the old age part time agreements against the case of insolvency.

12.5.10 Any liabilities from service and employment relationships due until Closing Date have been or will be fulfilled until Closing Date.

12.5.11 No obligations of any of the Group Companies vis-á-vis former managing directors or members of the board of directors of the Company or any of its Subsidiaries exist except as set forth in Annex 12.5.15.

12.5.12 No former employees of hr Team Horst Rückle GmbH have claimed or will claim damages based on an omitted of deficient notification of the business transfer from hr Team Horst Rückle GmbH to CP hr Training GmbH and none of these employees has objected or will object to the transfer of their employment form hr Team Horst Rückle GmbH to CP hr Training GmbH.

12.5.13 To the Sellers’ Best Knowledge there are no freelancers and/or consultants and/or employees supplied by other persons (Leiharbeitnehmer) who could claim to be or would be considered by the competent Governmental Body as employees of the Company or any of its Subsidiaries.

12.5.14 Neither the execution, delivery or performance of this Agreement or any agreement entered into pursuant to this Agreement, nor the consummation of any of the transactions contemplated hereunder and thereunder, will or may (either alone or upon the occurrence of any additional or subsequent events) result in any of the Group Companies becoming obliged to any payment (whether of severance pay or otherwise and whether or not under any Plan), acceleration, forgiveness of Indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any current or former employee (including managing directors and members of the board of directors) of the Company or any of the Subsidiaries or provide such individuals with a right to terminate their employment agreements, in each course except as in accordance with the ordinary course of business.

12.5.15 In respect of the Group Companies, Annex 12.5.15 contains a list as of five Business Days before the Signing Date of all its active employees, former employees with vested pension entitlements, pensioners with ongoing pensions, surviving dependents with ongoing pensions, surviving dependents, in each case with an entitlement to a surviving spouse or orphan’s pensions,

Seite 53 von 83

in each case describing the applicable pension applicable to that individual and listing the amount of the entitlement (vested or unvested) of this individual, if any.

12.5.16 There are no individuals whose pensions entitlements were settled or individuals with whom there are any disputes (whether in or out of court) around pension matters.

12.5.17 All obligations under or in connection with any pension commitments of the Group Companies, be it vis-à-vis employees, life insurance companies, a support fund (Unterstützungskasse), a pension fund (Pensionsfond, Pensionskasse), or any other entity being entitled to any payments in connection with any pension commitments, including obligations arising by operation of law, existing before the Closing Date and pertaining to periods prior to the Closing have to the Sellers` Best Knowledge either been fulfilled or have been duly funded in accordance with applicable law.

12.5.18 In the past all pension commitments of the Group Companies have to the Sellers` Best Knowledge been adjusted regularly as required by Section 16 German Company Pension Act (Betriebsrentengesetz - BetrAVG) or, where applicable, by equivalent provisions of foreign law or contractual provisions, and no backlog adjustments (nachholende Anpassung) must be made for periods up to the Closing except as set forth in Annex 12.5.18.

12.5.19 All relevant fiscal directives and regulations, in each case with regard to pension matters, have been observed and there are no pending disputes (whether in or out of court) with fiscal authorities around pension matters.

12.6 Litigation

No Group Company is a party to any litigation, dispute resolution or similar proceedings and no such proceedings have been threatened in writing by or against a Group Company (i) as of the Signing Date, except as otherwise disclosed in Annex 12.6, with a value in dispute exceeding, in each case, Euro 15,000.-- (in words: Euro fifteen thousand) and (ii) as of the Closing Date with a value in dispute exceeding, in each case, Euro 50,000.-- (in words: Euro fifty thousand).

12.7 Warranties with regard to certain public subsidies

12.7.1 Annex 12.7.1 contains a list of all public subsidy grant orders (öffentlich rechtliche Zuwendungs- und Förderbescheide) and public subsidy grant agreements (öffentlich rechtliche Zuwendungs und Förderverträge) except for public subsidy grants and public subsidy grant agreements under HSP 1 and HSP 2 received by the Company and the Group Companies during the last five (5) years including the sums payable and in fact paid under these public subsidy grant orders and public subsidy grant agreements, as well as their subsidy periods (Förderperioden).

12.7.2 To the Sellers` Best Knowledge, the Company and the other Group Companies comply with the conditions of the listed public grant orders and public subsidy grant agreements as well as with any law and regulation relating to these public grant orders and public subsidy grant agreements (including but not limited to the Company’s and the other Group Companies’ use of the funds provided under the aforementioned public grant orders and public subsidy grant agreements the non-compliance of which would have an adverse effect on any Group Company). Neither of

Seite 54 von 83

these public grant orders and public subsidy grant agreements listed in Annex 12.7.1 will legally be terminated because of the sale and transfer of the Sold Shares under this Agreement on the basis of a chance of control clause. This warranty is not given with respect to compliance with conditions (Auflagen, Bedingungen, Nebenbestimmungen) and other obligations under public grant orders and public subsidy grant agreements which are to be fulfilled after the Closing Date respectively the fulfillment date of which expires after the Closing Date whereas it is clarified that the compliance until Closing Date is not affected or limited thereby.

12.8 No Brokerage or Commission Fees / No Liabilities From Historic Transactions

12.8.1 Neither the Sellers nor any Group Company have incurred any liability for brokerage, finder’s or other similar fees or commissions or any other costs in relation to or in connection with the transactions contemplated hereby, the payment of which may be claimed from any Group Company on or after the Closing Date. The Parties explicitly agree that the limitations contained in clause 14 shall under no circumstances apply in case of a breach of the foregoing warranty contained in this clause 12.8.1

12.8.2 Except as set out otherwise in Annex 12.8.2, none of the Group Companies is subject to any liability (whether actual or contingent) arising from any acquisitions or disposals of shares or major assets by means of a share and /or asset deal which occurred within a period of ten (10) years prior to the Closing Date as truly and completely and exhaustively listed in Annex 12.8.2 (i).

12.9 Warranties with regard to Taxes and Social Securities

12.9.1 Taxes within the meaning of this Agreement are any and all taxes and supplementary tax payments pursuant to Section 3 of the German Fiscal Code (Abgabenordnung, AO) on the level of the Group Companies or of the relevant laws of any other jurisdiction, together with any interest, penalty or addition thereto (steuerliche Nebenleistungen), and contributions to any kind of pension scheme, social security contributions under German law and equivalent charges under foreign law, as well as all duties and tariffs (Zölle) (including anti-dumping duties and tariffs (Antidumpingzölle)), including duties and tariffs under foreign law as well as fines in relation to taxes, in each case irrespective of whether owed as tax payer, as a withholding agent, by way of a secondary liability (Haftungsschuld), by way of a transferee liability, contractual assumption or otherwise as a result of being a member of (or leaving) an affiliated or consolidated tax group or under a tax sharing or allocation agreement or otherwise, in each case, whether disputed or not (hereinafter also individually referred to as “Tax” or collectively “Taxes”). The warranties under clause 12.9 are not granted with regard to the HSP Matter and the HSP 1 Amount and HSP 2 Amount.

12.9.2 Except as listed in Annex 12.9.2 the Group Companies have properly and completely prepared and duly filed any and all tax returns (including applications for loss carry-forwards) until Signing Date and will do so until the Closing Date. The Sellers do not give a warranty as to the amount and survival of any loss carry forwards due to the transactions contemplated in this Agreement.

Seite 55 von 83

12.9.3 Any and all due taxes owed by the Company and the Group Companies until the Closing Date have been or will be duly paid or retained; VAT, in particular, has been paid within the scope of legal requirements and/or within the permanent extension of the filing deadline (Dauerfristverlängerung) granted by the tax office. Tax liabilities not due before Closing Date have been properly accounted for by the forming of tax accruals to the extent legally required and permissible.

12.9.4 The Group Companies have not applied for any tax rulings (verbindliche Auskünfte) until the Closing Date within the last three years before the date hereof.

12.9.5 No Group Company has received written notice of any violation of any applicable law, rule or regulation of any Tax authority relating to the payment or withholding of Taxes within the last three (3) years until the date hereof.

12.9.6 Each Group Company has maintained all records in relation to Tax which it is required to maintain, in accordance with any applicable requirements and which is sufficient to enable it and/or its officers, employees, or representatives to compute its liability to Tax in so far as it applies in any transaction occurring on or before Closing. Annex 12.9.6 contains a list of all ongoing investigations, ongoing non-routine audits or ongoing non-routine visits by or involving any Taxation authority until Signing Date.

12.9.7 No Group Company is involved in any dispute (Einspruchsverfahren) in relation to Tax with any Taxation authority until Signing Date.

12.9.8 Each Group Company is, to the extent that it is required to be registered, a registered person for the purposes of the relevant VAT applicable in any relevant jurisdiction.

12.9.9 No Group Company is a party to any transaction or arrangement the terms of which are any different from terms that would exist were the transaction to be entered into by two unconnected parties dealing at “arm’s length”.

12.9.10 Each Group Company has been resident for Tax purposes in its place of incorporation and nowhere else at all times since its incorporation. There are no foreign permanent establishments.

12.9.11 Except as otherwise disclosed in Annex 12.9.11 there are no tax relevant holding periods relating to the Group Companies which have been established within the seven years` period before Closing Date and no real property or holdings of any rights equivalent to real property (Grundstücksgleiche Rechte).

12.9.12 All employees and/or contract staff has been properly classified for Tax and social security purposes whereas any indemnifiable damage and loss resulting from a breach of this warranty shall only be taken into account for periods until the Closing Date and the period of three months` after Closing Date.

12.9.13 The fiscal unities as listed in Annex 12.9.13 within the Group have been duly established and exist as of the date of Signing.

Seite 56 von 83

12.10 Warranties regarding Compliance with Anti- Bribery and Anti- Corruption Law

12.10.1 The entire warranty pursuant to this clause 12.10 is given only to the Seller’s Knowledge in its entirety, whereas in deviation of clause 12.14 last sentence the positive knowledge of any Seller shall for purposes of this clause 12.10 not be imputed on the respective other Sellers.

12.10.2 Annex 12.10.2 contains a list of any and all current shareholders, managing directors, and key employees (excluding freelancers and lecturers) of the Company or the other Group Companies that are current or former (within the last five years) government officials (Beamte) and the amount of compensation each such individual has received over the past 5 years from any Group Company. No shareholders, managing directors and key employees (excluding freelancers and lecturers) of the Company or the other Group Companies - except as specified in Annex 12.10.2 - are current or former (within the last five years) government officials (Beamte).

12.10.3 Annex 12.10.3 contains a list of the current employees (excluding free lancers and lecturers) of the Company or the other Group Companies materially involved in interacting with government officials (Beamte) on the Company's or the other Group Companies' behalf. No employees of the Company or the other Group Companies - except as specified in Annex 12.10.3 - are materially involved in interacting with government officials (Beamte) on the Company’s or the other Group Companies’ behalf.

12.10.4 Except as disclosed in Annex 12.10.4, none of the Sellers acting in their respective capacity as (i) shareholder of the Company, (ii) member of the board of directors of a Group Company, (iii) member of the Company’s Advisory Board and/or (iv) member of the Supervisory Board of a Group Company Board as the case may be, directly or indirectly,

12.10.4.1 offered, promised, given, requested, agreed to receive, received or accepted a bribe or financial or other advantage prohibited under German Criminal Law (Strafgesetzbuch) or instigated (angestifted) any employee or director of a Group Company to do so on behalf and for the benefit of the Company or any other Group Company,

12.10.4.2 have been, and are not, the subject of any investigation, enquiry or enforcement proceedings by any governmental, administrative or regulatory body regarding any offence under any statutes, statutory instruments, orders, directives, decrees and laws which relate to anti-bribery and/or anti-corruption,

12.10.4.3 have been listed by any government agency as being debarred, suspended, proposed for suspension or debarment, or otherwise ineligible for participation in government subsidy programs or other government contracts or grant orders, or

12.10.4.4 established or maintained any funds or assets to be used for bribery or corruption in general that have not been properly recorded in the books and records of any of the Group Companies pursuant to German applicable law.

Seite 57 von 83

12.11 Information provided by the Sellers

As of the date of this Agreement, to the Sellers’ Best Knowledge, the information disclosed in the Disclosed Documents is true and fairly disclosed in all material respects. Such information is to Sellers’ Best Knowledge not misleading in any material respect.

This warranty shall not apply to the extent the Disclosed Documents relate to forecasts, estimations or budgets referring to future earnings, profits, returns, cash flows, the future financial situation, the future volume of orders, the future numbers of students or the future business of the Group or any Group Companies.

12.12 Warranties with regard to Shareholder Loans and other facilities

12.12.1 Each relevant Seller is the legal and beneficial holder of the relevant Repayment Claims under the Shareholder Loans.

12.12.2 Other than as set out in Annex 12.12.2 and (i) as of the Signing Date other than the Repayment Claims and (ii) as of the Closing Date other than the Remaining Shareholder Redemption Amounts as set out in in the respective confirmation letter pursuant to clause 11.1.10, none of the Sellers has any claim against any Group Company whereas clauses 14.4 and 14.6.3 (ii) shall not apply.

12.12.3 Other than the Restated Guarantee Facility there are no liabilities versus banks and other credit institutions pursuant to section 272 para 3 C no.2 German Commercial Code (HGB) as of the Closing Date (whereas this warranty is only given as of the Closing Date).

12.13 The Sellers do not give to the Purchaser any representations and/or warranties other than the warranties set forth in this clause 12. Notwithstanding the preceding sentence, the Purchaser in particular agrees that the Sellers do not give any warranties or guarantee undertakings with regard to (i) forecasts, estimations or budgets referring to future earnings, profits, returns, cash flows, the future financial situation, the future volume of orders or the future business of the Group made available to the Purchaser; (ii) other information or documents with regard to the business of the Group made available to the Purchaser, his lawyers, auditors or other advisers within the course of the sales process and the due diligence, unless otherwise expressly provided for in this Agreement; (iii) fiscal matters except for the provisions in clause 12.9.

12.14 The “Sellers’ Best Knowledge” within the meaning of this Agreement refers to (i) the actual positive knowledge (positive Kenntnis) of the relevant Seller and (ii) to the knowledge the relevant Seller must have had (hätte erkennen müssen), had it applied the care of a prudent business man (Sorgfalt eines ordentlichen Kaufmanns). The knowledge a Seller must have had, had it applied the care of a prudent business man shall (i) in case of any Auctus related Sellers being Seller 1 to 3 be imputed to the remaining Auctus related Sellers and (ii) in case of any Sellers not related to Auctus be imputed to the remaining Sellers not related to Auctus. For the avoidance of doubt, the knowledge any Auctus related Sellers must have had, had they applied the care of a prudent business man, shall not be imputed to any Sellers not related to Auctus and vice versa unless explicitly stated otherwise herein. For the avoidance of doubt, positive knowledge of any Seller shall be imputed to all remaining Sellers. ”Seller’s Knowledge” within the meaning of this

Seite 58 von 83

Agreement refers only to the actual positive knowledge (positive Kenntnis) of the relevant Seller which in the case of Seller 1 through 3 shall be Dr. Ingo Krocke and Florian Buddemeier.

13 Rules of Conduct

13.1 The Sellers undertake to ensure during the period between the Signing Date and the Closing Date (“Interim Period”) that the relevant business of the Company and its Subsidiaries is managed with the diligence of a prudent businessman and exclusively within the ordinary course of business and in accordance with past practice.

13.2 In particular, but without limitation to the generality of the foregoing, during the Interim Period, the Sellers shall not, and shall procure that none of their Affiliates and/or the Group Companies will, without the Purchaser’s prior written approval:

13.2.1 amend or modify the constitution documents of any Group Company;

13.2.2 undertake any material capital expenditure outside the approved CAPEX budget as attached hereto as Annex 13.2.2;

13.2.3 sell, encumber or otherwise transfer or dispose of any fixed assets that are material to the business of the Group Companies, or in any event such assets having a book value in excess of EUR 500,000.-- (in words: Euro five hundred thousand) in the aggregate and in excess of EUR 100,000.-- (in words: Euro one hundred thousand) in the individual case;

13.2.4 increase, redeem or decrease the share capital, issue any other security in relation to the Group Companies;

13.2.5 hire employees or amend or novate existing employment agreements if this would cause an aggregated annual cost for the concerned Group Company in excess of EUR 250,000.-- (in words: Euro two hundred fifty thousand);

13.2.6 resolve on or distribute any dividends of the Company;

13.2.7 materially amend or terminate any Material Contract or enter into any agreement which would constitute a Material Contract of a Group Company, which may not be terminated within twenty-four (24) months and involves capital expenditures of more than EUR 250,000.-- (in words: Euro two hundred fifty thousand); provided, however, that the Seller may do so for good business reasons in case the Purchaser’s consent may not be obtained due to restrictions of competition law;

13.2.8 enter into new financing agreements;

13.2.9 waive or settle any outstanding claim, whether active or passive, exceeding EUR 100,000.-- (in words: Euro one hundred thousand) in the aggregate;

Seite 59 von 83

13.2.10 settle or otherwise terminate any litigation proceedings or other form of legal action with a nominal value at dispute in excess of EUR 50,000.-- (in words: Euro fifty thousand) in the individual case;

13.2.11 acquire, create encumbrances on or dispose of participations in the equity of other companies; or acquire, dispose of or lease (as lessor or lessee) any business or segment of a business;

13.2.12 enter into any agreement or other transaction or arrangement between any Seller and/or any of their Affiliates and any Group Company;

13.2.13 submit any application for any government subsidies (including but not limited to any HSP program);

13.2.14 agree to do any of the foregoing.

13.3 For the avoidance of doubt, Purchaser shall not unreasonably withhold or delay its consent. In case Purchaser does not react to the request for approval within a period of ten Business Days upon its receipt such approval shall be deemed to be granted.

13.4 Notwithstanding anything in this Agreement to the contrary, the Sellers and the Group Companies are entitled to take all actions and/or do such other things (in each case only to the extent such actions and/or other things are in compliance with applicable law) as may be necessary to:

13.4.1 comply with any applicable law or any order of any competent public or judicial authority or existing contracts to which any of the Group Companies is a party; or

13.4.2 comply with this Agreement, in particular fulfill and perform the Closing Conditions and Closing Actions.

14 Legal Consequences in Case of a Breach of Warranties; Violations of Rules of Conduct; Indemnity

14.1 If any of the warranties given under clause 12 above is totally or partially inaccurate or incorrect or if any rule of conduct pursuant to clause 13 has been violated, the Sellers, shall as partial debtors (Teilschuldner) pro rata in accordance with their shareholding in the Company put the Purchaser to the extent of the warranties respectively given, into such position he would be in if the warranty had been correct or the rule of conduct had been complied with (restitution in kind (Naturalrestitution)). If the respective Seller has not made the restitution in kind (Naturalrestitution) within a period of two (2) months after the Purchaser has informed the respective Seller about the breach of the warranty in a substantiated form, the Purchaser may claim damages in money from the respective Seller.

14.2 The indemnifiable damages in case of a breach of warranties pursuant to clause 12 or a rule of conduct pursuant to clause 13 above shall include (x) any direct damage on the level of the Company and/or the Group Companies and/ or the Purchaser and (y) any indirect damages on the level of the Company and/or the Group Companies and/ or the Purchaser resulting from such

Seite 60 von 83

breach, but (in relation to (y)), only to the extent that such damage is typically foreseeable and intended to be covered by the purpose of the breached warranty or of the breached rule of conduct (innerhalb des Schutzzweckes der verletzten Garantie oder Verhaltensregel). However, such indirect damages under (y) above shall not include any contingent losses and lost business opportunities, reputational damages, internal administration or overhead costs, lost profits on the level of the Purchaser, and a decrease of the value in the shares in the Company (Wertminderung der Beteiligung), whereas the exclusion of the decrease of the value in the shares in the Company from the indemnifiable damages shall not apply in case of breach of the warranties contained in clauses 12.2.1, 12.2.2, 12.2.7 and 12.2.11. For the avoidance of doubt, the fact that a damage that is a direct damage or an indemnifiable indirect damage in the form of lost profits may at the same time be qualified as lost business opportunity shall not exclude Purchaser's ability to raise a claim against Sellers for recovery of such direct damage or indemnifiable indirect damage in the form of lost profits.

Any damage in case of a breach of warranties pursuant to clause 12 above or otherwise pursuant to this Agreement shall be computed by taking into account any present or future advantages and benefits (including avoided losses, tax and financial benefits and savings as well as increases in the value of any asset owned by the Group (Abzug Neu für Alt) related to the relevant matter but only to the extent that the aforementioned items are connected to the matters underlying the breach. In calculating any damage no valuation methodology using multiples of earnings or the like shall be applied. To the extent the Company holds only a percentage share in a Group Company respective damages on the level of such Group Company shall only be recovered in such percentage amount.

Any payments resulting from a breach of warranties and/or rule of conduct shall be treated as purchase price reductions for tax purposes.

14.3 Notices to Sellers; Proceeding in Case of Third Parties’ Claims

14.3.1 In case of a factual or possible breach of a warranty pursuant to clause 12 or a rule of conduct pursuant to clause 13, the Purchaser shall be obliged to notify the affected Seller in writing of the factual or possible breach without undue delay after he obtained knowledge of the breach giving a description of the circumstances and, if reasonably possible, the estimated amount of the claim. The affected Seller shall further be given the opportunity to remedy the breach within the period specified in clause 14.1.

14.3.2 If and to the extent claims are asserted by third parties against the Purchaser which may reasonably give rise to a claim of the Purchaser (i) in connection with the breach of a warranty pursuant to clause 12 or (ii) under the indemnity set forth in clause 14.8 (“Third Party Claim”), the Purchaser shall be obliged

14.3.2.1 to provide the respective Seller with a copy of such Third Party Claim as well as any and all documents referring to a deadline (fristbezogene Dokumente), and

14.3.2.2 if the Seller acknowledges (anerkennt) in writing to Purchaser that the circumstances underlying the Third Party Claim basically (dem Grunde nach) constitute a breach of the warranties (Anerkennung dem Grunde nach) set forth in clause 12 or a claim under

Seite 61 von 83

the indemnity set forth in clause 14.8 and that Seller shall (for the avoidance of doubt, subject to the further provisions of this Agreement, in particular clauses 14.4 subsequent which shall not be prejudiced by a Seller’s acknowledgment) be liable towards Purchaser for such breach subject to the terms of this Agreement, if and to the extent the Third Party Claims are finally held to be valid by a competent court or other competent authority or settlement, to give the respective Seller the opportunity to defend such claims for the Purchaser or the Company or the respective Subsidiary (at such Seller’s own cost).

The respective Seller shall be entitled to principally institute and control any and all appropriate proceedings and to coordinate such actions of defensive measures, it being understood that the Purchaser shall have customary participation rights, including the following:

(i)    At its option and expense, Purchaser shall have the right to reasonably participate in the defense (including through counsel of its choice).

(ii)    The respective Seller shall (x) keep Purchaser informed to a reasonable extent of the status of defense, (ii) give Purchaser the opportunity to discuss and comment on proposed defense measures and (iii) comply with any reasonable requests of Purchaser with respect to the defense necessary to avoid a material adverse effect on significant business interests of Purchaser, the Company or the Group Companies as a whole.

With respect to any Third Party Claim being controlled by a respective Seller, the Purchaser or the Company (and/or the respective Subsidiary) shall under no circumstances be entitled to acknowledge any Third Party Claim, to reach a settlement or to approve the acknowledgement (Anerkenntnis) or settlement (Vergleich) of a Third Party Claim without the prior written approval of the affected Seller. The respective Seller controlling a Third Party Claim shall only be entitled to acknowledge such Third Party Claim, to reach a settlement or to approve the acknowledgement (Anerkenntnis) or settlement (Vergleich) of such Third Party Claim, if the Purchaser approves such acknowledgement (Anerkenntnis) or settlement (Vergleich) in writing; besides § 254 BGB shall remain unaffected.

The Purchaser and the Company and/or the respective Subsidiary shall be obliged to reasonably assist the respective Seller in the defending of the Third Party Claim and in particular to provide to the respective Seller all relevant documents in relation to the Third Party Claim and to permit the respective Seller and his representatives to consult the management and other key employees of the Purchaser or the Company, in each case to the extent reasonably required by the respective Seller for the defense.

14.3.3 In the absence of an unconditional acknowledgement by a Seller, the defense against the Third Party Claim shall be controlled by Purchaser or the relevant Group Company, as the case may be whereas the participation rights pursuant to clause 14.3.2.2 2^nd para (i) and (ii) shall apply mutatis mutandis with regard to the Sellers.

The Purchaser or the Company (and/or the respective Subsidiary) shall under no circumstances be entitled to acknowledge any Third Party Claim, to reach a settlement or to approve the

Seite 62 von 83

acknowledgement (Anerkenntnis) or settlement (Vergleich) of a Third Party Claim without the prior written approval of the affected Seller, unless to avoid a material adverse effect on significant business interests of Purchaser, the Company or the Group Companies as a whole. Besides, § 254 BGB shall remain unaffected.

14.3.4 For the avoidance of doubt, in all cases of this clause 14.3 the costs incurred by Purchaser and/or the Group Companies in defending the Third Party Claim shall be part of the recoverable damages of Purchaser and/or the Group Companies under this Agreement to the extent they have a claim for recovery. If and to the extent that a Seller has exercised control of the defense pursuant to clause 14.3.2, such Seller shall indemnify and hold harmless Purchaser and the Group Companies from and against any proven and adequate costs incurred by Purchaser and the Group Companies for such defense.

14.3.5 If and to the extent the Purchaser or the Company or the relevant Group Company does not completely and properly fulfill his or its respective obligations pursuant to clause 14.3, the respective Seller(s) shall be released from his/their obligations under clauses 12, 13 and clause 14 only if and to the extent the Purchaser’s or the Company’s or the relevant Group Company’s failure to fulfill his or its obligations pursuant to clause 14.3 has caused or increased a damage and Purchaser shall procure that the Group Companies also adhere to these obligations.

14.4 De Minimis, Exemption Amount (Freibetrag)

The Purchaser shall only be entitled to a claim against a Seller under a breach of one of the warranties given under clause 12 if and to the extent an individual claim exceeds an amount of EUR 150,000.-- (in words: Euro One Hundred Fifty Thousand) (“Indemnifiable Claim”) and the sum of all Indemnifiable Claims exceeds an amount of EUR 1,500,000.-- (in words: Euro One Million Five Hundred Thousand). If the total amount of EUR 1,500,000.-- (in words: Euro One Million Five Hundred Thousand) is exceeded, the Purchaser may only claim the exceeding amount (exemption amount (Freibetrag)).

The limitation in this clause 14.4 shall not apply to Sellers’ liability for breach of warranties in relation to Taxes and the Sellers’ indemnity obligations under clause 14.8 as well as Sellers` liability in relation to breach of warranties pursuant to clause 12.2.1, 12.2.2, 12.2.7, 12.2.11, 12.2.12 and 12.12.2

14.5 Maximum Liability Amount

14.5.1 Any claims of the Purchaser against an individual Seller under a breach of one of the warranties given under clause 12.2, under clause 12.4.2 or under clause 12.9 shall be limited to the amount of the Share Purchase Price allocated to the respective Seller.

14.5.2 Any other claims of the Purchaser under clause 12 of this Agreement against an individual Seller shall be limited to 10% of the Share Purchase Price allocated to the respective Seller (unless explicitly set forth otherwise in this Agreement). For the avoidance of doubt, this shall not apply to claims of the Purchaser under this Agreement relating to Taxes.

Seite 63 von 83

14.5.3 The total and overall liability of each Seller for all and any claims under or arising out of this Agreement shall be limited to the Share Purchase Price allocated to the respective Seller (the “Overall Liability Cap”).

14.6 Exclusion of Liability in Case of Knowledge

14.6.1 The Purchaser shall not be entitled to assert any claims under clause 12 if, at the Signing Date, the breach of the respective warranty under clause 12 was part of the actual knowledge (positive Kenntnis) of the Purchaser whereas the actual knowledge (positive Kenntnis) of the representatives of Purchaser as well as of the employees listed in Annex 14.6.1as well as his advisersshall be imputed to the Purchaser, whereas the foregoing shall not apply to claims under clause 12.2.1. Section 442 BGB shall not apply.

14.6.2 Before the Signing Date, the Purchaser has been able to carry out a commercial, financial, tax and legal due diligence with regard to the Group Companies and their respective businesses and in the course of such due diligence has been provided with the documents listed inAnnex 14.6.2-1 and stored on the 2 digital versatile discs (DVD) attached hereto as Annex 14.6.2-2 (copies of such digital versatile discs deposited in a sealed envelope with the officiating notary Dr. Bernhard Schaub for a period of 10 years post Signing for purposes of evidence) (hereinafter referred to as the “Disclosed Documents”)whereas such list as well as the Due Diligence Documents are of mere informational nature and the Due Diligence Documents or their content do not limit and are not considered or deemed to be disclosed against any obligations, covenants, indemnification obligations or warranties set out in this Agreement, other than as set out in clause 14.6.3.

14.6.3 Each of the warranties set forth in clause 12 shall be read with, limited by and subject to, any matter, information or item disclosed

(i) specifically against the respective warranty to the extent an Annex attached to such warranty contains respective information or matters or the wording of such warranty explicitly limits its content; and

(ii) by way of True and Fair and Disclosures in the Due Diligence Documents.

14.6.4 “True andFair Disclosures” means that facts and circumstance are disclosed in the Disclosed Documents in such a manner, that a deviation from a certain warranty would become apparent (hätte erkennen müssen) to a prudent business man in the position of the Purchaser applying professional standards of duty and care (Maßstab eines sorgfältigen Kaufmanns)(“Professional Standards Of Duty And Care”) upon the diligent review of a single Disclosed Document or several Disclosed Documents (i) either making reference to each other and/or (ii) which a prudent business man applying Professional Standards Of Duty And Care would be reasonably expected to discover and put in context to each other.

14.6.5 Any fact, matter, information or item disclosed under any specific warranty set forth in clause 12 pursuant to clause 14.6.3 (i) shall be deemed to have been disclosed only against such specific warranty and not against any other warranty.

14.6.6 For the avoidance of doubt, no True and Fair Disclosure in accordance with clause 14.6.3 (ii) shall under any circumstances affect or limit any liability of the Sellers for breach of warranties

Seite 64 von 83

in relation to (i) Taxes (clause 12.9), (ii) title to Sold Shares (clause 12.2.1), shareholding in the Group Companies and valid incorporation of the Group Companies under applicable law (clause 12.2.7), (iii) unrestricted ability of the Sellers to transact under this Agreement (clause 12.2.11) and (iv) the warranties given by Seller in clauses 12.4.2 and 12.9.

14.6.7 No disclosure contained anywhere in this Agreement shall under any circumstances affect or limit any liability of the Sellers under the indemnification obligations contained in clause 14.8 and the tax indemnities contained in clause 17.

14.6.8 Each of the warranties set forth in clause 12 are separate and independent and, other than (i) knowledge imputed to the Purchaser in accordance with clause 14.6.1 and (ii) what has been disclosed in accordance with clause 14.6.3, none of the warranties set forth in clause 12 shall be treated as qualified by any constructive knowledge on the part of the Purchaser or any of its agents, representatives, officers, employees or advisers.

14.7 Exclusion and Limitation of Liability

14.7.1 No Double Consideration and other Restrictions

Any claim of the Purchaser under or in connection with this Agreement shall be excluded if and to the extent:

a. the claim refers to facts specifically taken into account in the amounts as reflected and shown in the 2014 Financial Statements as reserves, liabilities, depreciation or write-down (individually or as lump-sum); or

b. the claim refers to facts specifically taken into account in the amounts as reflected and shown in the Final Effective Date Accounts as deduction item in the Final Effective Date Debt or Final Effective Date Working Capital; or

c. the underlying facts constitute a final and binding claim of the Purchaser or a Group Company against a third party other than the Parties, including insurance companies and such claim has actually been recovered by the Purchaser or the respective Group Company from such third party (including any amounts which would have been recoverable under any insurance policy as existing on the Closing Date if the insurance coverage had been continued without change). Upon request by the Sellers, the Purchaser shall and shall procure that the respective Group Companies assign the respective aforesaid claims against the respective third party or a portion thereof (as the case may be) if and to the extent such claim has not already been taken into account and thus deducted when calculating the damage. Such assignment shall be made simultaneously (Zug um Zug) against payment of the damages by the respective Sellers.

If a Seller pays an amount in discharge of any claim and the Purchaser or a Group Company subsequently recovers from any insurance company or any other third party a sum relating to the subject matter of the claim, the Purchaser shall pay to that Seller an amount equal to the difference between (x) the amount paid by that Seller to the Purchaser and (y) the amount that the Purchaser or the Group Company would have

Seite 65 von 83

received if the amount of such recovery had been taken into account in determining the amount due by that Seller in respect of any claim in accordance with this clause 14.7.1 lit c.

d. the claim is based on any amendment of a law, ordinance, statutes, administrative regulation, judgment, ruling, decision, permission, decree or another (administrative) act or other legal provision, each occurred after the Effective Date and having retroactive effect for periods until and including the respective date on which the warranty which is breached is given, however, limited to 50% of the respective amount of the claim.

14.7.2 No Liability in Case of Actions Taken by the Purchaser

None of the Sellers shall be liable for any facts or circumstances having occurred after the Closing Date and having caused or increased any damage relating to time periods prior to Closing or other periods for which the Sellers may be held liable if and to the extent such facts or circumstances would not have occurred without an arbitrary action or omission by the Purchaser, by a company affiliated to him or by a close person or a member of the management, an employee or representative of the Purchaser or of a company affiliated to him as of the Closing Date (verbundenes Unternehmen i.S.d. § 15 ff. AktG am Vollzugsstichtag) or of a close person (nahestehende Person i.S.d. § 15 AO) unless required by mandatory law or by Tax authorities. This, in particular but not exclusively, shall apply to a material change of the Company’s business operations caused by the mentioned persons, a change of the accounting and fiscal practice of the Purchaser or a company affiliated to him that are implemented or become effective after the Closing Date, unless required by mandatory law or by Tax authorities.

14.7.3 Time Limitation

Any claims of the Purchaser under this Agreement shall become statute-barred (verjähren) at the expiry of twenty four (24) months as of the Closing Date, unless stipulated otherwise in this Agreement. Notwithstanding the foregoing sentence

a. claims of the Purchaser due to a breach of the warranties pursuant to clause 12.3 to 12.6, 12.8 and 12.11 to 12.12 shall become statute-barred at the expiry of eighteen (18) months as of the Closing Date;

b. claims of the Purchaser due to the breach of warranties pursuant to clause 12.2, shall become statute-barred at the expiry of 5 (five) years as of the Closing Date;

c. claims of the Purchaser due to the breach of warranties pursuant to clause 12.7 shall become statute-barred at the expiry of six (6) years as of the Closing Date;

d. claims of the Purchaser due to a breach of clause 12.9 (Taxes) shall become statute-barred four (4) months after the formally and materially final and conclusive assessment (bestandskräftiger nicht unter dem Vorbehalt der Nachprüfung stehender Bescheid) of the respective taxes, however, five (5) years after the Closing Date at the latest.

Seite 66 von 83

Section 203 BGBshall not apply. §§ 204 subsequent BGB shall apply.

14.7.4 Exclusion of Further Legal Consequences

14.7.4.1 The Parties agree that this Agreement finally and exclusively regulates the legal consequences in case of a breach of a warranty given by a Seller pursuant to clauses 12 and 14 as well as a breach of a rule of conduct pursuant to clause 13 and that the Purchaser is therefore only entitled to the claims regulated in this Agreement including the legal consequences regulated herein.

14.7.4.2 The Purchaser expressly acknowledges that the Sellers do not give any express or implied guarantee undertakings, warranties, representations or other initial declarations with regard to the disclosed information or other information or documents provided to the Purchaser or his advisers, unless otherwise expressly provided for herein.

14.7.4.3 If and to the extent legally permissible, any claims and rights including without limitation rights to rescind this Agreement (Rücktritt), claims for reduction (Minderung) or repayment of the Share Purchase Price, claims for damages (Schadenersatz) (including damages for non-performance (Schadenersatz statt der Leistung)) other than the claims and rights of the Purchaser regulated herein shall be excluded, irrespective of their origin, scope and legal foundation. This shall, inter alia, apply to claims for a violation of duties (Sections 311(2) and (3), 241(2) BGB (Schadenersatz wegen Verschuldens bei Vertragsverhandlungen, culpa in contrahendo)), violation of a duty under an obligation (in particular pursuant to Sections 280, 281, 282, 241 BGB), obstruction or frustration (Störung der Geschäftsgrundlage) of a contract (Section 313 BGB), avoidance (Anfechtung) due to statutory warranty provisions (in particular pursuant to Sections 437 through 441, 553BGB) and tort as well as to any other claims that in consequence of a termination or invalidity of this Agreement may result in a change of its contents or a repayment or reduction of the Share Purchase Price, unless the claim is based on a willful deceit (arglistige Täuschung) or intentional misconduct (Vorsatz) of a Seller.

14.7.4.4 Notwithstanding anything to the contrary above, the Purchaser shall be entitled to specific performance (Primärerfüllungsanprüche) and injunctive relief (einstweiligen Rechtsschutz) in accordance with applicable statutory law in case of a breach by any Seller of its obligations under this Agreement.

14.7.5 Adjustment of Profit; No Double Relief

14.7.5.1 If and to the extent a fact constituting a claim of the Purchaser under this Agreement constitutes a fiscal or other benefit (including tax benefits) of a Group Company connected with the matter underlying the claim, the Purchaser or one of the companies affiliated to it, such benefit shall be set off against the claim (adjustment of profit).

14.7.5.2 If a Seller made restitution in kind (Naturalrestitution) or paid damages, the assertion of further contractual or legal claims for the same damage on the basis of the same

Seite 67 von 83

fact or circumstance shall be excluded (i.e. the Parties agree that neither the Sellers nor the Purchaser shall have a double benefit or double disadvantage (no double counting and no double dip).

14.7.6 Section 254 BGB shall remain unaffected.

14.7.7 Nothing under this Agreement shall limit the liability of the Sellers for fraud, willful misconduct and/or intentional misrepresentation by the Sellers. In case of fraud, willful misconduct and/or intentional misrepresentation no monetary or time limitations or any other restrictions shall apply.

14.8 Indemnities

14.8.1 Subject to the other provisions set out in this clause 14.8, the Sellers as partial debtors hereby agree to fully indemnify, defend and hold harmless the Purchaser, the Purchaser’s Affiliates (including any of the Group Companies) and each of their lawful successors, permitted assigns, from and against

14.8.1.1 any and all claims of repayment as well as direct costs connected with the claims of repayment including but not limited to penalty payments, fines, interest and legal costs pursuant to or resulting from any repeal of or any other action taken by the respective competent authority in connection with any public subsidy grant or subsidy grant agreement received by the Company and the Group Companies under HSP 1, but, however, as regards the amount of repayment claims limited to the amount of (i) the HSP 1 Amount actually received by the Group according to clause 1.7.1and (ii) the amounts received by the Group in case of a Split HSP Event in relation to HSP 1 and paid to the Joint Sellers’ Account pursuant to and in accordance with clause 1.7.3; and

14.8.1.2 any and all claims of repayment as well as direct costs which are not HSP 2 2^nd Tranche Handling Costs or Recoverable HSP 2 2^nd Tranche Handling Costs connected with the claims of repayment including but not limited to penalty payments, fines, interest and legal costs pursuant to or resulting from any repeal of or any other action taken by the respective competent authority in connection with funds received by the Company under HSP 2, but, however, as regards the amount of repayment claims limited to (i) the amount of the HSP 2 Amount actually received by the Group according to clause 1.7.2 and (ii) the amounts received by the Group in case of a Split HSP Event in relation to HSP 2 and paid to the Joint Sellers’ Account pursuant to and in accordance with clause 1.7.3 (the “HSP 2 Indemnification Claims”). The HSP 2 Indemnification Claims shall exclusively be brought forward against and satisfied by the HSP 2 Escrow Amount (limited recourse). Only in case the HSP 2 Escrow Amount has been used up in full Purchaser may bring forward yet outstanding HSP 2 Indemnification Claims against other assets of a Seller in accordance with the provisions of this Agreement;

14.8.1.3 such direct administration and delivery costs incurred by the Group handling the HSP 2 2^nd Tranche Grant the kind of which are conclusively defined in more detail in Annex 14.8.1.3 (the “HSP 2 2^nd Tranche Handling Costs”) which do not form part of any costs already reflected in the Relevant Business Plan (i.e. extraordinary costs of administration and delivery) if and to the extent (i) they exceed the amount of EUR

Seite 68 von 83

200,000.00 (in words: two hundred thousand euros) (which has already been deducted as Debt, see Annex 7.1.3) and (ii) such HSP 2 2^nd Tranche Handling Costs – for the avoidance of doubt, including the costs up to the amount of EUR 200,000.00 (in words: two hundred thousand euros) - have been proven in writing to the Parties` satisfaction (the “Recoverable HSP 2 2^nd Tranche Handling Costs” whereas clauses 7.5.4 and 7.5.5 shall apply mutatis mutandis.

14.8.1.4 any payments and directly connected costs arising out of the termination and settlement of the employment relationship between the Group Company PROAKTIV Management Training und Beratung in Management und Verkauf Aktiengesellschaft and its former managing director Matthias von Puttkamer in excess of the amount of EUR 150,000.-- (in words: one hundred fifty thousand euros).

14.8.2 The knowledge of the Purchaser or the conduct of any investigation in relation to each Group Company or the Seller (actual, constructive or imputed) shall not in any manner affect or limit the Purchaser's right to indemnification set forth under this clause 14.8. For the avoidance of doubt, the Sellers’ liability under this clause 14.8 shall not be limited in any way by a disclosure pursuant to clause 14.6.

14.8.3 For the avoidance of doubt, the limitations set forth in clauses 14.4, 14.5 (except for clause 14.5.3 which shall apply) and 14.7.3 shall not apply to the Purchaser's right to indemnification set forth under this clause 14.8, in which case the Sellers' liability shall be limited to the amount of the Share Purchase Price, shall become time-barred in case of clause 14.8.1.1 and 14.8.1.2 and 14.8.1.3 six years after the Closing Date and in case of clause 14.8.1.4. 24 months after the Closing Date. Clauses 14.7.1, 14.7.2, 14.7.5 and 14.7.6 shall apply mutatis mutandis, except for clause 14.7.1 lit.d) which shall not apply.

14.8.4 There shall be no indemnification obligation pursuant to clauses 14.8.1.1 and 14.8.1.2 and 14.8.1.3 by Sellers if and to the extent

(i) the indemnification obligation is based on the non- compliance with conditions (Auflagen, Bedingungen, Nebenbestimmungen) and other obligations under the respective public grant orders and public subsidy grant agreements with regard to HSP 1 and HSP 2 (in particular the proof of usage of funds (Mittelverwendungsnachweis), which is to be made and carried through after the Closing Date, unless the Group had to spend additional and extraordinary funds beyond those foreseen in the business plan attached hereto as Annex 14.8.4 (the “Relevant Business Plan”).

(ii) in relation to the Actual HSP 2 Amount, the claim giving rise to the indemnification obligation resulted from the Group Companies’ failure to incur an expense set forth in the Relevant Business Plan that was required in order to comply with the HSP 2 2^nd Tranche Grant Order.

14.8.5 As regards procedural rules clauses 14.3.2.2 para 2 to 5 as well as clause 14.3.4 shall apply mutatis mutandis.

Seite 69 von 83

15 Independent Guarantee Undertakings of the Purchaser

The Purchaser hereby warrants by way of an independent guarantee undertaking pursuant to Section 311(1) BGB (selbständiges Garantieversprechen) the following:

15.1 The Purchaser has been duly established under German law, effectively exists and disposes of the required corporate power of disposal in order to hold the assets and to carry on the business.

15.2 The Purchaser disposes of the required corporate power of disposal and has been duly authorized by any and all required corporate actions to execute this Agreement and any legal transactions provided for herein.

15.3 The execution and performance of this Agreement and any legal transactions provided for herein by the Purchaser do not constitute a violation of the Purchaser’s articles of association or rules of procedure and no violation of applicable legal provisions, judgments, injunctions or other binding provisions. To the Purchaser’s knowledge there neither exist pending legal proceedings, preliminary investigations or other proceedings against the Purchaser before a court, an arbitral tribunal or an administrative authority that may prevent, modify or delay in any way the execution of the legal transactions provided for herein nor are they threatened.

15.4 On the basis of the due diligence carried out, the Purchaser is not aware of any facts or circumstances which may give rise to the accrual of claims against the Sellers pursuant to clause 12 through clause 14.

15.5 The Purchaser disposes of adequate and immediately available funds or binding financial commitments in order to pay the Share Purchase Price including any interest and to make any and all required payments under or in connection with this Agreement.

15.6 If the Purchaser breaches a guarantee undertaking pursuant to clause 15.1 through clause 15.5, it shall be obliged to indemnify the Sellers against any damage resulting therefrom. Any and all claims of the Sellers pursuant to clause 15 shall become statute-barred five (5) years after the Closing Date.

16 Indemnities and Covenants by Purchaser

16.1 In the event that insolvency proceedings are opened in respect of the Company and the insolvency administrator of the Company contests (anfechten) on the basis of Section 135 para. 1 no. 2 of the German Insolvency Act (Insolvenzordnung) the repayment of one or more of the Repayment Claims under the Shareholder Loans (including the payment of the Remaining Shareholder Redemption Amount) pursuant to and in accordance with clause 1.3 and clause 4 and claims against the Sellers to repay the received Repayment Claims to the Company, the Purchaser shall indemnify the Sellers against any such claims raised by the insolvency administrator against the Sellers.

16.2 The Purchaser covenants not to assert and procures that the Group companies do not assert any claims against managing directors, and/or the members of the board of directors of the Group

Seite 70 von 83

Companies as well as the (existing and former) members of the Company’s advisory board each as listed in Annex 16.2 for time periods prior to Closing if and to the extent the Purchaser basically (dem Grunde nach) has a claim for the respective damage against the respective Seller under clause 12 subsequent of this Agreement or in case of Dr. Ingo Krocke against any Seller under clause 12 subsequent of this Agreement (in each case unless in cases of willful misconduct). Clause 12 et. seq. shall remain unaffected, for the avoidance of doubt. Besides, the managing directors shall be granted full discharge with effect on the Closing Date on the basis of the Final Effective Date Accounts.

17 Tax Indemnity

17.1 Sellers shall as partial debtors (Teilschuldner) indemnify and hold harmless the Purchaser or at the discretion of Purchaser the respective Group Company of any Taxes (but excluding, for the avoidance of doubt, deferred Taxes (latente Steuern) and notional Tax losses (such as reduction of loss carry forwards)) and reasonable external costs that are owed by the respective Group Company under the applicable laws and (i) relate to taxable periods (Veranlagungszeiträume and Erhebungszeiträume) or portions thereof ending on or before the Effective Date until the Effective Date (the “Relevant Tax Period”), or (ii) are due and payable as of the Effective Date, but have not been paid by the respective Group Company; or (iii) are caused by and / or related to the management equity participation program entered into by the Sellers, including the distribution of the Share Purchase Price among the Sellers in accordance with their internal agreements; or (iv) are caused by the Delveo Carve Out and / or the subsequent sale of the shares in Delveo GmbH on the level of the Company (whereas any gains resulting from such sale shall first be set off against any loss carry forwards); or (v) are caused by the grant and / or receipt of HSP 1 and / or HSP 2 amounts be it before, or after Effective Date, provided, however, after Effective date only (i) with respect to clause 1.7.3 only to the extent such subsidies are for the benefit of Sellers and (ii) in view of HSP II amounts received before the Closing Date to the extent the relevant tax effects resulting from such payments are reflected alongside the student periods in periods after the Effective Date (the “Indemnifiable Taxes”). Sellers' obligation under this clause 17.1 shall be referred to as the “Tax Indemnification Obligation” and claims of the Purchasers under this clause 17.1 shall be referred to as the “Tax Indemnification Claims”.

17.2 There shall be no Tax Indemnification Obligation of any Seller, if and to the extent the Indemnifiable Taxes

17.2.1 have been specifically included in the Final Effective Date Accounts or 2014 Financial Statements by means of liability, accrual or provision; or

17.2.2 have already been rendered as prepayments or otherwise paid on or prior to the Effective Date; or

17.2.3 have been caused by restructuring or reorganization matters having a retroactive effect initiated or implemented after the Effective Date except for measures which are required by the Tax authorities or otherwise compelled by mandatory law; or

Seite 71 von 83

17.2.4 have either been actually recovered by the Group Companies from a third party or, if the Group Companies decide not to enforce a potential claim against a third party with respect to Indemnifiable Taxes the Group Companies have not assigned such potential claims to Sellers.

17.3 Tax Savings

17.3.1 Any Tax Indemnification Obligation of Sellers shall be furthermore reduced by the amount of any Tax Saving that is caused by the same events or based on the same facts and circumstances and is related to the respective Tax Liability, however, no double consideration, double counting or double dip should occur.

17.3.2 “Tax Saving” means the net present value (calculated on a basis of a discount rate of 6 %) of any realized or reasonably expected future decrease of Tax relating to a period of 5 (five) years after the Effective Date on the basis of a with and without calculation, and which decrease may be caused without limitation, by an increase of loss carry forwards, any depreciable, amortizable or accruable item or amount relevant for the assessment of any present or future Tax, or any increase of any corporation tax credit (Körperschaftsteuerguthaben) within the meaning of Section 37 Corporation Tax Act (KStG) or similar tax credits under the tax laws of any other jurisdiction), in each case regardless of whether any such decrease is realized at the level of the Purchaser, or the relevant Group Company or by the Purchaser or any of the Affiliates of the Purchaser other than the Group Companies.

17.4 Tax Filings

In relation to the preparation of Tax Returns the following shall apply:

17.4.1 Sellers shall file (or cause the respective Group Company to file) all Tax Returns which are due to be filed by Sellers or by the respective Group Company on or before the Effective Date. The Purchaser shall file (or cause the respective Group Company to file) all Tax Returns other than those referred to in the preceding sentence. If and to the extent the Purchaser files or causes the respective Group Company to file Tax Returns which relate to periods before the Effective Date, the Sellers shall be entitled to participate in the preparation of and to review any such Tax Returns at their own expense, whereas the obligation of the management of the Group Companies to comply with their duties under applicable statutory law regarding filing of Tax Returns shall not be affected thereby.

17.4.2 In particular the following shall apply: Tax matters of the respective Group Company which could give rise to a Tax Indemnification Obligation in a Relevant Tax Period (including any remedies, pending or upcoming or threatened tax examinations or audits, investigations, reminders, adjustments, tax assessments or tax realignments, the “Tax Matters”) will only be handled, negotiated, amended or conceded by the respective Group Company and the Purchaser in cooperation with and with the consent of the respective Sellers which may not be unreasonably withheld. With regard to the handling of any Tax Matters arising out of or in connection with the HSP Matter and/or the receipt and tax treatment of the HSP 1 Amount and/or HSP 2 Amount by the Group the Parties have agreed on the principles as set forth on Annex 17.4.2 which shall be binding on the Parties. In particular, the Purchasers will (or cause the respective Group Company to) inform Sellers of any Tax Matters regarding the Relevant Tax Period without undue delay

Seite 72 von 83

and Sellers will be afforded the opportunity to participate, at Sellers' own costs and expenses, in any Tax Matters for a Relevant Tax Period and be present at all discussions regarding Tax Matters for a Relevant Tax Period with the Tax authority. Sellers will be afforded the opportunity to give their comments to any Tax Matters at their own expense and to reasonably instruct the respective Group Company on how to correspond with the Tax authority regarding any such Tax Matters, unless this would constitute an unlawful action. With respect to Tax Matters, the Purchaser will (or shall cause the respective Group Company to) give legally binding declarations or make any agreements or take any other actions or measures, unless this would constitute an unlawful action, to the Tax authority only with the consent of the respective Sellers which shall not be unreasonably withheld. The Purchaser shall (or shall cause the respective Group Company to) provide Sellers with copies of all tax returns and amendments thereto and any other documents regarding the Tax Matters if filed after the Closing for the Relevant Tax Period. Failure of the Purchaser to comply with its obligations under this clause 17.4.2 shall exclude any liability of Sellers under this clause 17 only if and to the extent a failure of the Purchaser to comply has caused a Tax Indemnification Claim which would have otherwise not incurred. Besides, Section 254 BGB applies.

17.5 Without prejudice to the foregoing, the Parties agree to fully cooperate with each other in connection with any matter relating to Tax Matters including the preparation of any Tax Return, conduct of any audit, investigation or contest. Such cooperation shall include, without limitation, providing or making available all relevant books, records and documentation and the assistance of officers and employees. The Purchaser shall cause the respective Group Company to furnish to Sellers all such information as may be necessary or helpful for Sellers to prepare any Tax Return to be filed after the Closing Date, consistent with prior practice of the Sellers. Purchaser shall not and shall procure that after the Effective Date no Group Company will take, any action (including any change in the exercise of any Tax election right, the amendment of any Tax Return, the termination of any control or profit transfer agreement or tax consolidation scheme, the implementation of any acquisition structure in connection with this Agreement or the approval or implementation of any restructuring) that could give rise to any Tax Liability or result in any increase thereof, unless such action is required by law and/or tax audit.

17.6 All claims under this clause 17 shall be time-barred four (4) months after the date of the formally and materially final non-appealable assessment concerning the respective Tax.

17.7 Any respective Tax Indemnification Claims shall become due for payment five (5) business days after the Purchaser or the respective Group Company have sent a written indemnification request to the Sellers, except suspension of the enforcement (Aussetzung der Vollziehung) is granted for the relevant Indemnifiable Tax (whereas the Purchaser shall procure that each Group Company takes any steps and files any applications for suspension of the enforcement; the provision of collateral is not required by the Group Companies).

17.8 The total liability of a Seller under this clause 17 shall be limited to the amount of the Share Purchase Price allocated to such Seller, any liability shall count towards the Overall Liability Cap. Clauses 14.7.1 lit d, 14.7.5.2 and 14.7.6 shall apply mutatis mutandis.

17.9 Taxes will be reimbursed on a EUR by EUR basis. Clauses 14.4 and 14.5 (except for clause 14.5.3) shall not apply mutatis mutandis with regard to the Tax Indemnity in this Clause 17.

Seite 73 von 83

17.10 Tax Refunds

17.10.1 The Purchaser shall pay to the Sellers as an additional portion of the Share Purchase Price (i) within five business days after receipt the amount of any Tax Refund received by the Purchaser, any Group Company or any of the Affiliates of the Purchaser other than the Group Companies after the Effective Date and relating to the Relevant Tax Period, except to the extent such Tax Refund was reflected as a receivable in the Final Effective Date Accounts and (ii) within five days after dissolution an amount equal to any unused Tax provision of the Group Companies (as shown in the Final Effective Date Accounts) which is dissolved in accordance with applicable statutory accounting principles (except to the extent that such Tax provision has been set off against any obligation of the Sellers to indemnify the Purchaser from any Tax Liability in accordance with Clause 17.2) and (iii) within five days after realization any Tax effects which result from or are connected with the HSP 2 Indemnification Claims and their respective satisfaction (including repayments to the respective public authorities) as well as the Recoverable HSP 2 2^nd Tranche Handling Costs. Such payment obligation of the Purchaser shall be reduced by the amount of any Tax Burden related to the Tax Refund or the unused Tax provision. Any payment by the Purchaser under this clause 17.10.1 shall be repaid (i) if the Tax Refund must be repaid (be it by actual payment, by netting or by set-off), (ii) if the dissolution of any Tax provision turns out to be inappropriate under applicable statutory accounting principles or (iii) if any Tax effects which result from or are connected with the HSP 2 Indemnification Claims and their respective satisfaction (including repayments to the respective public authorities) as well as the Recoverable HSP 2 2^nd Tranche Handling Costs are not realized.

17.10.2 In calculating the “Tax Burden” for purposes of this clause 17.10, clause 17.3 shall apply mutatis mutandis. The Purchaser shall promptly notify the Sellers in writing of the receipt of the Tax Refund or the unused Tax provisions. Any amount payable to the Sellers pursuant to this clause 17.10.2 shall be due and payable within five (5) Business Days after the Tax Refund has been received by the Purchaser or the Group Company or after the dissolution of the relevant tax provision. “Tax Refund” means any repayment of any Tax received by any Group Company by way of a cash payment or as credit or set-off (Verrechnung) against a Tax payable by a Group Company.

17.11 Tax Elections

17.11.1 The Sellers acknowledge that Purchaser may make an election under Section 338(g) of the Internal Revenue Code of 1986, as amended to treat the purchase of the Shares as an asset acquisition for U.S. federal income tax purposes with respect any of the Group Companies that are eligible to make such election, and the Sellers agree that they will reasonably cooperate, and – to the extent factually doable after Closing Date- that they will cause the Group Companies to reasonably cooperate, with the Purchaser to the extent reasonably requested in connection with making any such elections. Purchaser shall thereby treat the shares in the Group Companies as a C Corporation for US income tax purposes at all times through and including the Closing Date.

17.11.2 Further, Purchaser may request – to the extent factually doable after Closing Date - that the Sellers cause some or all of the Group Companies to make an entity classification election to be treated as either a disregarded entity or a partnership, as applicable, for U.S. federal income tax purposes, with the elections to be effective prior to the Closing Date. The Sellers agree that they will cause

Seite 74 von 83

the Group Companies to make such elections as requested by Purchaser, provided that such elections do not have any adverse U.S. federal income tax consequences or other negative tax consequence under applicable Tax laws to the Sellers. Sellers further agree to reasonably cooperate with Purchaser in connection with making such election and that they will cause the Group Companies to reasonably cooperate with the Purchaser to the extent reasonably requested in connection with making any such elections. Notwithstanding anything to the contrary, Purchaser will not make any entity classification elections for any Group Company retroactive to a date that is prior to or on (including) the Closing Date. However, Purchaser shall be free to make any entity classification elections for a Group Company effective after the Closing Date (excluding the Closing Date).

17.11.3 Sellers do not assume any liability for any measures and actions contemplated under this clause 17.11, any liability of Sellers and their direct or indirect shareholders and investors shall be excluded to the broadest extent permissible. Any proven and adequate costs and expenses of Sellers and their direct or indirect shareholders and investors incurred in connection with clause 17.11 shall be borne and reimbursed by Purchaser. To the extent a Tax election pursuant to this clause 17.11 is detrimental to the position of Sellers or any of Sellers’ direct or indirect shareholders and investors (in particular in the form of any increased tax burden) or the Group or the tax treatment of the transaction contemplated hereunder Purchaser shall indemnify and hold harmless Sellers from any detrimental Tax effects , in particular any additional or increased Tax payments including any Tax on the indemnification payments (if any) and consequences resulting therefrom upon first demand; provided, however that the Sellers represent that none of the Group Companies will be treated as a controlled foreign corporation as defined in Section 957(a) of the Internal Revenue Code of 1986 for any period prior to and including the Closing Date, and the Sellers agree that the indemnity described in this Section 17.11.3 shall not apply to any costs incurred by the Sellers as a result of the fact that any Group Company was a controlled foreign corporation.

17.12 All payments to be made under this clause 17 shall constitute adjustments of the Share Purchase Price.

17.13 All claims of the Purchaser under this clause 17 shall exist irrespective of actual or potential knowledge of the Purchaser, related parties to the Purchaser, their respective advisors or employees.

17.14 Unless expressly stipulated otherwise, clause 17 shall exclusively govern the Tax Indemnity.

18 Non-Compete and Non-Solicit

18.1 Non-compete

18.1.1 (x) For a period of twenty-four (24) months from the Closing Date, the Sellers 4 through 9 and (y) for a period of twelve (12) months from the Closing Date Sellers 1 through 3 shall not, and the Sellers shall procure that none of their respective Affiliates shall, directly or indirectly, in all of the countries of the European Union, the United Kingdom, the United States, Canada, Brazil, Mexico, Chile, South Africa, Australia and India (the “Territories”)

Seite 75 von 83

18.1.1.1 own, manage, operate, control, enable (whether by license, sublicense, assignment or otherwise) or otherwise engage or participate or be involved in any manner in the Restricted Businesses (other than through the Group Companies prior to Closing), and/or

18.1.1.2 be connected as a shareholder of or partner to any corporation, limited liability company, partnership or other entity that, directly or indirectly, engages in the Restricted Businesses or otherwise competes with the business in which any Group Company is involved or becomes involved in up to the Closing Date.

18.1.2 For the purposes of this clause 18.1.2, "Restricted Businesses" means the provision of post-secondary university or vocational education and training courses either on-ground or online.

18.1.3 The non-compete obligation pursuant to this clause 18.1 shall not apply to an acquisition by any Seller and/or any of their Affiliates of minority shareholdings of up to 5% in a listed stock company.

18.2 Non-solicitation

For a period of three years from the Closing Date Sellers shall not, and Sellers shall procure that none of their Affiliates shall, directly or indirectly:

18.2.1 actively solicit, endeavour to solicit, influence or attempt to influence any employee, customer or supplier of any Group Companies to cease doing business with the Group Companies, or with a view to direct its purchase of the Group Companies' products and/or availing of services to itself or any person, firm, corporation, institution or other entity in competition with the business of the Group Companies;

18.2.2 solicit, influence or attempt to influence any employees and directors of or any other person employed, engaged or contracted by the Purchaser and/or the Group Companies (other than employees who (i) have been given notice of termination of their employment by the respective Group Company after the Closing Date, (ii) have given notice of termination of their employment or agreed to terminate their employment with the respective Group Company without any inducement by the Sellers or any of their Affiliates, or (iii) seek for employment with any of the Sellers or any of their Affiliates as a result of general advertising or otherwise upon their own initiative) to terminate or otherwise cease such employment, engagement or contract with the Purchaser and/or the Group Companies.

Parties agree that clause 18.2 shall not apply to the Delveo Employees.

19 Confidentiality

19.1 The Parties to this Agreement undertake to maintain silence about and to keep secret and confidential (x) the contents of this Agreement as well as the previous negotiations between them for an unlimited period and (y) all information in its possession relating to the terms of this Agreement, the business, affairs, properties or operations of the other Party or in the case of the

Seite 76 von 83

Sellers, also of the Group Companies ((x) and (y) together the “Confidential Information”), for a period of five years in case of Sellers 1 through 3 and ten years in case of the other Sellers commencing as of the Closing Date, provided, however, that nothing contained in this clause 19.1 shall prohibit and hinder any of the Sellers from continuing to exercise their respective professions and/or businesses (soll nicht daran gehindert sein, weiterhin seinen /ihren Beruf und/oder seine / ihre Geschäftstätigkeiten auszuüben) by making use of its/his abstract knowledge and professional expertise and experience (for the avoidance of doubt, without disclosing any Confidential Information explicitly relating to this Agreement or any Group Company) subject, however, to clause 18, which shall remain unaffected.

19.2 The contents hereof may, however, be disclosed and clause 19.1 shall not apply:

19.2.1 to employees or advisers of the respective Party or any of its Affiliates who are subject to customary or professional confidentiality obligations (it being understood that each Party shall cause its and its Affiliates' directors, officers, employees and consultants to whom such information has been disclosed to comply with the commitment set forth in clause 19.1);

19.2.2 to existing or future investors of the Sellers 1 through 2 to the extent they are subject to customary confidentiality obligations and to the extent that Sellers 1 through 2 may reasonably assume that such investors will not use this information for directly or indirectly competing with any of the Group Companies within the Restricted Business;

19.2.3 to information that is or falls in the public domain or is otherwise communicated to third parties through no fault of such Party.

19.3 If any of the Parties is obliged by mandatory provisions or requirements of any laws issued by any government or any judicial, regulatory or stock exchange authority having jurisdiction over such Party to disclose this Agreement or individual provisions hereof, such Party shall be permitted to do so. This confidentiality obligation shall not apply to a notification of the change of control as such within the scope of a press release jointly agreed upon between the Parties after the execution of this Agreement.

20 Delveo Carve-Out

20.1 Upon request of Seller 1, the Company shall do either (i) or both (i) and (ii) (with the request of Seller 1 not having to be exercised simultaneously in relation to (i) and (ii)) of the following:

(i) the Company shall without undue delay be obligated to take and effect any measures required to spin-off / carve out the Delveo Business (including the employees (for avoidance of doubt only to the extent legally permissible and not subject to third party consent) pertaining to such business, the “Delveo Employees”) into a new limited liability company in a tax optimized manner with a share capital in the nominal value of EUR 25,000.-- (in words: twenty five thousand euros) (the “Delveo GmbH”) subject to approval of Seller 1 and at Seller 1’s expenses; and

(ii) the Company shall sell and transfer all shares in Delveo GmbH to Seller 1 or a third party nominated as transferee by Seller 1 (the “Delveo Call Option” );

Seite 77 von 83

whereas the request to carry out the actions and transactions set forth in items (i) and (ii) above may only validly be exercised within 24 months after the Closing Date (the “Delveo Exercise Period”) by Seller 1 (it being understood that the Seller 1 shall together with the aforementioned request communicate the third party nominee and after such request Seller 1 or such nominee, as the case may be, shall be obliged to accept the sale and transfer of the shares in Delveo GmbH set out in item (ii) above). The purchase price for the shares in Delveo GmbH shall be EUR 25,000.-- (in words: twenty five thousand euros) and the transfer of these shares shall be subject to the payment of the purchase price. The Company shall indemnify and hold harmless Seller 1 or the nominated acquirer from any liability and claims pursuant to clause 133 UmwG in relation to the businesses retained by the Company; conversely, the Seller 1 and the nominated acquirer shall indemnify and hold harmless the Company from any liability and claims pursuant to clause 133 UmwG in relation to the Delveo Business and any other businesses conducted by Delveo GmbH. Upon the transfer being effected Delveo GmbH shall grant a non-exclusive, unlimited common license (einfache, nicht beschränkte, nicht exklusive) for the use for any students on the CP Group platform (B2B or B2C), but in any case limited to its analytics functions to the Group Companies to use the products from the Delveo Business free of charge in the territory of the Federal Republic of Germany. This implies that the Delveo GmbH provides a branded platform with all functionalities of Delveo analytics with the IUBH brand. IUBH can use this platform with all available reporting functions for its students (B2C and B2B free of charge, but will not resell the product separately. As Delveo is a web application, the IUBH branded platform is operated by the Delveo GmbH.

20.2 However, the exercise of rights of Seller 1 pursuant to clause 20.1 are subject to a payment in the amount of EUR 250,000.-- (in words: two hundred fifty thousand euros) into a joint blocked account (gemeinsames Sperrkonto) of the Seller 1 and the Purchaser (the “Delveo Blocked Account” ) after the Closing Date; whereas, an amount of EUR 200,000.-- (in words: two hundred thousand euros) shall serve as security for reimbursement of direct development costs of the Delveo Business reasonably incurred during the Delveo Exercise Period and an amount of EUR 50,000.-- (in words: fifty thousand euros) shall only serve as reserve for (i) the close down and costs related to the establishment and execution of the Delveo Call Option (and must not be used for any reimbursement of any development costs) in case Seller 1 does not exercise its rights pursuant to clause 20.1 within the Delveo Exercise Period. Seller 1 and Purchaser may only jointly dispose of any amounts credited to the Delveo Blocked Account. For the avoidance of doubt, Purchaser shall not stop or hinder the development of the Delveo Business including the investment of funds which the Delveo Employees deem necessary for the development of the Delveo Business up to an amount of EUR 200,000.-- (in words: two hundred thousand euros). For the avoidance of doubt, Purchaser shall be entitled to stop or hinder at its sole discretion the investment of funds in the Delveo Business which exceed EUR 200,000.-- (in words: two hundred thousand euros).

20.3 Seller 1 and Purchaser are obligated to release the Delveo Blocked Account only as follows:

20.3.1 Seller 1 and Purchaser, each, shall only release any amounts up to at maximum EUR 200,000.-- (in words: two hundred thousand euros) to any account designated by the Purchaser upon demonstrating the spending of respective direct costs developing the Delveo Business within the Delveo Exercise Period until the earlier of (x) the transfer of the shares in Delveo GmbH pursuant to clause 20.1 becoming effective or (y) the expiry of the Delveo Exercise Period or (z) Seller 1

Seite 78 von 83

having finally abstained from exercising the Delveo Call Option (the “Delveo Call Option Withdrawal”).

20.3.2 In case of the transfer of the shares in Delveo GmbH following the exercise of the Delveo Call Option pursuant to clause 20.1, Purchaser shall be obligated to release the reminder of the Delveo Blocked Account existing at that point of time, however, in any case at least EUR 50,000.-- (in words: fifty thousand euros) to an account designated by Seller 1.

20.3.3 In case of (i) the expiry of the Delveo Exercise Period without the Delveo Call Option having been exercised or (ii) the Delveo Call Option Withdrawal , Seller 1 shall be obligated to release upon evident proof (x) an amount corresponding to the actual costs of winding up the Delveo Business, however, maximum up to an amount of EUR 50,000.-- (in words: fifty thousand euros) and (y), also, upon evident proof an amount corresponding to the respective direct costs reasonably accrued developing the Delveo Business until the expiry of (i) the Delveo Exercise Period or (ii) the Delveo Call Option Withdrawal which have not yet been reimbursed to the Purchaser.

20.3.4 If and to the extent there is a reminder after releases pursuant to clause 20.3.3 have taken place, such reminder shall be released to any account designated by Seller 1.

20.4 “Delveo Business”means the business described in Annex 20.4.

21 Costs

Each Party shall bear and pay the legal and other professional costs and expenses incurred by it in connection with the negotiation, execution and exchange of this Agreement and the performance of the obligations contemplated hereby. This also applies to income Taxes and corporate income Taxes owed by Sellers on their respective profits from the sale of the Sold Shares.

The costs for notarization of this Agreement shall be borne by the Purchaser.

22 Final Provisions

22.1 Notices

22.1.1 Any and all declarations and notices in connection herewith must be made in writing, unless notarization or another form is required under mandatory law. In order to comply with the written form requirement a sending by telefax (to the extent telefax numbers have been provided below) or letter shall be sufficient but not by way of another form of telecommunication. The electronic form, including email, does not replace the written form requirement.

22.1.2 Notices have to be addressed to:

If to the Purchaser's Guarantor:

BPP Holdings Limited

Seite 79 von 83

Address: BPP House, Aldine Place

142-144 Uxbridge Road

London W12 8AA

UK

Attn.: Chief Executive Officer

With a copy to:

Apollo Global, Inc.

Attention:  General Counsel

4025 S. Riverpoint Parkway, MS CF-KX01

Phoenix, Arizona USA

85040

and a further copy to:

DLA Piper UK LLP

Attn.: Dr. Benjamin Parameswaran

Jungfernstieg 7

20354 Hamburg

Germany

(Fax: 0049 40 18888111)

If to the Purchaser:

Apollo Global Germany GmbH

c/o Apollo Global, Inc.

Address: 4025 S. Riverpoint Parkway

Phoenix, Arizona, USA 

85040

Attention: General Counsel

With a copy to:

DLA Piper UK LLP

Attn.: Dr. Benjamin Parameswaran

Jungfernstieg 7

20354 Hamburg

Germany

(Fax: 0049 40 18888111)

If to the Sellers:

To the Sellers’ Agent

MFBay Mittelstandsfonds Bayern GmbH

Attn: Dr. Ingo Krocke

An den Römerhügeln 1,

82031 Grünwald

Seite 80 von 83

With a copy to:

AFR RECHTSANWÄLTE

Attn: Florian Aigner

Möhlstraße 2

D 81675 München .

(Fax: 0049 89 386660100)

For the avoidance of doubt, receipt by the respective Party of the SPA shall be relevant.

22.1.3 The Parties shall notify the remaining Parties of any change of their addresses stated in clause 22.1.2. Until the receipt of such notice by the other Party, the address above shall remain relevant.

22.2 Purchaser's Guarantor

The Purchaser’s Guarantor shall be jointly and severally liable for the proper fulfillment of any financial obligations of the Purchaser arising out of or in connection with this Agreement (i.e. in particular with respect to the payment of the Share Purchase Price, payment of the Earn-Out, payment of the Remaining Shareholder Redemption Amount, any payment obligations and undertakings in connection with clause 4, the indemnification obligations of Purchaser, claims for breach of warranties granted by the Purchaser), it being understood that the Sellers shall be obliged to first raise any claims against the Purchaser and only once the enforcement (Vollstreckung) of an enforceable title (vollstreckbarer Titel) attained by the relevant Seller against the Purchaser has failed shall the Purchaser’s Guarantor be obliged to fulfill the respective obligation instead of Purchaser.

22.3 Entire Agreement

This Agreement (including the Reference Deed) as well as any Annexes and documents referred to herein and which are an integral part hereof include any and all agreements and contain the entire understanding between the Parties with regard to the subject-matter hereof and supersede all former agreements, if any, existing in this regard. There do not exist any ancillary agreements of whatever nature.

22.4 Jurisdiction

If an agreement on the place of jurisdiction is permissible, the courts of Munich, Germany shall exclusively be competent for any and all disputes under and in connection with this Agreement.

22.5 Governing Law

This Agreement and the rights and obligations of the Parties hereunder shall exclusively be subject to the laws of the Federal Republic of Germany excluding German rules on conflicts of laws and the UN Convention on the Sale of Goods.

Seite 81 von 83

22.6 Several Liability

Unless otherwise expressly be provided for herein, the Sellers shall be liable for the obligations hereunder, in particular for those in connection with clauses 12 through 17 as partial debtors (Teilschuldner) and they are, respectively, entitled to the rights hereunder as partial creditors (Teilgläubiger). The percentage liability of each Seller as partial debtors shall be proportionate to the portion of the Share Purchase Price allocated to the respective Seller. In case Seller 3 becomes dissolved and liquidated Seller 1 becomes liable for the obligations of Seller 3 hereunder.

22.7 No Set-Off / Right of Retention

Except as explicitly otherwise provided in this Agreement, no Party shall be entitled (i) to set off (aufrechnen) any claims it may have under this Agreement against any claims any other Party may have under this Agreement or (ii) to refuse to perform any obligation it may have under this Agreement on the grounds that it has a right of retention (Zurückbehaltungsrecht) unless the rights or claims of the Party claiming a right of set-off (Aufrechnung) or retention (Zurückbehaltung) are not disputed by the other Party or have been confirmed by final decision of a competent court (Gericht) or arbitral tribunal (Schiedsgericht) or – if claimed in legal proceedings – a decision on the rights and claims of the Party can be taken in the last oral hearing.

22.8 Amendments

Any amendment of or supplement to this Agreement, including any amendment of, or supplement to this clause 22.8, as well as any declarations given hereunder must be made in writing in order to be effective, unless notarization is required.

22.9 Assignment

Unless otherwise agreed herein, neither this Agreement nor any right, remedy, liability or obligation resulting from this Agreement must be assigned by any of the Sellers without the prior written approval of the Purchaser and by the Purchaser without the prior written approval of the Sellers (except for any assignment from the Purchaser to any of its Affiliates, which shall not require the Sellers consent).

22.10 Sellers' Agent

22.10.1 If a joint action of Sellers is required pursuant to this Agreement the Sellers hereby authorize and empower Seller 1 (“Sellers’ Agent”)

(i) to perform any acts and give any declarations necessary and required in connection therewith; and

(ii) for making and receiving payments under this Agreement (as far as permissible under applicable laws) whereby the Parties agree and clarify that this shall not be construed to be or constitute a joint and several liability (gesamtschuldnerische Haftung) of Seller 1 under this Agreement.

Seite 82 von 83

22.10.2 Each Seller hereby authorizes Sellers' Agent to be his representative for giving and receiving notices under this Agreement and for executing all documents, deeds and writings and for doing all acts and deeds pursuant to the provisions of this Agreement, for and on their behalf (including execution of the Escrow Agreement and to handle all matters thereunder with the Escrow Agent).

Each Seller hereby agrees and confirms that in the event of a Party giving notice to the Sellers' Agent in the manner provided for in clause 22.1, such Party shall be deemed to have given notice to all of the Sellers.

22.10.3 All actions, waivers, consents given and omissions by the Sellers' Agent on behalf of the Sellers shall be binding on the Sellers.

22.10.4 The power of attorney contained in this clause 22.10 may be revoked by any Seller for good cause only by giving notice to the other Parties, provided, however, that and only if a new joint representative having power of attorney is validly set in place. Seller 1 shall be entitled to request such power of attorney to be transferred to Seller 2.

22.11 Severability

Should any provision of this Agreement be or become totally or partially invalid or unenforceable or should a required provision not be included in this Agreement, the validity of the remaining provisions hereof shall remain unaffected thereby. In lieu of the invalid or unenforceable provision or in order to fill in the gap, the Parties shall agree upon such legally permissible provision which most closely corresponds to the economic intention of the Parties or to what the Parties would have agreed upon according to the Agreement’s meaning and purpose if they had considered the invalidity or unenforceability of the respective provision or the gap herein. Should any provision hereof be invalid because of its territorial, factual, chronological or contractual scope of application, such provision should not be totally invalid but effective as agreed with the permissible scope which most closely corresponds to the originally agreed scope.

22.12 Copies

Each Party, the competent tax authorities, AFR RECHTSANWÄLTE, Munich, and DLA Piper UK LLP, Hamburg, each shall receive a certified copy of this deed.

This record has been read out to the individuals appearing, it has been approved by them and it has been signed by them and by the Notary autographically:

/s/ Florian Schütz

/s/ Florian Buddemeier

/s/ Sebastian Decker

/s/ Dr. Berhard Schaub

Seite 83 von 83

EX-2.2

Exhibit 2.2

Notarial Deed No. 7646 /2015

ms / 13795

FIRST AMENDMENT AGREEMENT

Before me,

Dr. Bernhard Schaub

Notary in Munich

appeared on tenth December two thousand fifteen

- 10. December 2015 -

in my offices at Tal 12, 80331 Munich, Germany:

1 Mr. Florian Aigner, born on 9. September 1971, resident AFR Rechtsanwälte Möhlstrasse 2, 81675 Munich , identified by Identity-Card,

acting on behalf of powers of attorney, the originals of which have been on hand while notarization and certified copies of which are attached to this deed for

1.1 Mr. Florian Schütz, born on September 20, 1969, resident 1751 Hawthorne St, Sarasota, FL 34239, USA,

1.2 Career Partner GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Welfenstraße 22, 81541 Munich, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 168017

1.3 Mr. Dr. Michael Weber, born on 18. October 1971, resident Liebigstr. 10b, 80538 Munich, Germany,

1.4 Mr. Prof. Dr. Peter Thuy, born on 9. March 1961, resident Germersreuth 41, 95234 Sparneck, Germany,

1.5 PROAKTIV Holding GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Säggasse 10, 83666 Waakirchen-Schaftlach, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 138075,

1.6 Mr. Dr. Sven Schütt, born on 18. August 1972, resident Kornblumenweg 14a, 81545 Munich, Germany,

1.7 Mr. Oliver Dange, born on 2. September 1965, resident Kapellenstraße 13, 61440 Oberursel, Germany.

1

1.8 MFBay Mittelstandsfonds Bayern GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at An den Römerhügeln 1, 82031 Grünwald, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 149476,

1.9 AUCTUS II B GmbH & Co. KG, a limited partnership incorporated under the laws of the Federal Republic of Germany, with its registered offices at An den Römerhügeln 1, 82031 Grünwald, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRA 90454,

1.10 Career Partner Co-Investment GbR, a civil law association under the laws of the Federal Republic of Germany, whose shareholders are Attegia GmbH, Grünwald, Dr. Nicolas Himmelmann, Jörg Grüneisen, Dr. Daniel Meuthen, Georg Görlich, Christoph Blanke, Auctus Management GmbH & Co. KG, Grünwald, Dr. Ingo Krocke and Florian Buddemeier, business address: Prinzregentenstr. 18, 80538 Munich, Germany.

3 Mrs. Cristina Villafrade, born on 09 March 1974, business address: c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, identified by Identity-Card,

not acting in her own name but on behalf of powers of attorney, the originals of which have been on hand while notarization and certified copies of which are attached to this deed for

3.1 Apollo Global Germany GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Hamburg, Germany, under docket no. HRB 135556,

3.2 BPP Holdings Limited, a corporation incorporated under the laws of England and Wales, with its business seat at BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA, registered with the Companies House under company number 01245304.

The persons appearing requested this deed to be recorded in the English language. The acting notary who is in sufficient command of the English language ascertained that the persons appearing are also in sufficient command of the English language.

After having been instructed by the acting notary, the persons appearing waived their rights to obtain the assistance of a sworn interpreter and to obtain a certified translation of this deed.

The persons appearing declared as follows requesting that it be notarized:

2

FIRST AMENDMENT AGREEMENT TO THE

AGREEMENT

ON

THE SALE AND TRANSFER OF SHARES

IN A

GERMAN LIMITED LIABILITY COMPANY (GMBH)

(NOTARIAL DEED NR. 6496/2015, DATED 20 OCTOBER 2015 AND NOTARIAL DEED NR. 6495/2015, DATED 19 AND 20 OCTOBER 2015, EACH OF THE ACTING NOTARY)

by and between

1. MFBay Mittelstandsfonds Bayern GmbH,

- hereinafter also referred to as the “Seller 1”-

2. Auctus II B GmbH & Co. KG

- hereinafter also referred to as the “Seller 2” -

3. Career Partner Co-Investment GbR

- hereinafter also referred to as the “Seller 3” -

4. Dr. Florian Schütz

- hereinafter also referred to as the “Seller 4” -

5. Dr. Michael Weber

- hereinafter also referred to as the “Seller 5” -

6. Prof. Dr. Peter Thuy

- hereinafter also referred to as the “Seller 6” -

7. PROAKTIV Holding GmbH

- hereinafter also referred to as the “Seller 7” -

8. Dr. Sven Schütt

- hereinafter also referred to as the “Seller 8” -

3

9. Oliver Dange

- hereinafter also referred to as the “Seller 9” -

- Seller 1 through Seller 9 hereinafter also each individually referred to as a “Seller”

and also collectively the “Sellers” -

10. Apollo Global Germany GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at c/o DLA Piper UK LLP, Jungfernstieg 7, 20354 Hamburg, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Hamburg, Germany, under docket no. HRB 135556

- hereinafter also referred to as the “Purchaser” -

11. Career Partner GmbH, a company incorporated under the laws of the Federal Republic of Germany, with its registered offices at Welfenstraße 22, 81541 Munich, Germany, registered with the commercial register (Handelsregister) of the local court (Amtsgericht) of Munich, Germany, under docket no. HRB 168017

- hereinafter also referred to as the “Company” -

- the Sellers, the Purchaser and the Company also each individually referred to as a “Party”

and also collectively the “Parties” -

12. BPP Holdings Limited, a corporation incorporated under the laws of England and Wales, with its business seat at BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA, registered with the Companies House under company number 01245304

- hereinafter also referred to as the “Purchaser’s Guarantor” (becoming a party to this Amendment Agreement in accordance with and for purposes of clause 22.2 of the Principal Agreement only) -

Reference is made to the reference deed (Bezugsurkunde), notarial deed no. 7645/2015, dated 10 December 2015, of the acting Notary, comprising the new Annexes 7.1, 7.1.2, 7.1.3 and 7.1.4-1 referred to in this deed. The reference deed, the original of which was on hand during the notarization, constitutes an integral part of this deed. The individuals present declare to have knowledge of the reference deed and each of them waived the right to have the reference deed read again aloud and to have it attached to this deed. The individuals present are informed that hereby the Annexes become an integral part of this deed. The individuals present approve the declarations that were made in the reference deed on their behalf.

4

TABLE OF CONTENT

TABLE OF CONTENT		5
RECITALS		6
1	DEFINITIONS AND INTERPRETATION	6
2	AMENDMENTS TO THE PRINCIPAL AGREEMENT	6
3	NO FURTHER AMENDMENT	16
4	AGREEMENT ON CLOSING DATE UNDER THE SPA AND AMENDMENT TO THE ESCROW AGREEMENT	17
5	EFFECTIVE DATE	17
6	COSTS, EXPENSES AND FURTHER FUNDING	17
7	MISCELLANEOUS	17

5

RECITALS

(A) The Parties and the Purchaser’s Guarantor have executed an Agreement on the Sale and Transfer of Shares in a German Limited Liability Company (GmbH) (notarial deed no. 6496/2015 dated 20 October 2015 and notarial deed no. 6495/2015 dated 19 and 20 October 2015, each of the acting notary) (the “Principal Agreement”) in order to set out the terms and conditions for the sale and transfer of the Shares in the Company from the Sellers to the Purchaser. The Principal Agreement, the original of which was on hand during the notarization, constitutes an integral part of this deed. The individuals present declare to have knowledge of the Principal Agreement and each of them waived the right to have the Principal Agreement read again aloud and to have it attached to this deed.

(B) Closing (as defined in the Principal Agreement) has not yet occurred.

(C) The Parties had, inter alia, agreed in the Principal Agreement that (i) Closing shall take place on the last Business Day of the calendar month of the occurrence or waiver of the last of the Closing Conditions and (ii) that the financial statement of the Group on the basis of which the Share Purchase Price shall be determined would cover the period from 01 January 2015 until such Business Day, setting out, inter alia, the Cash, Debt and NWC of the Group Companies as of such Business Day.

(D) Subsequent to the execution of the Principal Agreement the Parties have agreed on an alternate mechanism under the Principal Agreement regarding the timing of the Closing and the reference date for the calculation of the Share Purchase Price.

(E) In light of the foregoing, the Parties have agreed to enter into this first amendment agreement (“Amendment Agreement”).

NOW THEREFORE, the Parties agree as follows:

1DEFINITIONS AND INTERPRETATION

Unless otherwise defined herein, capitalized terms used in this Amendment Agreement shall have the meaning attributed to them in the Principal Agreement. The capitalized terms defined in this Amendment Agreement shall be deemed to be incorporated in the Principal Agreement.

2 AMENDMENTS TO THE PRINCIPAL AGREEMENT

2.1 With a view to modifying, altering and amending the provisions of the Principal Agreement, the Parties thereto have agreed to execute this Amendment Agreement. It is hereby provided, declared and agreed that this Amendment Agreement shall be read in conjunction with the Principal Agreement and provisions of this Amendment Agreement shall override the provisions of the Principal Agreement in the manner, and only to the extent set out herein below. This Amendment Agreement

6

shall be, and form, an integral part of the Principal Agreement. The Principal Agreement shall continue to be valid in full force and effect, except to the extent modified herein.

2.2 Amendment to clause 5 of the Principal Agreement

In clause 5 of the Principal Agreement

(i) the heading shall be deleted in its entirety and shall be replaced by the following new heading:

“Effective Date, Signing Date, Reference Date”; and

(ii) after clause 5.2 a new clause 5.3 shall be inserted which shall read as follows:

“5.3 The date with reference to which the Share Purchase Price is determined in accordance with clause 7 shall be December 31, 2015, 24:00 hrs. and is hereinafter referred to as the “Reference Date”.

2.3 Amendment to clauses 7.1, 7.3, 7.5, 7.6.2, 9.2, 11.2, 14.7.1 lit b, 16.2 and 17.2.1 of the Principal Agreement

In clauses 7.1, 7.3, 7.5, 7.6.2, 9.2, 11.2, 14.7.1 lit b, 16.2 and 17.2.1 of the Principal Agreement the word “Effective” shall be replaced by the word “Reference” and in Clause 9.2 lit j the word “Aufwendungen” shall be replaced by the word “Erträge” and, thus, such clauses of the Principal Agreement shall read as follows:

2.3.1    Clause 7.1 of the Principal Agreement shall read as follows:

“7.1 The purchase price for the Sold Shares (the "Share Purchase Price") shall be an amount to be determined as follows and in accordance with clause 7.5 (and on the basis of the Final Reference Date Accounts):

7.1.1 the Enterprise Value of the Group (in relation to 100 % of the Shares in the Company) which shall amount to EUR 96,000,000.-- (in words: Euro ninety six million) (the "Enterprise Value") (for the avoidance of doubt, the Parties agree and confirm that the calculation and determination of the Enterprise Value has been unanimously made by and among the Parties and the Parties therefore irrevocably waive any rights they may have to challenge or rescind or otherwise modify the calculation of the Enterprise Value irrespective of the legal and/or factual basis) (for the avoidance of doubt, clauses 12 et. seq. shall remain unaffected);

7.1.2 plus the aggregate of the cash and cash equivalents as defined in Annex 7.1.2 ("Cash") of the Group Companies as of the Reference Date as determined in the Final Reference Date Accounts (the "Reference Date Cash");

7

7.1.3 minus the aggregate debt as defined in Annex 7.1.3 ("Debt") of the Group Companies as of the Reference Date as determined in the Final Reference Date Accounts (the "Reference Date Debt");

7.1.4 plus / minus the amount by which the combined net working capital as defined in Annex 7.1.4-1 ("NWC") of the Group Companies as of the Reference Date as determined in the Final Reference Date Accounts (the “Reference Date NWC”) exceeds / falls short of the amount of EUR - 9,456,000 (in words: Euro minus nine million four hundred fifty six thousand) such shortfall or excess, as the case may be, the “Reference Date NWC Deviation”);

whereas Annex 7.1.4-2 contains certain methodologies to be applied in the context of the calculation of the illustrative numbers in the aforementioned Annexes and such methodologies shall also be applied when determining the Reference Date Cash, the Reference Date Debt and the Reference Date NWC (on the basis of actual amounts as of the Reference Date, not on the basis of the illustrative numbers in the aforementioned Annexes).

Annex 7.1 contains a sample calculation of the Reference Date Cash, the Reference Date Debt as well as the Reference Date NWC Deviation. The Parties agree that any effects resulting from or connected with the receipt of the HSP 1 Amount and the HSP 2 Amount and the HSP Matter on the calculation of the Share Purchase Price as set forth in this clause 7.1 and its respective annexes and the Reference Date Accounts shall only be taken into account as shown in the Annexes 7.1.3 and 7.1.4.

7.1.5 For the avoidance of doubt,

(i) in case the actual HSP 2 2nd Tranche Grant Payments are in excess of the Projected HSP 2 2nd Tranche Grant Payments such excess amount shall form part of the Reference Date Cash to be determined on the basis of the Final Reference Date Accounts;

(ii) the Remaining Shareholder Redemption Amount shall form part of the Reference Date Debt to be determined on the basis of the Final Reference Date Accounts.”

2.3.2    Clause 7.3 of the Principal Agreement shall read as follows

“7.3 Closing Day Payments / Estimated Share Purchase Price

On the basis of (i) the information available to the Parties as of the Signing Date as to the amounts of the Reference Date Cash, the Reference Date Debt and the Reference Date NWC and (ii) the Projected HSP 2nd Tranche Grant Payments, the Parties estimate that the Share Purchase Price will amount to EUR 82,410,000 (in words: Euro eighty two million four hundred ten thousand) (the "Estimated Share Purchase Price") which consists of

8

(i) an amount of EUR 71,910,000 (in words: Euro seventy one million nine hundred ten thousand) ("Estimated Cash Amount"); and

(ii) an amount of EUR 3,000,000.-- (in words: Euro three Million) ("Escrow Amount"); and

(iii) an amount of EUR 7,500,000.-- (in words: Euro seven Million five hundred thousand) (“HSP 2 Escrow Amount”).

On the Closing Date, subject to the terms of this Agreement, the Purchaser shall pay (i) the Estimated Cash Amount to the Joint Sellers' Account (ii) the Escrow Amount to the Escrow Account and (iii) the HSP 2 Escrow Amount to the HSP 2 Escrow Account.

Clause 6.2 shall apply mutatis mutandis to the allocation and apportionment of the Estimated Share Purchase Price.”

2.3.3    Clause 7.5 of the Principal Agreement shall read as follows:

“7.5 Reference Date Accounts and Final Determination of the Share Purchase Price

7.5.1 Sellers shall prepare and Purchaser shall procure that the Company fully assists Sellers in preparing the consolidated financial statement of the Group for the period from 1 January 2015 until the Reference Date, consisting of a balance sheet (Bilanz) and a profit and loss statement (Gewinn- und Verlustrechnung) in accordance with past practice (the "Reference Date Accounts"), as well as a statement setting forth the calculation and value of the following items

(i) the Reference Date Cash;

(ii) the Reference Date Debt;

(iii) the Reference Date NWC;

(iv) the Reference Date NWC Deviation;

(v) the Share Purchase Price resulting from (i) through (iv); and

(vi) the Purchase Price Adjustment, if any;

(i) to (iii) each as shown in the Reference Date Accounts

consistent with the relevant format used in Annex 7.1.2, 7.1.3, 7.1.4, respectively (items (i) through and including (v) together the "Financial Statement").

The Reference Date Accounts shall be prepared in accordance with the provisions of the HGB and German generally accepted accounting principles ("German GAAP") and the same assumptions, policies, methodologies and rules shall be applied which have been applied in preparing the Group's financial statements for the last financial year as in

9

particular set forth in the attachments and reports to the respective financial statements. The Reference Date Accounts and the Financial Statement shall not be audited and shall be delivered to the Purchaser (for review by Purchaser and/or an auditor selected by Purchaser) as soon as reasonably practical after the Closing Date, but in no event later than eighty (80) Business Days after the Reference Date.

Each Party shall bear its own costs and the costs of its respective advisors with respect to the preparation or review, as the case may be, of the Reference Date Accounts and Financial Statement.

7.5.2 Purchaser shall, after the Closing Date, ensure that Sellers and their advisors, accountants and representatives are (subject to customary release letters and hold harmless letters) granted all such access (however, only during business days and normal business hours) to records, premises and personnel of the Group as they may reasonably request for purposes of preparing and solving any disputes between the Parties regarding the Reference Date Accounts and the Financial Statement pursuant to and in accordance with clause 7.5.1. Purchaser shall instruct the management and staff of the Company and their advisors, accountants and representatives to co-operate with all such persons as reasonably requested by Sellers. The Parties shall endeavor that the auditor(s) acting or appointed in accordance with this Agreement with regard to the preparation and/or review of the Reference Date Accounts and/or the Financial Statement grant each other access to their respective working papers.

7.5.3 The Reference Date Accounts and the Financial Statement become final and binding for purposes of this Agreement as between the Parties if and to the extent the Purchaser does not within thirty (30) Business Days after receipt of both, the Reference Date Accounts and the Financial Statement, object to the Reference Date Accounts and/or the Financial Statement by providing the Sellers with (i) a written statement of objections, specifying in reasonable detail the grounds for the objections, and (ii) a revised version of the Reference Date Accounts (the "Revised Reference Date Accounts") and a revised version of the Financial Statement (the "Revised Financial Statement") taking into account such objections and the changes which are necessary in Purchaser's view to comply with the requirements of this Agreement. Each Party shall bear its own costs and the costs of its respective advisors with respect to the preparation or review, as the case may be, of the Revised Reference Date Accounts and Revised Financial Statement.

7.5.4 If Purchaser properly objects in compliance with clause 7.5.3 to the Reference Date Accounts and/or the Financial Statement within thirty (30) Business Days after receipt of the Reference Date Accounts and the Financial Statement, the Parties shall endeavor in good faith to settle the disagreement. If Sellers and Purchaser reach an agreement, the Reference Date Accounts and the Financial Statement, as varied by such agreement, shall become final and binding on the Parties for purposes of this Agreement. If and to the extent Sellers and Purchaser fail to settle the disagreement within fifteen (15) Business Days (or such other time period as the Sellers and the Purchaser may agree upon in writing) after receipt by the Sellers of Purchaser's statement of objections, the Parties shall jointly appoint an auditor who shall resolve the dispute between the Parties (the "Neutral Auditor") unless otherwise agreed upon by the Parties. The Neutral Auditor shall belong to the service network of any of the “big four” other than Ernst & Young (i.e. PwC, KPMG, or Deloitte). If the Parties are unable to agree on a Neutral Auditor within ten (10) Business Days, each Party shall have

10

the right to refer the matter to the German Institute of Chartered Accountants (Institut der Wirtschaftsprüfer in Deutschland e. V.) to determine the Neutral Auditor (such determination to be final and binding on the Parties). The Neutral Auditor shall act as an arbitral expert (Schiedsgutachter) within the meaning of Section 317 of the German Civil Code (Bürgerliches Gesetzbuch - "BGB") and its decision, which shall be made in accordance with the provisions of this clause 7.5, and the Reference Date Accounts and Financial Statement as amended by the Neutral Auditor, shall be binding and final upon the Parties (in the absence of manifest material error). Unless instructed otherwise by Sellers and Purchaser jointly, the items determined by the Neutral Auditor may not be above or below the figures proposed by Sellers and Purchaser, respectively. Any costs and expenses incurred by the Neutral Auditor and in relation to the dispute over the Reference Date Accounts and/or the Financial Statement shall be allocated and borne by the Parties in accordance with Section 91 et seq. of the German Civil Procedure Act (Zivilprozessordnung - "ZPO") which shall apply accordingly.

7.5.5 Sellers and Purchaser shall, within the subsequent five (5) Business Days after appointment of the Neutral Auditor, each prepare and deliver to the Neutral Auditor a written statement on the items in dispute, make available to the Neutral Auditor the Reference Date Accounts, the Revised Reference Date Accounts, the Financial Statement and the Revised Financial Statement and all other documentation and data reasonably required by the Neutral Auditor to make the required decisions and determination. The Neutral Auditor shall immediately submit copies of all documents and other data made available by Sellers or Purchaser to the respective other Parties as well. The Parties shall be given the opportunity to present their views in English in writing and at an oral hearing in the presence of Sellers and Purchaser and their professional advisors. The Parties shall use their best efforts to obtain the written decision of the Neutral Auditor with reasons for the decisions as soon as reasonably practicable. The Neutral Auditor shall be asked to send his/her decision in writing to the Parties within forty-five (45) days of the confirmation and acknowledgment by the Neutral Auditor of its appointment hereunder.

7.5.6 The Reference Date Accounts and Financial Statement or Revised Reference Date Accounts and Revised Financial Statement, as the case may be, that have become final and binding upon the Parties for purposes of this Agreement pursuant to and in accordance with clauses 7.5.3 through 7.5.5 are referred to herein as the "Final Reference Date Accounts" and the "Final Financial Statement".

The Reference Date Cash, Reference Date Debt, Reference Date NWC, Reference Date NWC Deviation, Share Purchase Price and Purchase Price Adjustment, in each case, shall be as set out in the Final Financial Statement.”

2.3.4    Clause 7.6.2 of the Principal Agreement shall read as follows:

"7.6.2 Any such amount pursuant to clause 7.6.1 (i) or clause 7.6.1 (ii) to be paid by either Purchaser or Sellers pursuant to and in accordance with clause 7.6.1 (each a "Purchase Price Adjustment") shall bear interest from the Closing Date until but excluding the date of payment at a rate of 5% (calculated daily on the basis of a year of three hundred sixty (360) days and payable at the same time as the payment to which it relates) and shall be paid within ten (10) Business Days after the Final Reference Date Accounts and Final Financial

11

Statement have become final and binding upon Sellers and Purchaser in accordance with clause 7.5."

2.3.5    Clause 9.2 of the Principal Agreement shall read as follows:

"9.2 "EBITDA" shall mean for the purpose of this clause 9

a. earnings from ordinary operations (Ergebnis der gewöhnlichen Geschäftstätigkeit), Section 275 (2) no. 14 HGB a.F. (alte Fassung);

b. minus earnings from other securities and financial assets (Erträge aus anderen Wertpapieren und Ausleihungen des Finanzanlagevermögens), Section 275 (2) no. 10 HGB);

c. minus interest income and similar income (sonstige Zinsen und ähnliche Erträge), Section 275 (2) no. 11 HGB;

d. plus interest expenses and similar expenses (Zinsen und ähnliche Aufwendungen), Section 275 (2) no. 13 HGB;

e. plus depreciations (Abschreibungen), Section 275 (2) no. 7 HGB and amortizations (Firmenwertabschreibungen);

f. minus appreciations (Zuschreibungen zum Anlagevermögen),

g. plus expenses relating to other accounting periods (periodenfremde Aufwendungen);

h. plus non-operating expenses without recurring characteristic (außergewöhnliche Aufwendungen mit nicht wiederkehrendem Charakter);

i. minus income relating to other accounting periods (periodenfremde Erträge);

j. minus non- operating income without recurring characteristic (außergewöhnliche Erträge mit nicht wiederkehrendem Charakter).

each on a consolidated basis of the Group and calculated in accordance with German GAAP and applying the same assumptions, policies, methodologies and rules which have been applied in preparing the Group`s financial statements for the past business years including the Reference Date Accounts. For the avoidance of doubt, the sections of the German Commercial Code (HGB) referred to in this clause 9.2 shall have the meaning as set forth in the German Commercial Code (HGB) as of the Signing Date (except as otherwise stated herein); future changes to the German Commercial Code (HGB), in particular the choice of applying future changes to the German Commercial Code (HGB) with retro-active effect, shall be disregarded for the purpose of the definition of EBITDA pursuant to this clause 9.2."

12

2.3.6    Clause 11.2 of the Principal Agreement shall read as follows:

"11.2 Waiver

Unless mutually agreed between the Parties, no Party shall be entitled to waive all or any of the Closing Conditions, except for (x) the Closing Conditions under clauses 11.1.7 through 11.1.10, 11.1.12 and 11.1.14 which may be waived by Purchaser in writing and (y) the Closing Condition under clause 11.1.9 and 11.1.12 (v) which may be waived by Sellers in writing whereas in such case Sellers as partial debtors shall indemnity and hold harmless Purchaser from any claims under the ARFH vendor loan to the extent such claims are not taken into account as Reference Date Debt in the Reference Date Accounts."

2.3.7    Clause 14.7.1, b. of the Principal Agreement shall read as follows:

"b. the claim refers to facts specifically taken into account in the amounts as reflected and shown in the Final Reference Date Accounts as deduction item in the Final Reference Date Debt or Final Reference Date Working Capital; or"

2.3.8    Clause 16.2 of the Principal Agreement shall read as follows:

"16.2 The Purchaser covenants not to assert and procures that the Group companies do not assert any claims against managing directors, and/or the members of the board of directors of the Group Companies as well as the (existing and former) members of the Company’s advisory board each as listed in Annex 16.2 for time periods prior to Closing if and to the extent the Purchaser basically (dem Grunde nach) has a claim for the respective damage against the respective Seller under clause 12 subsequent of this Agreement or in case of Dr. Ingo Krocke against any Seller under clause 12 subsequent of this Agreement (in each case unless in cases of willful misconduct). Clause 12 et. seq. shall remain unaffected, for the avoidance of doubt. Besides, the managing directors shall be granted full discharge with effect on the Closing Date on the basis of the Final Reference Date Accounts."

2.3.9    Clause 17.2.1 of the Principal Agreement shall read as follows:

"17.2.1 have been specifically included in the Final Reference Date Accounts or 2014 Financial Statements by means of liability, accrual or provision; or"

2.4    Amendment to clause 17.10.1 of the Principal Agreement

In clause 17.10.1 of the Principal Agreement the term “Final Effective Date Accounts” shall be replaced by the term “FinalReference Date Accounts” and, thus, clause 17.10.1 of the Principal Agreement shall read as follows:

13

"17.10.1The Purchaser shall pay to the Sellers as an additional portion of the Share Purchase Price (i) within five business days after receipt the amount of any Tax Refund received by the Purchaser, any Group Company or any of the Affiliates of the Purchaser other than the Group Companies after the Effective Date and relating to the Relevant Tax Period, except to the extent such Tax Refund was reflected as a receivable in the Final Reference Date Accounts and (ii) within five days after dissolution an amount equal to any unused Tax provision of the Group Companies (as shown in the Final Reference Date Accounts) which is dissolved in accordance with applicable statutory accounting principles (except to the extent that such Tax provision has been set off against any obligation of the Sellers to indemnify the Purchaser from any Tax Liability in accordance with Clause 17.2) and (iii) within five days after realization any Tax effects which result from or are connected with the HSP 2 Indemnification Claims and their respective satisfaction (including repayments to the respective public authorities) as well as the Recoverable HSP 2 2nd Tranche Handling Costs. Such payment obligation of the Purchaser shall be reduced by the amount of any Tax Burden related to the Tax Refund or the unused Tax provision. Any payment by the Purchaser under this clause 17.10.1 shall be repaid (i) if the Tax Refund must be repaid (be it by actual payment, by netting or by set-off), (ii) if the dissolution of any Tax provision turns out to be inappropriate under applicable statutory accounting principles or (iii) if any Tax effects which result from or are connected with the HSP 2 Indemnification Claims and their respective satisfaction (including repayments to the respective public authorities) as well as the Recoverable HSP 2 2nd Tranche Handling Costs are not realized."

2.5    Amendment to Annexes 7.1, 7.1.2, 7.1.3 and 7.1.4-1 to the Principal Agreement

Annexes 7.1, 7.1.2, 7.1.3 and 7.1.4-1 to the Principal Agreement (as contained in notarial deed nr. 6495/2015 of the acting notary, dated 19 and 20 October 2015) shall be deleted in their entirety and stand replaced with the new Annexes 7.1, 7.1.2, 7.1.3 and 7.1.4-1 to the Principal Agreement as contained in the reference deed (Bezugsurkunde), notarial deed nr. 7645/2015, dated 10 December 2015, of the acting notary.

2.6    Insertion of new clause 13.5, 13.6 and 13.7 of the Principal Agreement

After clause 13.4 of the Principal Agreement the following new clauses 13.5, 13.6 and 13.7 shall be inserted in the Principal Agreement which shall read as follows:

"13.5 Subject to clause 13.6 below, the Purchaser undertakes to ensure during the period commencing as of the Closing and ending on and including the Reference Date (“Reference Date Period”) that the relevant business of the Company and its Subsidiaries is managed with the diligence of a prudent businessman and exclusively within the ordinary course of business and in accordance with past practice (“Relevant Management Standards”).

In particular, but without limitation to the generality of the foregoing, during the Reference Date Period, subject to clause 13.6 below, the Purchaser shall procure that none of the Group Companies will, without the Sellers’ prior written approval, carry out any of the actions set out in clauses 13.2.1 through 13.2.14 (it being understood that, for purposes of this clause 13.5, any reference made in clauses 13.2.1 through 13.2.14 to the Purchaser shall be deemed to be a reference to any Seller and any reference in clauses 13.2.1 through 13.2.14 to a Seller shall be deemed to be a reference to the Purchaser).

14

For the avoidance of doubt, Sellers shall not unreasonably withhold or delay their consent, provided, however, that Sellers shall in any case be entitled to withhold their consent in case the respective action is in the reasonable view of the Sellers likely to adversely affect or influence the Reference Date Accounts and thus the determination of the Share Purchase Price. In case Sellers do not react to the request for approval within a period of five (5) Business Days upon its receipt such approval shall be deemed to be granted.

Notwithstanding anything in this Agreement to the contrary, the Purchaser and the Group Companies are after Closing entitled to take all actions and/or do such other things (in each case only to the extent such actions and/or other things are in compliance with applicable law) as may be necessary to:

(i) comply with any applicable mandatory law or any mandatory order of any competent public or judicial authority or existing contracts to which any of the Group Companies is a party; or

(ii) comply with this Agreement.

13.6 The Parties agree that, only for the purposes of clause 13.5 and provided that the Purchaser has not appointed new managing directors of the Company and has not directed the Company to appoint new managing directors of any other Group Companies, any acts, measures or omissions from the Group Companies that are not based on an explicit instruction by the Purchaser in its capacity as the sole shareholder in the Company (either directly vis-à-vis the managing directors of the relevant Group Company or - if an advisory board of a Group company exists and is capable of directing the managing directors of such Group Company (which the Parties agree is currently not the case) - indirectly through such advisory board) (it being understood that Sellers shall be obliged to evidence such instruction by the Purchaser), shall be considered to comply with the Relevant Management Standards, i.e. the Purchaser shall only be considered to be in breach of its obligations pursuant to clause 13.5, if and to the extent the Purchaser actively (through its shareholder rights) directs a Group Company to carry out or omit any act or measure, and such act, measure or omission does not comply with the Relevant Management Standards.

For the avoidance of doubt, the Purchaser shall be entitled to direct any Group Company to carry out or omit any act or measure, if and to the extent such act, measure or omission complies with the Relevant Management Standards, subject to the second paragraph of clause 13.5 in connection with clauses 13.2.1 through 13.2.14 which shall prevail.

13.7 If Purchaser is in breach of any of its obligations set forth in clauses 13.5 and 13.6, any effects resulting from such breach shall be disregarded for the purposes of preparing the Reference Date Accounts and the Financial Statement (and in particular calculating the Reference Date Cash, Reference Date Debt and Reference Date NWC).

15

Furthermore, any expenses, costs, losses, lost turnover and/or amounts transferred by the Company or any Group Company to an entity other than a company of the Group which (i) are referred to in clauses 9.3 lit b, d, e, g and h, (ii) have been incurred by a Group Company in the Reference Date Period due to any acts, measures or omissions of the Group Companies that are based on an explicit instruction by the Purchaser (either directly vis-à-vis the managing directors of the relevant Group Company or - if an advisory board of a Group company exists and is capable of directing the managing directors of such Group Company (which the Parties agree is currently not the case) - indirectly through such advisory board) (it being understood that Sellers shall be obliged to evidence such instruction by the Purchaser), and (iii) would not have been incurred by such Group Company if the transactions contemplated under this Agreement had not taken place (i.e. if Closing had not occurred), shall be disregarded for the purposes of preparing the Reference Date Accounts and the Financial Statement.

For the avoidance of doubt, the Reference Date Cash, Reference Date Debt and Reference Date NWC shall be as determined in the Final Reference Date Accounts and the Final Financial Statement, i.e. any dispute between the Parties in relation to whether or not respective effects have been adequately disregarded pursuant to this clause 13.7 shall be resolved in accordance with the procedure set forth in clause 7.5.

For the avoidance of doubt, clause 22.4 shall apply to any dispute between the Parties in relation to whether or not Purchaser is in breach of any of its obligations set forth in clause 13.5.

For the avoidance of doubt, Sellers shall have no rights and there shall be no legal consequences whatsoever in case of a breach by Purchaser of its obligations set forth in clause 13.5, other than those explicitly set out in this clause 13.7."

3    NO FURTHER AMENDMENT

It is hereby agreed and declared that the provisions of the Principal Agreement shall prevail save to the extent specifically amended or modified by this Amendment Agreement and, it is expressly reiterated that all provisions of the Principal Agreement shall, save to the extent amended and modified by the provisions of section 2 of this Amendment Agreement, continue in full force and effect and to operate in accordance with the terms of the Principal Agreement.

16

4    AGREEMENT ON CLOSING DATE UNDER THE SPA AND AMENDMENT TO THE ESCROW AGREEMENT

4.1 The Parties herby agree in accordance with clause 11.1 of the Principal Agreement, that the closing of the Principal Agreement shall take place on the date hereof at the offices of notary Dr. Bernhard Schaub, at Tal 12, 80331 Munich.

4.2 Furthermore, the Parties agree, that the amendments to the Principal Agreement effected by this Amendment Agreement make certain amendments to the Escrow Agreement (as defined in the Principal Agreement) necessary and, that the parties to the Escrow Agreement shall on the date hereof enter into a respective amendment agreement to the Escrow Agreement.

5    EFFECTIVE DATE

The provisions of this Amendment Agreement shall come into operation with immediate effect on the date specified herein above.

6    COSTS, EXPENSES AND FURTHER FUNDING

Each Party shall bear and pay the legal and other professional costs and expenses incurred by it in connection with the negotiation, execution and exchange of this Agreement and the performance of the obligations contemplated hereby.

The costs for notarization of this Agreement shall be borne by the Sellers.

7    MISCELLANEOUS

7.1 This Amendment Agreement together with the Principal Agreement (including the Reference Deed) as well as any Annexes and documents referred to herein and which are an integral part hereof include any and all agreements and contain the entire understanding between the Parties with regard to the subject-matter hereof and supersede all former agreements, if any, existing in this regard. There do not exist any ancillary agreements of whatever nature.

7.2 This Amendment Agreement shall and the rights and obligations of the Parties hereunder shall exclusively be subject to the laws of the Federal Republic of Germany excluding German rules on conflicts of laws and the UN Convention on the Sale of Goods.

7.3 If an agreement on the place of jurisdiction is permissible, the courts of Munich, Germany shall exclusively be competent for any and all disputes under and in connection with this Agreement.

7.4 The provisions of clause 19 (Confidentiality), clause 22.1 (Notices), clause 22.8 (Amendments), clause 22.9 (Assignment), clause 22.10 (Sellers’ Agent) and clause 22.11 (Severability) of the Principal Agreement shall apply mutatis mutandis to this Amendment Agreement.

17

7.5 Each Party, the competent tax authorities, AFR RECHTSANWÄLTE, Munich, and DLA Piper UK LLP, Hamburg, each shall receive a certified copy of this deed.

This record has been read out to the individuals appearing, it has been approved by them and it has been signed by them and by the Notary autographically:

/s/ Florian Aigner

/s/ Cristina Villafrade

/s/ Bernhard Schaub

18

EX-10.1

Exhibit 10.1

			Deferral Election Program for Non-Employee Board Members
			2016 Deferral Election Form
			Please complete and return this form by December 09, 2015.
Participant Information (please print)
	Last Name			First Name		Middle Initial
	Home Address			City	State	Zip
	Social Security Number		Daytime Phone	Home Phone	Email Address
Deferral Amount - 2016 Annual Retainer Fees
You may defer either 50% or 100% of your Annual Retainer Fees. Select one of the below options:
		¨I hereby decline to defer my 2016 Annual Retainer Fees.
		¨ I elect to defer % (Either 50% or 100%) of my Annual Retainer Fees.
Distribution Election - 2016 Annual Retainer Fees
Please indicate the form of payment for your Annual Retainer Fees below. Your 2016 account will be distributed in a lump sum or annual installments up to 10 years. Payments will commence on the thirtieth (30th) day following cessation of Board service.
I elect my distribution to be paid in the following form/manner:
Lump Sum
		¨    Check for Lump Sum Payment
Annual Installments
		¨    Substantially Equal Annual Installments over  years (indicate the number of annual installments you wish to receive between 2-10 years).
Deferral Amount - Restricted Stock Unit Award that is Granted in Calendar Year 2016
You may defer either any multiple of 10% up to 100% or any multiple of $1,000 of your RSU award for the year. Select one of the below options:
		¨I hereby decline to defer my 2016 Restricted Stock Unit Award.
		¨    I elect to defer % (Any multiple of 10% up to 100%) of my Restricted Stock Unit Award.
		OR
		¨    I elect to defer $ (Any multiple of $1,000) of my Restricted Stock Unit Award.
Distribution Election - Restricted Stock Unit Award that is Granted in Calendar Year 2016
Please indicate the form of payment for your Restricted Stock Unit Award below. Your 2016 account will be distributed in a lump sum or annual installments up to 10 years. Payments will commence on the thirtieth (30th) day following cessation of Board service.
I elect my distribution to be paid in the following form/manner:
Lump Sum
		¨    Check for Lump Sum Payment
Annual Installments
		¨    Substantially Equal Annual Installments over  years (indicate the number of annual installments you wish to receive between 2-10 years).
Acknowledgment and Signature
I understand that I must meet certain eligibility requirements in order to participate in this Plan. I also understand that the Apollo Education Group, Inc. Deferral Election Program for Non-Employee Board Members is unfunded and is not protected against company insolvency and my right to receive payments from my account is a claim against the general assets of Apollo as an unsecured general creditor. I may not sell, encumber, pledge, assign or otherwise alienate the deferred amount held in my account.
I understand that my deferral and distribution elections are irrevocable for the plan year.
	Participant Signature				Date
Deliver or mail to: Nolan Financial 6720-B Rockledge Drive, Suite 140 Bethesda, MD 20817 Phone: (877)-230-2432 Fax: (888)-630-3060 Apollo@nolanfinancial.com

EX-10.2

4025 South Riverpoint Parkway, Phoenix, AZ 85040

Exhibit 10.2

August 20, 2014

Mr. Joseph D’Amico

[address redacted]

Re:    Extension of Consulting Agreement

Dear Joe:

Reference is made to the Consulting Agreement between Joseph D’Amico (“Consultant”) and Apollo Education Group, Inc. (the “Company”) effective as of September 1, 2013 (the “Agreement”). Pursuant to Section 2 of the Agreement, the Company and Consultant hereby agree to amend the Agreement as follows:

Effective as of September 1, 2014, Section 2 of the Agreement is hereby amended to read as follows:

2. Term of Agreement. This Agreement shall commence as of the Effective Date and shall continue until August 31, 2015 (the “Consultancy Period”), unless (i) earlier terminated pursuant to a right of termination specified in this Agreement or (ii) extended pursuant to a written agreement or amendment executed by each party hereto.

Other than the terms and conditions that have been expressly modified by this letter agreement, all terms and conditions of the Agreement remain in full force and effect.

Sincerely,

APOLLO EDUCATION GROUP, INC.

By:	/s/ Fred Newton
	Fred Newton
	SVP Human Resources

SO AGREED:

/s/ Joseph L. D’Amico	8/21/14
Joseph D’Amico	Date

EX-10.3

Exhibit 10.3

December 1, 2015

Joseph D’Amico

[address redacted]

Dear Joe:

Reference is made to the letter dated April 27, 2015 offering you temporary employment through November 30, 2015. This letter will confirm our agreement to extend your temporary employment arrangements on the following terms:

Job Position	As of October 26, 2015, your job position of Interim Chief Financial Officer ended. For the remainder of your temporary employment with Apollo, you will assume the job position of Senior Advisor to the Chief Executive Officer. This position will be based in Chicago, Illinois and will report to Gregory Cappelli, Chief Executive Officer.
Monthly Salary and Work Hours	For the remainder of the term of your initial engagement which continues through November 30, 2015, you will continue to work on a full time basis and receive a monthly salary of $80,000, less required tax withholdings, payable on a bi-weekly basis in arrears. Beginning December 1, 2015, your temporary employment will transition to working part-time, approximately eighty (80) hours a month on average, over the course of the term of the extension period, which is expected to continue through May 31, 2016 (“the Extension Period”). During the extension period, your monthly salary will be $40,000, less required tax withholdings, payable on a bi-weekly basis in arrears, commensurate with your transition to working on a part-time basis. If the amount of hours you actually work during the Extension Period regularly exceeds the 80 hours per week, on average, that is anticipated, Apollo agrees to provide you with additional reasonable compensation for this additional work, as mutually agreed. You will not be eligible to participate in the Executive Officer Performance Incentive Plan or any other bonus plan of Apollo or its subsidiaries.
Benefits	As a temporary employee, you will not be eligible to participate in any of Apollo’s employee benefit plans, programs, or arrangements, including, but not limited to, health care plans, 401(k) plan, UShare profit sharing program, deferred compensation plan, Educational Assistance Plan, paid vacation or sick time, or holiday time off. During the Extension Period, the Company will provide you with a monthly stipend of $1,250. You will also be eligible to continue to serve as a director of the University of Phoenix, Inc. Board of Trustees and the Western International University

Board of Trustees. The Company shall compensate you for your services to these boards consistent with the amount of compensation paid to other non-employee members of these boards and payable in the same manner as compensation is paid to other non-employee members of these boards. Because you are already being compensated for these board-related services, any hours spent in performing such board-related services for these companies will not be counted in determining whether you have exceeded the anticipated 80-hour per month on average level of work contemplated in your part-time role.

Severance Benefits

Because you are being employed through a temporary employment engagement, the end of this employment is not considered to be an involuntary termination under the Senior Executive Severance Pay Plan (“Severance Plan”), which means that you will not be eligible to receive severance benefits under the Severance Plan or any other arrangement in connection with your employment as Interim CFO or Senior Advisor to the Chief Executive Officer.

In addition to the compensation terms described above, the following terms will also apply during this temporary employment:

Cooperation

Apollo will provide reimbursement for any reasonable expenses actually incurred in providing cooperation to Apollo, including by providing truthful information and testimony as reasonably requested by Apollo, with regard to any claim asserted by or against Apollo or its subsidiaries as to which you have relevant knowledge and, in situations where you are not a named defendant in the claim, Apollo will also provide a reasonable rate of pay per hour for time spent in providing such services.

Indemnification

Apollo agrees to indemnify you to the maximum extent permitted by Section 10-856 of the Arizona Revised Statutes, Article 5 of the University of Phoenix Bylaws, and Section 5.14 of the Apollo Bylaws in regard to your service as Interim CFO and Senior Advisor to the Chief Executive Officer. As set forth in the Separation Agreement and General Release and Waiver of Claims with Apollo that you executed on September 12, 2013 (the “Separation Agreement”), your rights under Section 13(c) of the Employment Agreement (as defined in the Separation Agreement) remain in force in accordance with their terms.

Nothing in this letter shall restrict in any way your rights or Apollo’s rights, which rights are hereby expressly reserved by each, to terminate employment at any time for any reason, with or without cause, subject to applicable law.

Please note that the terms of this offer do not affect the terms of your outstanding equity awards (other than the RSU award described herein), and such other equity awards shall remain outstanding subject to all of their terms and conditions.

Your employment will be subject to all terms and conditions contained in the current version of the Employee Handbook.

Should you have any questions concerning any part of this offer, please call Fred Newton at (602) 557-1703.

Sincerely,

/s/ Fred Newton

Fred Newton

Chief Human Resources Officer

Apollo Education Group, Inc.

I accept this offer as presented.
	/s/ Joseph L. D’Amico	As of 12/1/2015
	Joseph D’Amico	Date

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory W. Cappelli, certify that:

1. I have reviewed this Form 10-Q of Apollo Education Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 11, 2016

/s/ Gregory W. Cappelli  

Gregory W. Cappelli 

Chief Executive Officer and Director

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory J. Iverson, certify that:

1. I have reviewed this Form 10-Q of Apollo Education Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 11, 2016

/s/ Gregory J. Iverson

Gregory J. Iverson

Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apollo Education Group, Inc. (the “Company”) on Form 10-Q for the quarter ended November 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory W. Cappelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 11, 2016

/s/ Gregory W. Cappelli  

Gregory W. Cappelli 

Chief Executive Officer and Director

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Apollo Education Group, Inc. and will be retained by Apollo Education Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apollo Education Group, Inc. (the “Company”) on Form 10-Q for the quarter ended November 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory J. Iverson, Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 11, 2016

/s/ Gregory J. Iverson

Gregory J. Iverson

Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Apollo Education Group, Inc. and will be retained by Apollo Education Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Nov. 30, 2015	Jan. 04, 2016
Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	Nov. 30, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Registrant Name	Apollo Education Group Inc
Entity Central Index Key	0000929887
Current Fiscal Year End Date	--08-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Apollo Class A nonvoting common stock [Member]
Entity Information [Line Items]
Entity Common Stock Outstanding (in shares)		108,064,797
Apollo Class B voting common stock [Member]
Entity Information [Line Items]
Entity Common Stock Outstanding (in shares)		475,149

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Nov. 30, 2015	Aug. 31, 2015
Current assets:
Cash and cash equivalents	$ 419,766	$ 503,705
Restricted cash and cash equivalents	209,480	198,369
Marketable securities	257,012	194,676
Accounts receivable, net	214,379	198,459
Prepaid taxes	26,795	38,371
Other current assets	57,559	48,823
Assets of business held for sale	0	40,897
Total current assets	1,184,991	1,223,300
Marketable securities	78,874	95,815
Property and equipment, net	351,602	370,281
Goodwill	173,012	247,190
Intangible assets, net	137,452	143,244
Deferred taxes	89,190	92,105
Other assets	31,457	29,129
Total assets	2,046,578	2,201,064
Current liabilities:
Short-term borrowings and current portion of long-term debt	22,485	14,080
Accounts payable	49,282	64,100
Student deposits	239,946	245,470
Deferred revenue	187,830	186,950
Accrued and other current liabilities	251,948	280,847
Liabilities of business held for sale	0	40,897
Total current liabilities	751,491	832,344
Long-term debt	20,782	31,566
Deferred taxes	7,928	7,729
Other long-term liabilities	169,661	172,452
Total liabilities	$ 949,862	$ 1,044,091
Commitments and contingencies
Redeemable noncontrolling interests	$ 9,702	$ 11,915
Shareholders’ equity:
Preferred stock, no par value
Additional paid-in capital	$ 0	$ 0
Apollo Class A treasury stock, at cost	(3,923,029)	(3,928,419)
Retained earnings	5,092,995	5,153,452
Accumulated other comprehensive loss	(83,575)	(80,579)
Total Apollo shareholders’ equity	1,086,495	1,144,558
Noncontrolling interests	519	500
Total equity	1,087,014	1,145,058
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	2,046,578	2,201,064
Common stock [Member] | Apollo Class A nonvoting common stock [Member]
Shareholders’ equity:
Apollo common stock	103	103
Total equity	103	103
Common stock [Member] | Apollo Class B voting common stock [Member]
Shareholders’ equity:
Apollo common stock	1	1
Total equity	$ 1	$ 1

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Income Statement [Abstract]
Net revenue	$ 586,021	$ 714,525
Costs and expenses:
Instructional and student advisory	291,327	321,574
Marketing	93,802	126,883
Admissions advisory	34,188	57,085
General and administrative	70,326	71,823
Depreciation and amortization	27,394	33,631
Provision for uncollectible accounts receivable	15,313	17,398
Restructuring and impairment charges	97,823	18,748
Acquisition and other related costs	1,097	3,219
Total costs and expenses	631,270	650,361
Operating (loss) income	(45,249)	64,164
Interest income	919	589
Interest expense	(1,456)	(1,662)
Other loss, net	(843)	(1,290)
(Loss) income from continuing operations before income taxes	(46,629)	61,801
Provision for income taxes	(12,239)	(27,054)
(Loss) income from continuing operations	(58,868)	34,747
Loss from discontinued operations, net of tax	(3,259)	(2,278)
Net (loss) income	(62,127)	32,469
Net loss attributable to noncontrolling interests	1,362	1,316
Net (loss) income attributable to Apollo	$ (60,765)	$ 33,785
Earnings (Loss) Per Share, Basic [Abstract]
Continuing operations attributable to Apollo	$ (0.53)	$ 0.33
Discontinued operations attributable to Apollo	(0.03)	(0.02)
Basic (loss) income per share attributable to Apollo (in dollars per share)	(0.56)	0.31
Earnings (loss) per share, Diluted [Abstract]
Continuing operations attributable to Apollo	(0.53)	0.33
Discontinued operations attributable to Apollo	(0.03)	(0.02)
Diluted (loss) income per share attributable to Apollo (in dollars per share)	$ (0.56)	$ 0.31
Basic weighted average shares outstanding (in shares)	108,446	108,581
Diluted weighted average shares outstanding (in shares)	108,446	109,378

XML

Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands		3 Months Ended
		Nov. 30, 2015	Nov. 30, 2014
Statement of Comprehensive Income [Abstract]
Net (loss) income		$ (62,127)	$ 32,469
Other comprehensive (loss) income (net of tax):
Currency translation loss	[1]	(3,564)	(17,780)
Change in fair value of available-for-sale securities	[1]	(99)	(74)
Comprehensive (loss) income		(65,790)	14,615
Comprehensive loss attributable to noncontrolling interests		2,029	5,872
Comprehensive (loss) income attributable to Apollo		$ (63,761)	$ 20,487

[1] The tax effect on each component of other comprehensive (loss) income during the three months ended November 30, 2015 and 2014, respectively, was not significant.

XML

Condensed Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interests - USD ($) shares in Thousands, $ in Thousands	Total		Redeemable noncontrolling interests [Member]	Apollo Class A nonvoting common stock [Member]	Apollo Class B voting common stock [Member]	Permanent Equity [Member]	Common stock [Member] Apollo Class A nonvoting common stock [Member]	Common stock [Member] Apollo Class B voting common stock [Member]	Additional paid-in capital [Member]	Apollo Class A treasury stock [Member]	Retained earnings [Member]	Accumulated other comprehensive loss [Member]	Total Apollo shareholders' equity [Member]	Noncontrolling interests [Member]
Balance at Aug. 31, 2014	$ 1,180,802						$ 103	$ 1	$ 0	$ (3,936,607)	$ 5,143,949	$ (27,320)	$ 1,180,126	$ 676
Shares at Aug. 31, 2014				188,007	475
Redeemable noncontrolling interests at Aug. 31, 2014			$ 64,527
Treasury stock outstanding (in shares) at Aug. 31, 2014										79,585
Share repurchases (in shares)				0	0					755
Share repurchases	(20,064)		0	$ 0	$ 0				0	$ (20,064)	0	0	(20,064)	0
Share reissuances (in shares)				0	0					(227)
Share reissuances	217		0	$ 0	$ 0				10,308	$ 9,319	1,206	0	217	0
Net tax effect for stock incentive plans	(2,067)		0	0	0				(2,067)	0	0	0	(2,067)	0
Share-based compensation	10,711		0	0	0				10,711	0	0	0	10,711	0
Currency translation adjustment, net of tax	(17,780)	[1]	(4,466)	0	0	$ (13,314)			0	0	0	(13,224)	(13,224)	(90)
Available-for-sale securities adjustment, net of tax	(74)	[1]	0	0	0				0	0	0	(74)	(74)	0
Redemption value adjustments			472	0	0	472			0	0	472	0	472	0
Net (loss) income	33,829			0	0				0	0	33,785	0	33,785	44
Net (loss) income			(1,360)
Other	1,664		0	$ 0	$ 0				1,664	0	0	0	1,664	0
Balance at Nov. 30, 2014	1,192,176						103	1	0	$ (3,947,352)	5,179,412	(40,618)	1,191,546	630
Shares at Nov. 30, 2014				188,007	475
Treasury stock outstanding (in shares) at Nov. 30, 2014										80,113
Redeemable noncontrolling interests at Nov. 30, 2014			58,229
Balance at Aug. 31, 2015	1,145,058						103	1	0	$ (3,928,419)	5,153,452	(80,579)	1,144,558	500
Shares at Aug. 31, 2015				188,007	475
Redeemable noncontrolling interests at Aug. 31, 2015	11,915		11,915
Treasury stock outstanding (in shares) at Aug. 31, 2015										80,082
Share repurchases (in shares)				0	0					64
Share repurchases	(517)		0	$ 0	$ 0				0	$ (517)	0	0	(517)	0
Share reissuances (in shares)				0	0					(174)
Share reissuances	0		0	$ 0	$ 0				6,050	$ 5,907	143	0	0	0
Net tax effect for stock incentive plans	(3,470)		0	0	0				(3,470)	0	0	0	(3,470)	0
Share-based compensation	9,520		0	0	0				9,520	0	0	0	9,520	0
Currency translation adjustment, net of tax	(3,564)	[1]	(642)	0	0	(2,922)			0	0	0	(2,897)	(2,897)	(25)
Available-for-sale securities adjustment, net of tax	(99)	[1]	0	0	0				0	0	0	(99)	(99)	0
Redemption value adjustments			165	0	0	$ 165			0	0	165	0	165	0
Net (loss) income	(60,721)			$ 0	$ 0				0	0	(60,765)	0	(60,765)	44
Net (loss) income			(1,406)
Balance at Nov. 30, 2015	1,087,014						$ 103	$ 1	$ 0	$ (3,923,029)	$ 5,092,995	$ (83,575)	$ 1,086,495	$ 519
Shares at Nov. 30, 2015				188,007	475
Treasury stock outstanding (in shares) at Nov. 30, 2015										79,972
Redeemable noncontrolling interests at Nov. 30, 2015	$ 9,702		$ 9,702

[1] The tax effect on each component of other comprehensive (loss) income during the three months ended November 30, 2015 and 2014, respectively, was not significant.

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Operating activities:
Net (loss) income	$ (62,127)	$ 32,469
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Share-based compensation	9,520	10,711
Excess tax benefits from share-based compensation	0	(229)
Depreciation and amortization	27,394	36,404
Accelerated depreciation included in restructuring	2,953	3,086
Impairment charges and loss on asset dispositions	(73,393)	(972)
Non-cash foreign currency loss, net	352	535
Provision for uncollectible accounts receivable	15,313	17,398
Deferred income taxes	3	2,938
Changes in assets and liabilities:
Restricted cash and cash equivalents	(10,973)	(3,298)
Accounts receivable	(32,899)	(50,331)
Prepaid taxes	11,612	19,989
Other assets	(9,915)	(13,032)
Accounts payable	(14,690)	5,156
Student deposits	(4,880)	(26,138)
Deferred revenue	2,087	29,822
Accrued and other liabilities	(26,010)	(48,153)
Net cash (used in) provided by operating activities	(18,867)	18,299
Investing activities:
Purchases of property and equipment	(14,456)	(20,337)
Purchases of marketable securities	(109,715)	(59,490)
Maturities and sales of marketable securities	62,776	53,974
Other investing activities	(196)	405
Net cash used in investing activities	(61,591)	(25,448)
Financing activities:
Payments on borrowings	(3,448)	(596,789)
Proceeds from borrowings	926	3,563
Share repurchases	(517)	(20,064)
Share reissuances	0	217
Excess tax benefits from share-based compensation	0	(229)
Payment for contingent consideration	0	(21,371)
Net cash used in financing activities	(3,039)	(634,215)
Exchange rate effect on cash and cash equivalents	(442)	(2,473)
Net decrease in cash and cash equivalents	(83,939)	(643,837)
Cash and cash equivalents, beginning of period	503,705	1,228,813
Cash and cash equivalents, end of period	419,766	584,976
Supplemental disclosure of cash flow and non-cash information:
Cash paid for income taxes, net of refunds	0	3,214
Cash paid for interest	1,392	1,701
Restricted stock units vested and released	$ 1,430	$ 5,499

XML

Nature of Operations and Significant Accounting Policies

3 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Nature of Operations and Significant Accounting Policies

Nature of Operations and Significant Accounting Policies

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We offer undergraduate, graduate, certificate andnondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad. Refer toNote 17,Segment Reporting, for further information regarding our institutions and operating segments.

Our fiscal year is from September 1 to August 31.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Seasonality

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• University of Phoenix - University of Phoenix generally has lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to holiday breaks.

• Apollo Global - Our Apollo Global subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower net revenue in our second and fourth fiscal quarters, particularly for BPP, which also results in substantially lower operating results during these quarters due to BPP’s relatively fixed cost structure.

Because of the seasonal nature of our business and other factors, the results of operations for the three months ended November 30, 2015 are not necessarily indicative of the results to be expected for the fiscal year ending August 31, 2016.

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• During the fourth quarter of fiscal year 2015, we began presenting Carnegie Learning, Inc.’s operating results as discontinued operations on our Condensed Consolidated Statements of Operations. Refer to Note 3, Discontinued Operations.

• During the first quarter of fiscal year 2016, we began presenting all deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets as discussed further in Recent Accounting Pronouncements below.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our first quarter of fiscal year 2016 on a retrospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our August 31, 2015 Condensed Consolidated Balance Sheet, which increased noncurrent deferred tax assets $64.7 million and decreased noncurrent deferred tax liabilities $3.7 million.

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”(“ASU 2015-16”). The standard requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is permitted. We early adopted ASU 2015-16 during our first quarter of fiscal year 2016, which had no impact on our financial statements, and we will apply the new guidance to future adjustments to provisional amounts.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. We adopted ASU 2014-08 during our first quarter of fiscal year 2016, which had no impact on our financial statements, and we will apply the new guidance to applicable components that are determined to be held for sale or disposed in future periods.

Future Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”(“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective dateof ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. Accordingly, the new revenue recognition standard is effective for us on September 1, 2018 using either a full retrospective or a modified retrospective approach. We are currently evaluating which transition approach to use and the impact that the standard will have on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on September 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

Subsequent Events

On December 10, 2015, we acquired all of the outstanding shares of Career Partner GmbH (“Career Partner”) for an initial cash payment of €96 million (equivalent to approximately $105 million on the transaction date), plus a future contingent payment of up to €11 million (equivalent to approximately $12 million on the transaction date) calculated principally based on Career Partner’s operating results for calendar year 2016. Career Partner is a provider of education and training programs in Germany, and this acquisition supports our strategy to diversify and expand our global operations. The transaction will be accounted for as a business combination and Career Partner’s operating results will be included in our consolidated financial statements from the acquisition date. Career Partner’s operating results are not material to our consolidated financial statements, and we have not yet completed the related purchase price allocation principally due to the recent acquisition date.

XML

Restructuring and Impairment Charges

3 Months Ended

Nov. 30, 2015

Restructuring and Related Activities [Abstract]

Restructuring and Impairment Charges

Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Restructuring charges	$	24,430	$	18,748
Goodwill impairments(1)	73,393		—
Restructuring and impairment charges	$	97,823	$	18,748

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during the first quarter of fiscal year 2016.

Restructuring Charges

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
University of Phoenix	$	19,090	$	10,223
Apollo Global	404		58
Other	4,936		8,467
Restructuring charges	$	24,430	$	18,748

The following details the changes in our restructuring liabilities during the three months ended November 30, 2015:

	Lease and Related Costs, Net					Severance and Other Employee Separation Costs						Other Restructuring Related Costs					Total
($ in thousands)	2016 Restructuring		Prior Year Restructuring(1)			2016 Restructuring			Prior Year Restructuring(1)			2016 Restructuring		Prior Year Restructuring(1)
August 31, 2015	$	—	$	74,990		$	—		$	8,210		$	—	$	90		$	83,290
Expense	—		10,479			10,380			1,058			210		2,303			24,430
Other	—		(387		)	(53		)	—			—		(1,211		)	(1,651		)
Payments	—		(12,662		)	(3,158		)	(5,257		)	—		(813		)	(21,890		)
November 30, 2015(2)	$	—	$	72,420		$	7,169		$	4,011		$	210	$	369		$	84,179

⁽¹⁾ We have incurred $430 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $267 million, $114 million and $49 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $319 million in University of Phoenix, $19 million in Apollo Global, and $92 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of November 30, 2015 was approximately $147 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally include rationalizing our leased administrative office facilities, closing approximately 150 University of Phoenix ground locations, and workforce reductions. During the three months ended November 30, 2015, we incurred $13.8 million of expense for these prior year activities. The substantial majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-6% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of November 30, 2015, we had approximately $66 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Activities Initiated in Fiscal Year 2016

During the three months ended November 30, 2015, we incurred $10.6 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 700 positions. The expense associated with these activities for the three months ended November 30, 2015 is reflected in our segment reporting as follows: $8.2 million in University of Phoenix, $0.2 million in Apollo Global and $2.2 million in Other.

XML

Discontinued Operations

3 Months Ended

Nov. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

During the first quarter of fiscal year 2016, we completed the sale of Carnegie Learning for a nominal amount resulting in a $2.8 million loss on sale. We do not have significant continuing involvement with Carnegie Learning after the sale.

During fiscal year 2015, we began presenting Carnegie Learning’s assets and liabilities as held for sale on our Condensed Consolidated Balance Sheets and its operating results as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented. As discussed further in Note 17, Segment Reporting, Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment.

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ in thousands)	As of August 31, 2015
Cash	$	10,220
Accounts receivable, net	10,327
Property and equipment, net	15,912
Intangible assets, net	14,100
Other	3,972
Allowance for reduction of assets of business held for sale	(13,634		)
Total assets	$	40,897
Deferred revenue	$	35,602
Other	5,295
Total liabilities	$	40,897

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue	$	2,993		$	4,527
Costs and expenses:
Loss on sale	2,773			—
Other	4,519			8,192
Loss from discontinued operations before income taxes	(4,299		)	(3,665		)
Benefit from income taxes	1,040			1,387
Loss from discontinued operations, net of tax	$	(3,259	)	$	(2,278	)

The operating results of our discontinued operations only includes revenues and costs directly attributable to the discontinued operations. Accordingly, no interest expense or general corporate overhead has been allocated to Carnegie Learning. Additionally, we ceased depreciation on Carnegie Learning’s property and equipment when we determined it was held for sale.

XML

Acquisitions

3 Months Ended

Nov. 30, 2015

Business Combinations [Abstract]

Acquisitions

Acquisitions

During fiscal year 2015, we completed the following acquisitions to support our strategy to diversify and expand our professional development offerings and global operations:

• The Iron Yard - On June 11, 2015, we acquired a 62% interest in TIY Academy, LLC (“The Iron Yard”), a provider of nondegree information technology bootcamp programs in the United States, for $15.9 million.

• FAEL - On December 4, 2014, we acquired a 75% interest in Sociedade Técnica Educacional da Lapa S.A., a provider of postsecondary educational programs in Brazil under the name Faculdade da Educacional da Lapa (“FAEL”). We made an initial cash payment of R$73.8 million (equivalent to $28.9 million on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future that is principally based on FAEL’s calendar year 2018 net revenue. The contingent payment has a maximum of approximately R$34 million (equivalent to $9.1 million as of November 30, 2015), and its fair value on the acquisition date was insignificant based on our estimate of FAEL’s future revenue in relation to the contingent payment threshold as defined in the acquisition agreement.

We accounted for these acquisitions as business combinations, and the operating results of The Iron Yard and FAEL are included in our consolidated financial statements from respective acquisition dates. We have not provided pro forma information or the revenue and operating results of the acquired entities because their results of operations are not material, either individually or in the aggregate, to our consolidated results of operations in the respective periods of acquisition. The purchase price allocations are summarized below:

($ in thousands)	The Iron Yard			FAEL
Tangible assets (net of acquired liabilities)	$	5,262		$	(2,807	)
Indefinite-lived intangibles	—			15,163
Finite-lived intangibles	4,690			5,394
Goodwill	15,888			14,538
Total assets acquired and liabilities assumed, net	25,840			32,288
Less: Fair value of redeemable noncontrolling interests	(9,900		)	(3,437		)
Total fair value of consideration transferred	15,940			28,851
Less: Cash acquired	(5,401		)	(7,685		)
Cash paid for acquisition, net of cash acquired	$	10,539		$	21,166

XML

Financial Instruments

3 Months Ended

Nov. 30, 2015

Financial Instruments [Abstract]

Financial Instruments

Financial Instruments

We invest our excess cash in a variety of marketable securities, which are all classified as available-for-sale. The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective periods:

	November 30, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	496,494	$	—	$	—		$	496,494	$	496,494	$	—	$	—
Level 1:
Money market funds	105,325		—		—			105,325		105,325		—		—
Level 2:
Corporate bonds	175,257		40		(437		)	174,860		954		128,158		45,748
Tax-exempt municipal bonds	99,267		61		(62		)	99,266		1,344		73,120		24,802
Time deposits	50,315		—		—			50,315		25,129		25,186		—
Other	38,917		4		(49		)	38,872		—		30,548		8,324
Total	$	965,575	$	105	$	(548	)	$	965,132	$	629,246	$	257,012	$	78,874

	August 31, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	564,225	$	—	$	—		$	564,225	$	564,225	$	—	$	—
Level 1:
Money market funds	107,408		—		—			107,408		107,408		—		—
Level 2:
Corporate bonds	137,283		16		(271		)	137,028		1,823		82,047		53,158
Tax-exempt municipal bonds	97,022		68		(60		)	97,030		2,408		61,530		33,092
Time deposits	50,267		—		—			50,267		25,110		25,157		—
Other	36,634		10		(37		)	36,607		1,100		25,942		9,565
Total	$	992,839	$	94	$	(368	)	$	992,565	$	702,074	$	194,676	$	95,815

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

We measure our financial instruments at fair value on a recurring basis as follows:

• Money market funds - We use Level 1 inputs that primarily consist of real-time quotes for transactions in active exchange markets involving identical assets.

• Other financial instruments - We use a market approach with Level 2 observable inputs for all other securities. The Level 2 inputs include quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.

Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales.

XML

Accounts Receivable, Net

3 Months Ended

Nov. 30, 2015

Receivables [Abstract]

Accounts Receivable, Net

Accounts Receivable, Net

Accounts receivable, net consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Student accounts receivable	$	254,244		$	234,204
Less allowance for doubtful accounts	(48,038		)	(42,259		)
Net student accounts receivable	206,206			191,945
Other receivables	8,173			6,514
Total accounts receivable, net	$	214,379		$	198,459

Student accounts receivable is composed primarily of amounts due related to tuition and educational services. The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Beginning allowance for doubtful accounts	$	42,259		$	50,145
Provision for uncollectible accounts receivable	15,313			17,398
Write-offs, net of recoveries	(9,491		)	(14,406		)
Currency translation adjustment	(43		)	(455		)
Ending allowance for doubtful accounts	$	48,038		$	52,682

XML

Goodwill and Intangibles

3 Months Ended

Nov. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles

Goodwill and Intangibles

The following details changes in our goodwill by reportable segment during the three months ended November 30, 2015:

($ in thousands)	University of Phoenix			Apollo Global			Other			Total
Goodwill as of August 31, 2015	$	71,812		$	142,599		$	32,779		$	247,190
Impairment(1)	(71,812		)	—			(1,581		)	(73,393		)
Currency translation adjustment	—			(785		)	—			(785		)
Goodwill as of November 30, 2015	$	—		$	141,814		$	31,198		$	173,012

⁽¹⁾ During the first quarter of fiscal year 2016, we recorded impairment charges of $71.8 million and $1.6 million for our University of Phoenix and Western International University reporting units, respectively.

Intangibles consist of the following as of the respective periods:

	November 30, 2015										August 31, 2015
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount
Accreditations and designations	$	21,628	$	(7,850	)	$	(3,050	)	$	10,728	$	21,628	$	(6,972	)	$	(3,153	)	$	11,503
Trademarks	21,019		(3,380		)	(2,921		)	14,718		21,019		(2,942		)	(3,034		)	15,043
Curriculum	19,715		(8,424		)	(2,462		)	8,829		19,715		(7,361		)	(2,470		)	9,884
Student and customer relationships	5,437		(2,805		)	(2,026		)	606		5,517		(2,632		)	(1,975		)	910
Other	3,770		(768		)	(740		)	2,262		3,746		(597		)	(633		)	2,516
Total finite-lived intangibles	71,569		(23,227		)	(11,199		)	37,143		71,625		(20,504		)	(11,265		)	39,856
Trademarks	101,637		—			(12,559		)	89,078		101,637		—			(9,906		)	91,731
Accreditations and designations	14,470		—			(3,239		)	11,231		14,470		—			(2,813		)	11,657
Total indefinite-lived intangibles	116,107		—			(15,798		)	100,309		116,107		—			(12,719		)	103,388
Total intangible assets, net	$	187,676	$	(23,227	)	$	(26,997	)	$	137,452	$	187,732	$	(20,504	)	$	(23,984	)	$	143,244

The estimated future amortization expense of our finite-lived intangibles as of November 30, 2015 is as follows:

($ in thousands)	Remainder of 2016		2017		2018		2019		2020		2021		Thereafter		Total
Estimated future amortization expense(1)	$	7,968	$	9,917	$	7,375	$	3,359	$	1,975	$	1,794	$	4,755	$	37,143

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

Goodwill Impairment

Our market capitalization declined significantly during the first quarter of fiscal year 2016 after we reported our fourth quarter fiscal year 2015 results and our business outlook for fiscal year 2016. We believe the decline in the first quarter of fiscal year 2016 was attributable to University of Phoenix’s lower enrollment, increasing risk associated with the proprietary education sector, and uncertainty associated with its strategy to transform into a more focused, higher retaining and less complex institution. Although we believe the University’s new strategy in the longer term will improve retention and graduation rates and help stabilize enrollment, the associated initiatives have accelerated the enrollment decline at the University and we expect they will negatively impact its cash flows in the short-term. Based on the decline in market capitalization, we performed an interim goodwill impairment analysis for University of Phoenix in the first quarter of fiscal year 2016.

University of Phoenix represents the substantial majority of our consolidated operating results and, as discussed above, we believe our market capitalization decline in the first quarter of fiscal year 2016 was attributable to the University. Accordingly, we estimated the fair value of our University of Phoenix reporting unit using a market-based valuation approach, which incorporated assumptions that we believe would be a reasonable market participant’s view of the increased risk and uncertainty associated with the University and its expected future cash flows. The market-based approach included multiples derived from comparable companies with consideration of the University’s current operating trends and transformational strategy in relation to the other companies. Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for University of Phoenix compared to its carrying value. Based on the University’s estimated fair value and a hypothetical purchase price allocation, we determined the University would have no implied goodwill. Accordingly, we recorded a $71.8 million impairment charge in the first quarter of fiscal year 2016 representing the University’s entire goodwill balance. We did not record an income tax benefit associated with this charge as the University’s goodwill is not deductible for tax purposes.

During the first quarter of fiscal year 2016, we also recorded a $1.6 million goodwill impairment charge representing the entire goodwill balance for our Western International University reporting unit. Western International University operates in the same sector of the U.S. proprietary education industry as University of Phoenix.

We did not record any impairment charges associated with our other reporting units as we do not believe there have been any events or changes in circumstances since their respective most recent annual impairment tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount. As part of this consideration, we compared the sum of the estimated fair values of our reporting units to our market capitalization in the first quarter of fiscal year 2016, plus an assumed control premium to acquire a controlling interest in Apollo. Apollo is a “Controlled Company” under Nasdaq listing rules and our market capitalization is based solely on our nonvoting publicly traded Class A common stock. Based on our evaluation, the fair values of our reporting units were reasonable in relation to our market capitalization. However, we may be required to record additional goodwill impairment charges in the future if our critical assumptions deteriorate or our market capitalization declines further.

XML

Fair Value Measurements

3 Months Ended

Nov. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We measure and disclose certain financial instruments at fair value as described in Note 5, Financial Instruments.Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of November 30, 2015 and August 31, 2015:

			Fair Value Measurements at Reporting Dates Using
	Fair Value as of Respective Reporting Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
($ in thousands)
Contingent consideration as of November 30, 2015	$	7,542	$	—	$	—	$	7,542
Contingent consideration as of August 31, 2015	$	7,499	$	—	$	—	$	7,499

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Beginning balance	$	7,499	$	41,893
Change in fair value included in net income	43		(1,121		)
Payment for contingent consideration(1)	—		(34,480		)
Ending balance	$	7,542	$	6,292

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition, which was initially measured at $21.4 million based on information available as of the acquisition date.

As of November 30, 2015, we have a $7.5 million contingent consideration liability, which resulted from our purchase of the noncontrolling interest in Apollo Global during fiscal year 2013 and is based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017. The liability is measured at fair value using Level 3 inputs included in the valuation method. The inputs include estimated operating results scenarios for the applicable performance period, probability weightings assigned to operating results scenarios and the discount rates applied. We did not change our valuation techniques associated with recurring fair value measurements from prior periods.

Liabilities measured at fair value on a nonrecurring basis during the three months ended November 30, 2015 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			Fair Value Measurements at Measurement Date Using
($ in thousands)	Fair Value at Measurement Date		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for Three Months Ended November 30, 2015
Restructuring obligations	$	7,671	$	—	$	—	$	7,671	$	7,671

During the three months ended November 30, 2015, we recorded $7.7 million of aggregate initial lease obligations at fair value associated with our restructuring activities. We recorded obligation liabilities on the dates we ceased using the respective facilities, and we measured the liabilities at fair value using Level 3 inputs included in the valuation method. Refer to Note 2, Restructuring and Impairment Charges.

XML

Accrued and Other Liabilities

3 Months Ended

Nov. 30, 2015

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Salaries, wages and benefits	$	55,036	$	74,454
Student discounts, grants and scholarships	49,009		44,682
Restructuring obligations	41,892		38,921
Legal and other professional obligations	27,190		23,961
Deferred rent and other lease liabilities	10,627		12,181
Curriculum materials	9,528		11,690
Advertising	8,850		21,931
Other	49,816		53,027
Total accrued and other current liabilities	$	251,948	$	280,847

Other long-term liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Deferred rent and other lease liabilities	$	47,980	$	49,745
Restructuring obligations	42,287		44,369
Deferred gains on sale-leasebacks	19,799		20,168
Deferred revenue	17,581		16,687
Other	42,014		41,483
Total other long-term liabilities	$	169,661	$	172,452

XML

Debt

3 Months Ended

Nov. 30, 2015

Debt Disclosure [Abstract]

Debt

Debt

Debt and short-term borrowings consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Revolving Credit Facility	$	—		$	—
Capital lease obligations	13,856			16,863
Other	29,411			28,783
Total debt	43,267			45,646
Less short-term borrowings and current portion of long-term debt	(22,485		)	(14,080		)
Long-term debt	$	20,782		$	31,566

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of November 30, 2015 and August 31, 2015, but we had approximately $59 million and $41 million of outstanding letters of credit as of the respective periods. Subsequent to November 30, 2015, we borrowed $50 million under the Revolving Credit Facility to use in our acquisition of Career Partner. Refer to Note 1, Nature of Operations and Significant Accounting Policies.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and U.S. Department of Education financial responsibility composite score requirements. We were in compliance with all applicable covenants related to the Revolving Credit Facility at November 30, 2015 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at both November 30, 2015 and August 31, 2015 was 5.6%.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

XML

Income Taxes

3 Months Ended

Nov. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We have historically determined our interim income tax provision by applying our estimated effective income tax rate expected to be applicable for the full fiscal year to our income before income taxes for the period. Our effective income tax rate is dependent upon several factors, such as tax rates in state and foreign jurisdictions and the relative amount of income we earn in such jurisdictions. In determining our full year estimate, we do not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes. We exercise significant judgment in determining our income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain.

As further discussed in Note 7, Goodwill and Intangibles, there is significant uncertainty associated with University of Phoenix’s future operating results due to competitive factors and its initiatives to transform itself into a more focused, higher retaining and less complex institution. Based primarily on this uncertainty, we used the discrete method to calculate our interim tax provision for the first quarter of fiscal year 2016. Under the discrete method, we determined our tax expense for the interim period based on actual results as if the interim period were an annual period, which we believe provides a more reasonable interim income tax provision than the continued use of the estimated annual effective tax rate method. Our first quarter fiscal year 2016 effective income tax rate for continuing operations was also significantly impacted by the goodwill impairment charge for our University of Phoenix reporting unit, which was not deductible for tax purposes. Refer to Note 7, Goodwill and Intangibles.

During fiscal year 2015, the Internal Revenue Service (“IRS”) completed its review of our United States federal income tax return for fiscal year 2014. Our United States federal income tax return for fiscal year 2013 is currently open for review by the IRS and we are also participating in the IRS’s Compliance Assurance Process for fiscal years 2015 and 2016, which is a voluntary program in which taxpayers seek to resolve all or most issues with the IRS prior to or soon after filing their United States federal income tax returns. Additionally, we are subject to numerous ongoing audits by state, local and foreign tax authorities with various tax years as early as 2007 that remain subject to examination.

Although we believe our tax accruals are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from our historical income tax provisions and accruals.

XML

Shareholders' Equity and Redeemable Noncontrolling Interests

3 Months Ended

Nov. 30, 2015

Equity [Abstract]

Shareholders' Equity and Redeemable Noncontrolling Interests

Shareholders’ Equity and Redeemable Noncontrolling Interests

Share Repurchases

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of November 30, 2015. There is no expiration date on the repurchase authorizations and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs.

We also repurchase shares in connection with tax withholding requirements associated with the release of vested share-based awards, which do not fall under the repurchase program described above.

The following summarizes our share repurchase activity for the respective periods:

	Three Months Ended November 30,
(In thousands, except per share data)	2015		2014
Share repurchases under share repurchase program:
Number of shares repurchased	—		677
Weighted average purchase price per share	$	—	$	26.72
Cost of share repurchases	$	—	$	18,092
Share repurchases related to vesting of share-based awards:
Number of shares repurchased	64		78
Cost of share repurchases	$	517	$	1,972

Share Reissuances

We reissue our Class A common stock from our treasury stock as a result of the release of shares associated with share-based awards and purchases under our employee stock purchase plan. Share reissuances were as follows for the respective periods:

	Three Months Ended November 30,
(In thousands)	2015	2014
Number of shares reissued	174	227

XML

Earnings Per Share

3 Months Ended

Nov. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Our outstanding shares consist of Apollo Class A and Class B common stock. Our Articles of Incorporation treat the declaration of dividends on the Class A and Class B common stock in an identical manner. As such, both the Class A and Class B common stock are included in the calculation of our earnings per share.

Diluted weighted average shares outstanding includes the incremental effect of shares that would be issued upon the assumed exercise of stock options and the vesting and release of restricted stock units and performance share awards. The components of basic and diluted earnings per share are as follows:

	Three Months Ended November 30,
(In thousands, except per share data)	2015			2014
Numerator:
Net (loss) income attributable to Apollo (basic and diluted)	$	(60,765	)	$	33,785
Denominator:
Basic weighted average shares outstanding	108,446			108,581
Dilutive effect of restricted stock units and performance share awards(1)	—			618
Dilutive effect of stock options(1)	—			179
Diluted weighted average shares outstanding	108,446			109,378
Basic (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Diluted (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Anti-dilutive securities excluded from diluted (loss) income per share:
Anti-dilutive restricted stock units and performance share awards outstanding(1)	4,385			316
Anti-dilutive stock options outstanding(1)	3,716			2,476

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the three months ended November 30, 2015, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

XML

Share-Based Compensation

3 Months Ended

Nov. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

The following details share-based compensation expense for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Instructional and student advisory	$	2,784	$	2,982
Marketing	764		836
Admissions advisory	165		261
General and administrative	5,754		5,880
Restructuring and impairment charges	53		752
Share-based compensation expense	$	9,520	$	10,711

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted 568,000 restricted stock units and performance share awards during the three months ended November 30, 2015. The granted awards had a weighted average grant date fair value per share of $7.50. As of November 30, 2015, we had $61.6 million and $3.0 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested restricted stock units and performance share awards, respectively. This expense is expected to be recognized over a weighted average period of 2.7 years.

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted 4,000 stock options during the three months ended November 30, 2015. The weighted average grant date fair value and the weighted average exercise price of the options granted were $4.12 and $10.35, respectively. As of November 30, 2015, we had $8.9 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.8 years.

XML

Commitments and Contingencies

3 Months Ended

Nov. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Surety Bonds

As part of our normal operations, our insurers issue surety bonds for us that are required by various states where we operate. We are obligated to reimburse our insurers for any surety bonds that are paid. As of November 30, 2015, the face amount of these surety bonds was approximately $11 million.

Letters of Credit

As of November 30, 2015, we had approximately $59 million of outstanding letters of credit, which support certain of our obligations and guarantees provided by our subsidiaries as part of our normal operations for which fair value is not material.

Litigation and Other Matters

We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. We do not believe any of these are material for separate disclosure.

The following is a description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business.

Class Action Alleging Violations of Kentucky Wage and Hour Laws

On June 9, 2015, two former University of Phoenix employees filed an action in the Circuit Court of Jefferson County Kentucky alleging that they were wrongfully terminated from their positions with the University in violation of Kentucky and federal law. In this action, which is captioned Aldrich et al. v. The University of Phoenix, 15-C-2839 (Jefferson Cty. Circuit Court), plaintiffs also allege that the University violated Kentucky wage and hour law by failing to pay plaintiffs overtime and other required wages, and in connection with these wage and hour claims, they seek to represent a class of plaintiffs consisting of all individuals employed by the University within the past five years who performed a substantial part of their job duties in Kentucky. Plaintiffs seek to recover damages on their own behalf in connection with their alleged wrongful termination and past due wages, overtime compensation and other relief on behalf of the class in connection with the wage and hour claims.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Incentive Compensation False Claims Act Lawsuit

On May 25, 2011, we were notified that a qui tam complaint had been filed against us in the U.S. District Court, Eastern District of California, by private relators under the Federal False Claims Act and California False Claims Act, entitled USA and State of California ex rel. Hoggett and Good v. University of Phoenix, et al, Case Number 2:10-CV-02478-MCE-KJN. When the federal government declines to intervene in a qui tam action, as it has done in this case, the relators may elect to pursue the litigation on behalf of the federal government and, if successful, they are entitled to receive a portion of the federal government’s recovery.

The complaint alleges, among other things, that University of Phoenix has violated the Federal False Claims Act since December 12, 2009 and the California False Claims Act for the preceding ten years by falsely certifying to the U.S. Department of Education and the State of California that University of Phoenix was in compliance with various regulations that require compliance with federal rules regarding the payment of incentive compensation to admissions personnel, in connection with University of Phoenix’s participation in student financial aid programs. In addition to injunctive relief and fines, the relators seek significant damages on behalf of the Department of Education and the State of California, including all student financial aid disbursed by the Department to our students since December 2009 and by the State of California to our students during the preceding ten years. On July 24, 2014, the Court granted our motion to dismiss for lack of jurisdiction and dismissed relators’ complaint with prejudice. On December 14, 2014, relators filed a Notice of Appeal with the U.S. Court of Appeals for the Ninth Circuit, and their appeal remains pending before that court.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

K.K. Modi Investment and Financial Services Pvt. Ltd.

On November 8, 2010, a suit was filed by K.K. Modi Investment and Financial Services Pvt. Ltd. (“Modi”) in the High Court of Delhi at New Delhi against defendants Apollo, Western International University, Inc., University of Phoenix, Inc., Apollo Global, Inc., Modi Apollo International Group Pvt. Ltd., Apollo International, Inc., John G. Sperling, Peter V. Sperling and Jorge Klor De Alva, seeking to permanently enjoin the defendants from making investments in the education industry in the Indian market in breach of an exclusivity and noncompete provision which plaintiff alleges is applicable to Apollo and its subsidiaries. The case is entitled, K.K. Modi Investment and Financial Services Pvt. Ltd. v. Apollo International, et. al. We believe that the relevant exclusivity and noncompete provision is inapplicable to us and our affiliates. On October 31, 2014, the Court denied the Apollo defendants’ initial applications to have the case dismissed, concluding that plaintiffs’ complaint raised factual issues that needed to be resolved through the submission of evidence. Defendants appealed that ruling to the Division Bench of the High Court, and that appeal was denied by the Division Bench on August 17, 2015. We then filed a Special Leave Petition before the India Supreme Court on November 21, 2015, seeking leave to appeal the decision of the Division Bench. If plaintiff ultimately obtains the requested injunctive relief, our ability to conduct business in India, including through our joint venture with HT Media Limited, may be adversely affected. It is also possible that in the future K.K. Modi may seek to expand existing litigation in India or commence litigation in the U.S. in which it may assert a significant damage claim against us.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Attorney General Investigations

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present. We are cooperating with the Attorney General in this matter. We cannot predict the eventual scope, duration or outcome of this matter at this time, but we expect to provide to the Attorney General’s office information relating to aspects of our operations that is not limited to military students.

In May 2011 and January 2013, University of Phoenix received Civil Investigative Demands from the State of Massachusetts Office of the Attorney General. The Demands relate to an investigation of possible unfair or deceptive methods, acts, or practices by proprietary educational institutions in connection with the recruitment of students and the financing of education. The Demands seek documents, information and testimony regarding a broad spectrum of the University’s business for the time period of January 1, 2002 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

On October 22, 2010, University of Phoenix received notice that the State of Florida Office of the Attorney General in Fort Lauderdale, Florida had commenced an investigation into possible unfair and deceptive trade practices associated with certain alleged practices of the University. The notice included a subpoena to produce documents and detailed information for the time period of January 1, 2006 to the present about a broad spectrum of the University’s business. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of these state Attorneys General investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

In addition, from time to time, we receive requests for information from state Attorneys General, accrediting bodies, state higher education regulatory bodies and other federal and state government agencies relating to investigations or inquiries being conducted by other state or federal agencies, pending litigation or specific complaints received from students or former students. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices. We have received such a request from the Wisconsin Department of Justice for information relating to programs offered by University of Phoenix to Wisconsin residents.

UNIACC Investigations

UNIACC was advised by the National Accreditation Commission of Chile in November 2011 that its institutional accreditation would not be renewed and therefore had lapsed. Subsequently, in June 2012, a prosecutor’s office in Santiago, Chile requested that UNIACC provide documents relating to UNIACC’s relationship with a former employee and consultant who served as a member of the National Accreditation Commission until March 2012, and we received requests for additional information in connection with this investigation. Furthermore, in August 2012, the prosecutor’s office began requesting that UNIACC provide information about UNIACC’s business structure and operations and its relationship with other Apollo entities, in connection with an additional investigation regarding UNIACC’s compliance with applicable laws concerning the generation of profit by universities such as UNIACC. The prosecutor’s office has also requested additional information from UNIACC regarding certain government funding received by the institution. UNIACC is cooperating with these investigations. At this time, we cannot predict the eventual scope, duration or outcome of these investigations.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

In addition, in August 2015, we received a notice from the FTC that it had commenced an inquiry into University of Phoenix’s practices and procedures for safeguarding student and staff personal information, which inquiry has since been closed without any adverse action.

Because of the many questions of fact and law that may arise, the outcome of the FTC investigation is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this matter and, accordingly, we have not accrued any liability associated with this matter.

Open Colleges Investigations

In September 2015, Open Colleges received a Notice from the Australian Competition and Consumer Commission (“ACCC”) requiring Open Colleges to produce information about student refunds upon withdrawal and related matters for the period of time since July 2014. In addition, Open Colleges receives inquiries from time to time from governmental regulatory authorities regarding student complaints, including an inquiry in October 2015 from the Australian Skills Quality Authority regarding student complaints about marketing practices, refund policies and other matters. Open Colleges is cooperating with the relevant authorities in these matters, but we cannot at this time predict their eventual scope, duration or outcome.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Office of the Inspector General of the U.S. Department of Education (“OIG”) Subpoena

On March 21, 2014, University of Phoenix received a subpoena from the Mid-Atlantic Region of the OIG. The subpoena seeks the production by the University of documents and detailed information regarding a broad spectrum of the activities conducted in the University’s Centralized Service Center for the Northeast Region located in Columbia, Maryland, for the time period of January 1, 2007 to the present, including information relating to marketing, recruitment, enrollment, financial aid processing, fraud prevention, student retention, personnel training, attendance, academic grading and other matters. We are cooperating with these requests, but we cannot at this time predict the eventual scope, duration or outcome of this matter.

Because of the many questions of fact and law that may arise, the outcome of this matter is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss and, accordingly, we have not accrued any liability associated with this matter.

Securities Class Action (Teamsters Local 617 Pensions and Welfare Funds)

On November 2, 2006, the Teamsters Local 617 Pension and Welfare Funds filed a class action complaint alleging that we and certain of our current and former directors and officers violated the Securities Exchange Act of 1934. The complaint is entitled Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc. et al., Case Number 06-cv-02674-RCB.

The parties reached an agreement in principle to settle this matter for an immaterial amount and, on July 29, 2015, the district court entered an order approving the settlement and dismissing with prejudice the claims against defendants. Subsequent to the approval, an individual non-class member filed an untimely objection to the settlement with the district court. On December 7, 2015, the district court struck the objection.

XML

Regulatory Matters

3 Months Ended

Nov. 30, 2015

Regulatory Matters [Abstract]

Regulatory Matters

Regulatory Matters

All U.S. federal student financial aid programs are established by Title IV of the Higher Education Act and regulations promulgated thereunder. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in Higher Education Act reauthorization hearings, but the timing and terms of any eventual reauthorization cannot be predicted.

The Higher Education Act, as reauthorized, specifies the manner in which the U.S. Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification, which is granted in a Program Participation Agreement with the institution.

University of Phoenix’s Title IV Program Participation Agreement expired on December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

Additionally, in August 2014, the Department commenced an ordinary course program review of University of Phoenix’s administration of Title IV programs covering federal financial aid years 2012-2013 and 2013-2014, as well as compliance with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, the Drug-Free Schools and Communities Act and related regulations. During fiscal year 2015, the University received a Final Program Review Determination Letter with regard to this program review. All administrative matters are deemed by the Department to be resolved and/or closed, with the exception of findings regarding compliance with the Clery Act, which have been referred to the Department’s Clery Team and to the Administrative Action and Appeals Division which is standard protocol in such matters. The outcome of this matter is uncertain at this point and, based on the information available to us at present, we have not accrued any liability associated with this matter.

Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet at least one of the minimum ratios for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet at least one of the minimum ratios for two years will immediately cease to be Title IV eligible for a period of not less than three years.

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students enrolled in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

Higher Learning Commission Accreditation

University of Phoenix is regionally accredited by The Higher Learning Commission (“HLC”), which provides the following:

• Recognition and acceptance by employers, other higher education institutions and governmental entities of the degrees and credits earned by students;

• Qualification to participate in Title IV programs (in combination with state higher education operating and degree granting authority); and

• Qualification for authority to operate in certain states.

In July 2013, the accreditation of University of Phoenix was reaffirmed by HLC through the 2022-2023 academic year. The University is subject to the Standard Pathway reaffirmation process, pursuant to which the University will host a comprehensive evaluation visit in 2016-2017 and will undergo its next reaffirmation process in 2022-2023.

Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On October 7, 2015, University of Phoenix was placed on probationary status by the U.S. Department of Defense (“DoD”) in respect of the University’s participation in the DoD Tuition Assistance Program for active duty military personnel, while the DoD is considering whether to terminate the Voluntary Education Partnership Memorandum of Understanding with the University (“DoD MOU”). The DoD MOU is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program. While on probationary status, currently eligible enrolled students remain eligible to participate in the Tuition Assistance Program, but newly enrolled or transfer students of the University are not eligible. Additionally, the University is not permitted to sponsor activities at military installations, including job training and career events. The DoD cited various bases for its actions, including prior compliance issues relating to the use of “challenge coins” without proper trademark authorization, sponsorship of military morale, welfare and recreation events without the specific written authorization of the officer designated in the DoD MOU, and the pending investigations by the Federal Trade Commission and the California Attorney General’s office. The DoD has informed the University that the specified prior compliance issues have been appropriately addressed. The FTC and California Attorney General investigatory demands for information do not include any allegations of violations and no charges have been made. The University has timely responded to the DoD with relevant information for its consideration, and the DoD has subsequently requested additional information, including information unrelated to the subject matter of the original notice of probation. If the DoD MOU is terminated, currently enrolled active military students will no longer be eligible to participate in the DoD’s Tuition Assistance Program. In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of University of Phoenix’s net revenue.

U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation from the Department of Defense described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, as determined in the same manner prescribed in the 90/10 Rule.

XML

Segment Reporting

3 Months Ended

Nov. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We operate in the education industry and our operating segments have been determined based on the method by which our chief operating decision maker evaluates performance and allocates resources. We have not aggregated any of our operating segments, which are presented in our segment reporting as follows:

• University of Phoenix, which offers undergraduate and graduate degrees through its nine colleges in a wide range of program areas as well as various nondegree programs. A significant majority of the University’s students attend classes exclusively online, and the University also offers its educational programs and services at ground locations throughout the United States.

• Apollo Global, which includes our institutions based outside the U.S., and its corporate operations. Apollo Global acquired FAEL during the second quarter of fiscal year 2015, and FAEL’s operating results are included in our Apollo Global operating segment from the date of acquisition.

• Other,which includes College for Financial Planning,Western International University, Apollo Professional Development, and Apollo corporate activities. Apollo acquired The Iron Yard during the fourth quarter of fiscal year 2015, and its operating results are included in Other in our segment reporting from the acquisition date.

During the fourth quarter of fiscal year 2015, we classified Carnegie Learning as held for sale and began presenting it as discontinued operations. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment. As Carnegie Learning’s operating results are presented as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented, we have revised our segment reporting to exclude Carnegie Learning’s operating results.

A summary of financial information by reportable segment is as follows:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue:
University of Phoenix	$	462,617		$	592,853
Apollo Global	115,332			115,140
Other	8,072			6,532
Net revenue	$	586,021		$	714,525
Operating (loss) income(1):
University of Phoenix	$	(17,504	)	$	96,614
Apollo Global(2)	(2,335		)	(4,842		)
Other(3)	(25,410		)	(27,608		)
Operating (loss) income	(45,249		)	64,164
Reconciling items:
Interest income	919			589
Interest expense	(1,456		)	(1,662		)
Other loss, net	(843		)	(1,290		)
(Loss) income from continuing operations before income taxes	$	(46,629	)	$	61,801

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges and Note 7, Goodwill and Intangibles.

⁽²⁾ Apollo Global includes $0.6 million and $1.7 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

⁽³⁾ Other includes $0.5 million and $1.5 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

A summary of our consolidated assets by reportable segment is as follows:

($ in thousands)	November 30, 2015		August 31, 2015
University of Phoenix	$	602,873	$	648,755
Apollo Global	564,797		588,434
Other(1)	878,908		963,875
Total assets	$	2,046,578	$	2,201,064

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

XML

Nature of Operations and Significant Accounting Policies (Policies)

3 Months Ended

Nov. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation Policy

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Use of Estimates Policy

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation Policy

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Reclassifications Policy

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• During the fourth quarter of fiscal year 2015, we began presenting Carnegie Learning, Inc.’s operating results as discontinued operations on our Condensed Consolidated Statements of Operations. Refer to Note 3, Discontinued Operations.

• During the first quarter of fiscal year 2016, we began presenting all deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets as discussed further in Recent Accounting Pronouncements below.

XML

Restructuring and Impairment Charges (Tables)

3 Months Ended

Nov. 30, 2015

Restructuring and Related Activities [Abstract]

Restructuring and impairment charges

Restructuring and impairment charges include the following for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Restructuring charges	$	24,430	$	18,748
Goodwill impairments(1)	73,393		—
Restructuring and impairment charges	$	97,823	$	18,748

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during the first quarter of fiscal year 2016.

Changes in restructuring liabilities

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
University of Phoenix	$	19,090	$	10,223
Apollo Global	404		58
Other	4,936		8,467
Restructuring charges	$	24,430	$	18,748

The following details the changes in our restructuring liabilities during the three months ended November 30, 2015:

	Lease and Related Costs, Net					Severance and Other Employee Separation Costs						Other Restructuring Related Costs					Total
($ in thousands)	2016 Restructuring		Prior Year Restructuring(1)			2016 Restructuring			Prior Year Restructuring(1)			2016 Restructuring		Prior Year Restructuring(1)
August 31, 2015	$	—	$	74,990		$	—		$	8,210		$	—	$	90		$	83,290
Expense	—		10,479			10,380			1,058			210		2,303			24,430
Other	—		(387		)	(53		)	—			—		(1,211		)	(1,651		)
Payments	—		(12,662		)	(3,158		)	(5,257		)	—		(813		)	(21,890		)
November 30, 2015(2)	$	—	$	72,420		$	7,169		$	4,011		$	210	$	369		$	84,179

⁽¹⁾ We have incurred $430 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $267 million, $114 million and $49 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $319 million in University of Phoenix, $19 million in Apollo Global, and $92 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of November 30, 2015 was approximately $147 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

XML

Discontinued Operations (Tables)

3 Months Ended

Nov. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ in thousands)	As of August 31, 2015
Cash	$	10,220
Accounts receivable, net	10,327
Property and equipment, net	15,912
Intangible assets, net	14,100
Other	3,972
Allowance for reduction of assets of business held for sale	(13,634		)
Total assets	$	40,897
Deferred revenue	$	35,602
Other	5,295
Total liabilities	$	40,897

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue	$	2,993		$	4,527
Costs and expenses:
Loss on sale	2,773			—
Other	4,519			8,192
Loss from discontinued operations before income taxes	(4,299		)	(3,665		)
Benefit from income taxes	1,040			1,387
Loss from discontinued operations, net of tax	$	(3,259	)	$	(2,278	)

XML

Acquisitions (Tables)

3 Months Ended

Nov. 30, 2015

The Iron Yard [Member]

Purchase price allocation [Line Items]

Purchase price allocation

The purchase price allocations are summarized below:

($ in thousands)	The Iron Yard			FAEL
Tangible assets (net of acquired liabilities)	$	5,262		$	(2,807	)
Indefinite-lived intangibles	—			15,163
Finite-lived intangibles	4,690			5,394
Goodwill	15,888			14,538
Total assets acquired and liabilities assumed, net	25,840			32,288
Less: Fair value of redeemable noncontrolling interests	(9,900		)	(3,437		)
Total fair value of consideration transferred	15,940			28,851
Less: Cash acquired	(5,401		)	(7,685		)
Cash paid for acquisition, net of cash acquired	$	10,539		$	21,166

FAEL [Member]

Purchase price allocation [Line Items]

Purchase price allocation

The purchase price allocations are summarized below:

($ in thousands)	The Iron Yard			FAEL
Tangible assets (net of acquired liabilities)	$	5,262		$	(2,807	)
Indefinite-lived intangibles	—			15,163
Finite-lived intangibles	4,690			5,394
Goodwill	15,888			14,538
Total assets acquired and liabilities assumed, net	25,840			32,288
Less: Fair value of redeemable noncontrolling interests	(9,900		)	(3,437		)
Total fair value of consideration transferred	15,940			28,851
Less: Cash acquired	(5,401		)	(7,685		)
Cash paid for acquisition, net of cash acquired	$	10,539		$	21,166

XML

Financial Instruments (Tables)

3 Months Ended

Nov. 30, 2015

Financial Instruments [Abstract]

Financial instruments

The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective periods:

	November 30, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	496,494	$	—	$	—		$	496,494	$	496,494	$	—	$	—
Level 1:
Money market funds	105,325		—		—			105,325		105,325		—		—
Level 2:
Corporate bonds	175,257		40		(437		)	174,860		954		128,158		45,748
Tax-exempt municipal bonds	99,267		61		(62		)	99,266		1,344		73,120		24,802
Time deposits	50,315		—		—			50,315		25,129		25,186		—
Other	38,917		4		(49		)	38,872		—		30,548		8,324
Total	$	965,575	$	105	$	(548	)	$	965,132	$	629,246	$	257,012	$	78,874

	August 31, 2015
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	564,225	$	—	$	—		$	564,225	$	564,225	$	—	$	—
Level 1:
Money market funds	107,408		—		—			107,408		107,408		—		—
Level 2:
Corporate bonds	137,283		16		(271		)	137,028		1,823		82,047		53,158
Tax-exempt municipal bonds	97,022		68		(60		)	97,030		2,408		61,530		33,092
Time deposits	50,267		—		—			50,267		25,110		25,157		—
Other	36,634		10		(37		)	36,607		1,100		25,942		9,565
Total	$	992,839	$	94	$	(368	)	$	992,565	$	702,074	$	194,676	$	95,815

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

XML

Accounts Receivable, Net (Tables)

3 Months Ended

Nov. 30, 2015

Receivables [Abstract]

Accounts receivable, net

Accounts receivable, net consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Student accounts receivable	$	254,244		$	234,204
Less allowance for doubtful accounts	(48,038		)	(42,259		)
Net student accounts receivable	206,206			191,945
Other receivables	8,173			6,514
Total accounts receivable, net	$	214,379		$	198,459

Allowance for doubtful accounts

The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Beginning allowance for doubtful accounts	$	42,259		$	50,145
Provision for uncollectible accounts receivable	15,313			17,398
Write-offs, net of recoveries	(9,491		)	(14,406		)
Currency translation adjustment	(43		)	(455		)
Ending allowance for doubtful accounts	$	48,038		$	52,682

XML

Goodwill and Intangibles (Tables)

3 Months Ended

Nov. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in goodwill

The following details changes in our goodwill by reportable segment during the three months ended November 30, 2015:

($ in thousands)	University of Phoenix			Apollo Global			Other			Total
Goodwill as of August 31, 2015	$	71,812		$	142,599		$	32,779		$	247,190
Impairment(1)	(71,812		)	—			(1,581		)	(73,393		)
Currency translation adjustment	—			(785		)	—			(785		)
Goodwill as of November 30, 2015	$	—		$	141,814		$	31,198		$	173,012

⁽¹⁾ During the first quarter of fiscal year 2016, we recorded impairment charges of $71.8 million and $1.6 million for our University of Phoenix and Western International University reporting units, respectively.

Intangible assets

Intangibles consist of the following as of the respective periods:

	November 30, 2015										August 31, 2015
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Effect of Foreign Currency Translation			Net Carrying Amount
Accreditations and designations	$	21,628	$	(7,850	)	$	(3,050	)	$	10,728	$	21,628	$	(6,972	)	$	(3,153	)	$	11,503
Trademarks	21,019		(3,380		)	(2,921		)	14,718		21,019		(2,942		)	(3,034		)	15,043
Curriculum	19,715		(8,424		)	(2,462		)	8,829		19,715		(7,361		)	(2,470		)	9,884
Student and customer relationships	5,437		(2,805		)	(2,026		)	606		5,517		(2,632		)	(1,975		)	910
Other	3,770		(768		)	(740		)	2,262		3,746		(597		)	(633		)	2,516
Total finite-lived intangibles	71,569		(23,227		)	(11,199		)	37,143		71,625		(20,504		)	(11,265		)	39,856
Trademarks	101,637		—			(12,559		)	89,078		101,637		—			(9,906		)	91,731
Accreditations and designations	14,470		—			(3,239		)	11,231		14,470		—			(2,813		)	11,657
Total indefinite-lived intangibles	116,107		—			(15,798		)	100,309		116,107		—			(12,719		)	103,388
Total intangible assets, net	$	187,676	$	(23,227	)	$	(26,997	)	$	137,452	$	187,732	$	(20,504	)	$	(23,984	)	$	143,244

Future intangibles amortization

The estimated future amortization expense of our finite-lived intangibles as of November 30, 2015 is as follows:

($ in thousands)	Remainder of 2016		2017		2018		2019		2020		2021		Thereafter		Total
Estimated future amortization expense(1)	$	7,968	$	9,917	$	7,375	$	3,359	$	1,975	$	1,794	$	4,755	$	37,143

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

XML

Fair Value Measurements (Tables)

3 Months Ended

Nov. 30, 2015

Fair Value Disclosures [Abstract]

Fair value liabilities measured on recurring basis

Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of November 30, 2015 and August 31, 2015:

			Fair Value Measurements at Reporting Dates Using
	Fair Value as of Respective Reporting Dates		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
($ in thousands)
Contingent consideration as of November 30, 2015	$	7,542	$	—	$	—	$	7,542
Contingent consideration as of August 31, 2015	$	7,499	$	—	$	—	$	7,499

Fair value liabilities measured on recurring basis, unobservable input reconciliation

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Beginning balance	$	7,499	$	41,893
Change in fair value included in net income	43		(1,121		)
Payment for contingent consideration(1)	—		(34,480		)
Ending balance	$	7,542	$	6,292

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition, which was initially measured at $21.4 million based on information available as of the acquisition date.

Fair Value Measurements, Nonrecurring [Table Text Block]

Liabilities measured at fair value on a nonrecurring basis during the three months ended November 30, 2015 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			Fair Value Measurements at Measurement Date Using
($ in thousands)	Fair Value at Measurement Date		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses for Three Months Ended November 30, 2015
Restructuring obligations	$	7,671	$	—	$	—	$	7,671	$	7,671

XML

Accrued and Other Liabilities (Tables)

3 Months Ended

Nov. 30, 2015

Payables and Accruals [Abstract]

Accrued and other current liabilities

Accrued and other current liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Salaries, wages and benefits	$	55,036	$	74,454
Student discounts, grants and scholarships	49,009		44,682
Restructuring obligations	41,892		38,921
Legal and other professional obligations	27,190		23,961
Deferred rent and other lease liabilities	10,627		12,181
Curriculum materials	9,528		11,690
Advertising	8,850		21,931
Other	49,816		53,027
Total accrued and other current liabilities	$	251,948	$	280,847

Other long-term liabilities

Other long-term liabilities consist of the following as of the respective periods:

($ in thousands)	November 30, 2015		August 31, 2015
Deferred rent and other lease liabilities	$	47,980	$	49,745
Restructuring obligations	42,287		44,369
Deferred gains on sale-leasebacks	19,799		20,168
Deferred revenue	17,581		16,687
Other	42,014		41,483
Total other long-term liabilities	$	169,661	$	172,452

XML

Debt (Tables)

3 Months Ended

Nov. 30, 2015

Debt Disclosure [Abstract]

Debt

Debt and short-term borrowings consist of the following as of the respective periods:

($ in thousands)	November 30, 2015			August 31, 2015
Revolving Credit Facility	$	—		$	—
Capital lease obligations	13,856			16,863
Other	29,411			28,783
Total debt	43,267			45,646
Less short-term borrowings and current portion of long-term debt	(22,485		)	(14,080		)
Long-term debt	$	20,782		$	31,566

XML

Shareholders' Equity and Redeemable Noncontrolling Interests (Tables)

3 Months Ended

Nov. 30, 2015

Equity [Abstract]

Share repurchases

The following summarizes our share repurchase activity for the respective periods:

	Three Months Ended November 30,
(In thousands, except per share data)	2015		2014
Share repurchases under share repurchase program:
Number of shares repurchased	—		677
Weighted average purchase price per share	$	—	$	26.72
Cost of share repurchases	$	—	$	18,092
Share repurchases related to vesting of share-based awards:
Number of shares repurchased	64		78
Cost of share repurchases	$	517	$	1,972

Share reissuances

Share reissuances were as follows for the respective periods:

	Three Months Ended November 30,
(In thousands)	2015	2014
Number of shares reissued	174	227

XML

Earnings Per Share (Tables)

3 Months Ended

Nov. 30, 2015

Earnings Per Share [Abstract]

Earnings per share

The components of basic and diluted earnings per share are as follows:

	Three Months Ended November 30,
(In thousands, except per share data)	2015			2014
Numerator:
Net (loss) income attributable to Apollo (basic and diluted)	$	(60,765	)	$	33,785
Denominator:
Basic weighted average shares outstanding	108,446			108,581
Dilutive effect of restricted stock units and performance share awards(1)	—			618
Dilutive effect of stock options(1)	—			179
Diluted weighted average shares outstanding	108,446			109,378
Basic (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Diluted (loss) income per share attributable to Apollo	$	(0.56	)	$	0.31
Anti-dilutive securities excluded from diluted (loss) income per share:
Anti-dilutive restricted stock units and performance share awards outstanding(1)	4,385			316
Anti-dilutive stock options outstanding(1)	3,716			2,476

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the three months ended November 30, 2015, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

XML

Share-Based Compensation (Tables)

3 Months Ended

Nov. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation expense

The following details share-based compensation expense for the respective periods:

	Three Months Ended November 30,
($ in thousands)	2015		2014
Instructional and student advisory	$	2,784	$	2,982
Marketing	764		836
Admissions advisory	165		261
General and administrative	5,754		5,880
Restructuring and impairment charges	53		752
Share-based compensation expense	$	9,520	$	10,711

XML

Segment Reporting (Tables)

3 Months Ended

Nov. 30, 2015

Segment Reporting [Abstract]

Segment reporting information

A summary of financial information by reportable segment is as follows:

	Three Months Ended November 30,
($ in thousands)	2015			2014
Net revenue:
University of Phoenix	$	462,617		$	592,853
Apollo Global	115,332			115,140
Other	8,072			6,532
Net revenue	$	586,021		$	714,525
Operating (loss) income(1):
University of Phoenix	$	(17,504	)	$	96,614
Apollo Global(2)	(2,335		)	(4,842		)
Other(3)	(25,410		)	(27,608		)
Operating (loss) income	(45,249		)	64,164
Reconciling items:
Interest income	919			589
Interest expense	(1,456		)	(1,662		)
Other loss, net	(843		)	(1,290		)
(Loss) income from continuing operations before income taxes	$	(46,629	)	$	61,801

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges and Note 7, Goodwill and Intangibles.

⁽²⁾ Apollo Global includes $0.6 million and $1.7 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

⁽³⁾ Other includes $0.5 million and $1.5 million of acquisition and other related costs during the three months ended November 30, 2015 and 2014, respectively.

A summary of our consolidated assets by reportable segment is as follows:

($ in thousands)	November 30, 2015		August 31, 2015
University of Phoenix	$	602,873	$	648,755
Apollo Global	564,797		588,434
Other(1)	878,908		963,875
Total assets	$	2,046,578	$	2,201,064

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

XML

Nature of Operations and Significant Accounting Policies (Details) € in Millions, $ in Millions	1 Months Ended		12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2015 EUR (€)	Aug. 31, 2015 USD ($)	Dec. 10, 2015 USD ($)	Dec. 10, 2015 EUR (€)
Subsequent Event [Member]
Subsequent Event [Line Items]
Contingent consideration maximum				$ 12.0	€ 11
Subsequent Event [Member] | Career Partner GmbH [Member]
Subsequent Event [Line Items]
Initial cash payment	$ 105.0	€ 96
Adjustments for New Accounting Principle, Early Adoption [Member]
Subsequent Event [Line Items]
Increase (decrease) in noncurrent deferred tax assets			$ 64.7
Increase (decrease) in noncurrent deferred tax liabilities			$ 3.7

XML

Restructuring and Impairment Charges (Details) $ in Thousands	3 Months Ended
	Nov. 30, 2015 USD ($) Positions	Nov. 30, 2014 USD ($)
Restructuring [Line Items]
Restructuring charges	$ 24,430	$ 18,748
Goodwill impairments	73,393	0
Restructuring and impairment charges	97,823	18,748
Balance	83,290
Other	(1,651)
Payments	(21,890)
Balance	84,179
Restructuring gross obligation	$ 147,000
Minimum [Member]
Restructuring [Line Items]
Discount rate	3.00%
Maximum [Member]
Restructuring [Line Items]
Discount rate	6.00%
2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	$ 10,600
Number of positions eliminated | Positions	700
Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	$ 13,800
Cumulative costs for restructuring activities	430,000
University Of Phoenix [Member]
Restructuring [Line Items]
Restructuring charges	19,090	10,223
Goodwill impairments	71,812
University Of Phoenix [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	8,200
University Of Phoenix [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	$ 319,000
Number of facilities	150
Apollo Global [Member]
Restructuring [Line Items]
Restructuring charges	$ 404	58
Goodwill impairments	0
Apollo Global [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	200
Apollo Global [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	19,000
Other [Member]
Restructuring [Line Items]
Restructuring charges	4,936	$ 8,467
Goodwill impairments	1,581
Other [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	2,200
Other [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	92,000
Lease and related costs, net [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	0
Balance	0
Other	0
Payments	0
Balance	0
Lease and related costs, net [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	10,479
Balance	74,990
Other	(387)
Payments	(12,662)
Balance	72,420
Cumulative costs for restructuring activities	267,000
Severance and other employee separation costs [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	10,380
Balance	0
Other	(53)
Payments	(3,158)
Balance	7,169
Severance and other employee separation costs [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	1,058
Balance	8,210
Other	0
Payments	(5,257)
Balance	4,011
Cumulative costs for restructuring activities	114,000
Other restructuring related costs [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	210
Balance	0
Other	0
Payments	0
Balance	210
Other restructuring related costs [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	2,303
Balance	90
Other	(1,211)
Payments	(813)
Balance	369
Cumulative costs for restructuring activities	49,000
Lease abandonment [Member] | University Of Phoenix [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring gross obligation	$ 66,000

XML

Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Aug. 31, 2015
Discontinued Operations [Line Items]
Total assets	$ 0		$ 40,897
Total liabilities	0		40,897
Loss from discontinued operations, net of tax	(3,259)	$ (2,278)
Carnegie Learning [Member]
Discontinued Operations [Line Items]
Cash			10,220
Accounts receivable, net			10,327
Property and equipment, net			15,912
Intangible assets, net			14,100
Other			3,972
Allowance for reduction of assets of business held for sale			(13,634)
Total assets			40,897
Deferred revenue			35,602
Other			5,295
Total liabilities			$ 40,897
Net revenue	2,993	4,527
Loss on sale	2,773	0
Other	(4,519)	(8,192)
Loss from discontinued operations before income taxes	(4,299)	(3,665)
Benefit from income taxes	1,040	1,387
Loss from discontinued operations, net of tax	$ (3,259)	$ (2,278)

XML

Acquisitions (Details) $ in Thousands, BRL in Millions	1 Months Ended
	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2014 BRL	Nov. 30, 2015 USD ($)	Nov. 30, 2015 BRL	Aug. 31, 2015 USD ($)	Jun. 11, 2015 USD ($)	Dec. 04, 2014 USD ($)
Purchase price allocation [Line Items]
Goodwill				$ 173,012		$ 247,190
The Iron Yard [Member]
Purchase price allocation [Line Items]
Percentage of shares acquired							62.00%
Initial cash payment	$ 15,900
Tangible assets (net of acquired liabilities)							$ 5,262
Indefinite-lived intangibles							0
Finite-lived Intangibles							4,690
Goodwill							15,888
Total assets acquired and liabilities assumed, net							25,840
Fair value of redeemable noncontrolling interests							(9,900)
Total fair value of consideration transferred							15,940
Cash acquired							$ (5,401)
Cash paid for acquisition, net of cash acquired	$ 10,539
FAEL [Member]
Purchase price allocation [Line Items]
Percentage of shares acquired								75.00%
Initial cash payment		$ 28,900	BRL 73.8
Contingent consideration maximum				$ 9,100	BRL 34.0
Tangible assets (net of acquired liabilities)								$ (2,807)
Indefinite-lived intangibles								15,163
Finite-lived Intangibles								5,394
Goodwill								14,538
Total assets acquired and liabilities assumed, net								32,288
Fair value of redeemable noncontrolling interests								(3,437)
Total fair value of consideration transferred								28,851
Cash acquired								$ (7,685)
Cash paid for acquisition, net of cash acquired		$ 21,166

XML

Financial Instruments (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2015	Aug. 31, 2015
Financial Instruments [Line Items]
Amortized cost	$ 965,575	$ 992,839
Unrealized gains	105	94
Unrealized losses	(548)	(368)
Fair value	965,132	992,565
Cash and cash equivalents	629,246	702,074
Current marketable securities	257,012	194,676
Noncurrent marketable securities	$ 78,874	95,815
Maximum [Member]
Financial Instruments [Line Items]
Marketable securities maturities	3 years
Cash [Member]
Financial Instruments [Line Items]
Amortized cost	$ 496,494	564,225
Unrealized gains	0	0
Unrealized losses	0	0
Fair value	496,494	564,225
Cash and cash equivalents	496,494	564,225
Current marketable securities	0	0
Noncurrent marketable securities	0	0
Money market funds [Member]
Financial Instruments [Line Items]
Amortized cost	105,325	107,408
Unrealized gains	0	0
Unrealized losses	0	0
Cash and cash equivalents	105,325	107,408
Current marketable securities	0	0
Noncurrent marketable securities	0	0
Corporate bonds [Member]
Financial Instruments [Line Items]
Amortized cost	175,257	137,283
Unrealized gains	40	16
Unrealized losses	(437)	(271)
Cash and cash equivalents	954	1,823
Current marketable securities	128,158	82,047
Noncurrent marketable securities	45,748	53,158
Tax-exempt municipal bonds [Member]
Financial Instruments [Line Items]
Amortized cost	99,267	97,022
Unrealized gains	61	68
Unrealized losses	(62)	(60)
Cash and cash equivalents	1,344	2,408
Current marketable securities	73,120	61,530
Noncurrent marketable securities	24,802	33,092
Time deposits [Member]
Financial Instruments [Line Items]
Amortized cost	50,315	50,267
Unrealized gains	0	0
Unrealized losses	0	0
Cash and cash equivalents	25,129	25,110
Current marketable securities	25,186	25,157
Noncurrent marketable securities	0	0
Other [Member]
Financial Instruments [Line Items]
Amortized cost	38,917	36,634
Unrealized gains	4	10
Unrealized losses	(49)	(37)
Cash and cash equivalents	0	1,100
Current marketable securities	30,548	25,942
Noncurrent marketable securities	8,324	9,565
Level 1 [Member] | Money market funds [Member]
Financial Instruments [Line Items]
Fair value	105,325	107,408
Level 2 [Member] | Corporate bonds [Member]
Financial Instruments [Line Items]
Fair value	174,860	137,028
Level 2 [Member] | Tax-exempt municipal bonds [Member]
Financial Instruments [Line Items]
Fair value	99,266	97,030
Level 2 [Member] | Time deposits [Member]
Financial Instruments [Line Items]
Fair value	50,315	50,267
Level 2 [Member] | Other [Member]
Financial Instruments [Line Items]
Fair value	$ 38,872	$ 36,607

XML

Accounts Receivable, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Nov. 30, 2015	Aug. 31, 2015
Accounts receivable, net [Abstract]
Student accounts receivable			$ 254,244	$ 234,204
Less allowance for doubtful accounts	$ (42,259)	$ (50,145)	(48,038)	(42,259)
Net student accounts receivable			206,206	191,945
Other receivables			8,173	6,514
Total accounts receivable, net			$ 214,379	$ 198,459
Allowance for doubtful accounts [Abstract]
Allowance for doubtful accounts	42,259	50,145
Provision for uncollectible accounts receivable	15,313	17,398
Write-offs, net of recoveries	(9,491)	(14,406)
Currency translation adjustment	(43)	(455)
Allowance for doubtful accounts	$ 48,038	$ 52,682

XML

Goodwill and Intangibles (Details) - USD ($)	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Aug. 31, 2015
Goodwill [Line Items]
Goodwill beginning balance	$ 247,190,000
Goodwill impairment	(73,393,000)	$ 0
Currency translation adjustment	(785,000)
Goodwill ending balance	173,012,000
Intangible assets, net	137,452,000		$ 143,244,000
Future intangible amortization [Abstract]
Remainder of 2016	7,968,000
2017	9,917,000
2018	7,375,000
2019	3,359,000
2020	1,975,000
2021	1,794,000
Thereafter	4,755,000
Total estimated future amortization expense	37,143,000
University Of Phoenix [Member]
Goodwill [Line Items]
Goodwill beginning balance	71,812,000
Goodwill impairment	(71,812,000)
Currency translation adjustment	0
Goodwill ending balance	0
Tax benefit on goodwill impairment	0
Apollo Global [Member]
Goodwill [Line Items]
Goodwill beginning balance	142,599,000
Goodwill impairment	0
Currency translation adjustment	(785,000)
Goodwill ending balance	141,814,000
Other [Member]
Goodwill [Line Items]
Goodwill beginning balance	32,779,000
Goodwill impairment	(1,581,000)
Currency translation adjustment	0
Goodwill ending balance	31,198,000
Western International University [Member]
Goodwill [Line Items]
Goodwill impairment	$ (1,581,000)

XML

Goodwill and Intangibles (Details 2) - USD ($) $ in Thousands	Nov. 30, 2015	Aug. 31, 2015
Intangible Assets [Line Items]
Gross carrying amount	$ 187,676	$ 187,732
Accumulated amortization	(23,227)	(20,504)
Effect of foreign currency translation	(26,997)	(23,984)
Intangible assets, net	137,452	143,244
Finite-Lived Intangible Assets [Member]
Intangible Assets [Line Items]
Gross carrying amount	71,569	71,625
Accumulated amortization	(23,227)	(20,504)
Effect of foreign currency translation	(11,199)	(11,265)
Intangible assets, net	37,143	39,856
Finite-Lived Intangible Assets [Member] | Accreditations and designations [Member]
Intangible Assets [Line Items]
Gross carrying amount	21,628	21,628
Accumulated amortization	(7,850)	(6,972)
Effect of foreign currency translation	(3,050)	(3,153)
Intangible assets, net	10,728	11,503
Finite-Lived Intangible Assets [Member] | Trademarks [Member]
Intangible Assets [Line Items]
Gross carrying amount	21,019	21,019
Accumulated amortization	(3,380)	(2,942)
Effect of foreign currency translation	(2,921)	(3,034)
Intangible assets, net	14,718	15,043
Finite-Lived Intangible Assets [Member] | Curriculum [Member]
Intangible Assets [Line Items]
Gross carrying amount	19,715	19,715
Accumulated amortization	(8,424)	(7,361)
Effect of foreign currency translation	(2,462)	(2,470)
Intangible assets, net	8,829	9,884
Finite-Lived Intangible Assets [Member] | Student and customer relationships [Member]
Intangible Assets [Line Items]
Gross carrying amount	5,437	5,517
Accumulated amortization	(2,805)	(2,632)
Effect of foreign currency translation	(2,026)	(1,975)
Intangible assets, net	606	910
Finite-Lived Intangible Assets [Member] | Other [Member]
Intangible Assets [Line Items]
Gross carrying amount	3,770	3,746
Accumulated amortization	(768)	(597)
Effect of foreign currency translation	(740)	(633)
Intangible assets, net	2,262	2,516
Indefinite-lived Intangible Assets [Member]
Intangible Assets [Line Items]
Gross carrying amount	116,107	116,107
Accumulated amortization	0	0
Effect of foreign currency translation	(15,798)	(12,719)
Intangible assets, net	100,309	103,388
Indefinite-lived Intangible Assets [Member] | Accreditations and designations [Member]
Intangible Assets [Line Items]
Gross carrying amount	14,470	14,470
Accumulated amortization	0	0
Effect of foreign currency translation	(3,239)	(2,813)
Intangible assets, net	11,231	11,657
Indefinite-lived Intangible Assets [Member] | Trademarks [Member]
Intangible Assets [Line Items]
Gross carrying amount	101,637	101,637
Accumulated amortization	0	0
Effect of foreign currency translation	(12,559)	(9,906)
Intangible assets, net	$ 89,078	$ 91,731

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Aug. 31, 2015	Nov. 30, 2015
Assets and liabilities measured on a recurring basis [Line Items]
Change in fair value included in net income	$ 43	$ (1,121)
Payment for contingent consideration	0
Losses for period	24,430	18,748
Open Colleges [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Payment for contingent consideration		(34,480)
Payment for contingent consideration			$ 21,400
Recurring Fair Value Measurement [Member] | Noncontrolling Interest in Apollo Global [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration	7,499		7,499	$ 7,542
Balance	7,499
Balance	7,542		7,499
Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Losses for period	7,671
Level 1 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration	0		0	0
Balance	0
Balance	0		0
Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations				0
Level 2 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration	0		0	0
Balance	0
Balance	0		0
Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations				0
Level 3 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		41,893	41,893
Balance		41,893	41,893
Level 3 [Member] | Recurring Fair Value Measurement [Member] | Noncontrolling Interest in Apollo Global [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration	7,499	6,292	7,499	7,542
Balance	7,499
Balance	$ 7,542	$ 6,292	$ 7,499
Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations				$ 7,671

XML

Accrued and Other Liabilities (Details) - USD ($) $ in Thousands	Nov. 30, 2015	Aug. 31, 2015
Other liabilities, current [Abstract]
Salaries, wages and benefits	$ 55,036	$ 74,454
Student discounts, grants and scholarships	49,009	44,682
Restructuring obligations	41,892	38,921
Legal and other professional obligations	27,190	23,961
Deferred rent and other lease liabilities	10,627	12,181
Curriculum materials	9,528	11,690
Advertising	8,850	21,931
Other	49,816	53,027
Total accrued and other current liabilities	251,948	280,847
Other Long-Term Liabilities [Abstract]
Deferred rent and other lease liabilities	47,980	49,745
Restructuring obligations	42,287	44,369
Deferred gains on sale-leasebacks	19,799	20,168
Deferred revenue	17,581	16,687
Other	42,014	41,483
Total other long-term liabilities	$ 169,661	$ 172,452

XML

Debt (Details) - USD ($)	3 Months Ended
	Nov. 30, 2015	Dec. 10, 2015	Aug. 31, 2015
Debt [Line Items]
Total debt	$ 43,267,000		$ 45,646,000
Less short-term borrowings and current portion of long-term debt	(22,485,000)		(14,080,000)
Long-term debt	20,782,000		31,566,000
Letters of credit outstanding	59,000,000		41,000,000
Revolving credit facility [Member]
Debt [Line Items]
Total debt	0		0
Borrowing capacity	$ 625,000,000
Debt term	5 years
Revolving credit facility [Member] | Subsequent Event [Member]
Debt [Line Items]
Total debt		$ 50,000,000
Revolving credit facility [Member] | Minimum [Member]
Debt [Line Items]
Fees	0.25%
Revolving credit facility [Member] | Minimum [Member] | Prime Rate [Member]
Debt [Line Items]
Fees for borrowings	0.25%
Revolving credit facility [Member] | Maximum [Member]
Debt [Line Items]
Fees	0.40%
Revolving credit facility [Member] | Maximum [Member] | Prime Rate [Member]
Debt [Line Items]
Fees for borrowings	0.85%
Capital Lease Obligations [Member]
Debt [Line Items]
Total debt	$ 13,856,000		16,863,000
Notes Payable, Other Payables [Member]
Debt [Line Items]
Total debt	$ 29,411,000		$ 28,783,000
Weighted average interest rate	5.60%		5.60%

XML

Shareholders' Equity and Redeemable Noncontrolling Interests (Details) - USD ($) $ / shares in Units, shares in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014	Aug. 31, 2013
Share Repurchases [Line Items]
Share repurchases	$ 517,000	$ 20,064,000
Apollo Class A nonvoting common stock [Member]
Share Repurchases [Line Items]
Aggregate share repurchase program			$ 250,000,000
Share repurchase program, remaining authorized repurchased amount	$ 52,200,000
Share repurchases (in shares)	0	0
Share repurchases	$ 0	$ 0
Share reissuances (in shares)	174	227
Apollo Class A nonvoting common stock [Member] | Share Repurchases [Member]
Share Repurchases [Line Items]
Share repurchases (in shares)	0	677
Share repurchases, weighted average price per share	$ 0	$ 26.72
Share repurchases	$ 0	$ 18,092,000
Apollo Class A nonvoting common stock [Member] | Repurchases Related To Restricted Stock Units [Member]
Share Repurchases [Line Items]
Share repurchases (in shares)	64	78
Share repurchases	$ 517,000	$ 1,972,000

XML

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Earnings Per Share [Abstract]
Net (loss) income attributable to Apollo (basic and diluted)	$ (60,765)	$ 33,785
Basic weighted average shares outstanding (in shares)	108,446	108,581
Anti-dilutive securities [Line Items]
Diluted weighted average shares outstanding (in shares)	108,446	109,378
Basic (loss) income per share attributable to Apollo (in dollars per share)	$ (0.56)	$ 0.31
Diluted (loss) income per share attributable to Apollo (in dollars per share)	$ (0.56)	$ 0.31
Restricted stock units and performance share awards [Member]
Anti-dilutive securities [Line Items]
Dilutive effect of share-based awards (in shares)	0	618
Anti-dilutive securities excluded from earnings per share computation (in shares)	4,385	316
Stock options [Member]
Anti-dilutive securities [Line Items]
Dilutive effect of share-based awards (in shares)	0	179
Anti-dilutive securities excluded from earnings per share computation (in shares)	3,716	2,476

XML

Share-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2015	Nov. 30, 2014
Share-based compensation expense [Line Items]
Share-based compensation expense	$ 9,520	$ 10,711
Instructional and student advisory [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	2,784	2,982
Marketing [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	764	836
Admissions advisory [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	165	261
General and administrative [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	5,754	5,880
Restructuring and impairment charges [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	$ 53	$ 752

XML

Share-Based Compensation (Details 2) $ / shares in Units, shares in Thousands, $ in Millions	3 Months Ended
	Nov. 30, 2015 USD ($) $ / shares shares
Restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized shared-based compensation cost | $	$ 61.6
Performance share awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized shared-based compensation cost | $	$ 3.0
Restricted stock units and performance share awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	568
Weighted average fair value of granted awards | $ / shares	$ 7.50
Weighted average period unrecognized share-based compensation expected to be recognized	2 years 8 months 12 days
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted | shares	4
Weighted average grant date fair value of options | $ / shares	$ 4.12
Weighted average exercise price of options | $ / shares	$ 10.35
Unrecognized shared-based compensation cost | $	$ 8.9
Weighted average period unrecognized share-based compensation expected to be recognized	2 years 9 months 18 days

XML

Commitments and Contingencies (Details) - USD ($) $ in Millions	Nov. 30, 2015	Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Outstanding surety bonds	$ 11
Letters of credit outstanding	$ 59	$ 41

XML

Regulatory Matters (Details) - University Of Phoenix [Member]	12 Months Ended
	Aug. 31, 2015
Percentage of degreed enrollment	10.00%
Percent of cash basis revenue	10.00%
Maximum [Member]
Percent of net revenue	1.00%

XML

Segment Reporting (Details) $ in Thousands	3 Months Ended
	Nov. 30, 2015 USD ($)	Nov. 30, 2014 USD ($)	Aug. 31, 2015 USD ($)
Segment reporting [Line Items]
Net revenue	$ 586,021	$ 714,525
Operating (loss) income	(45,249)	64,164
Interest income	919	589
Interest expense	(1,456)	(1,662)
Other loss, net	(843)	(1,290)
(Loss) income from continuing operations before income taxes	(46,629)	61,801
Goodwill impairments	73,393	0
Total assets	2,046,578		$ 2,201,064
Acquisition and other related costs	$ 1,097	3,219
University Of Phoenix [Member]
Segment reporting [Line Items]
Number of colleges	9
Net revenue	$ 462,617	592,853
Operating (loss) income	(17,504)	96,614
Goodwill impairments	71,812
Total assets	602,873		648,755
Apollo Global [Member]
Segment reporting [Line Items]
Net revenue	115,332	115,140
Operating (loss) income	(2,335)	(4,842)
Goodwill impairments	0
Total assets	564,797		588,434
Acquisition and other related costs	600	1,700
Other [Member]
Segment reporting [Line Items]
Net revenue	8,072	6,532
Operating (loss) income	(25,410)	(27,608)
Goodwill impairments	1,581
Total assets	878,908		$ 963,875
Acquisition and other related costs	$ 500	$ 1,500