APOL Apollo Education Grp., Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14C

(Amendment No. 1)

(RULE 14c-101)

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934

Check the appropriate box:

o		Preliminary information statement.
o		Confidential, for use of the Commission only (as permitted by Rule 14c-5(d)(2))
þ		Definitive information statement.

APOLLO GROUP, INC.

Payment of filing fee (check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

	(1)		Title of each class of securities to which transaction applies:

o

Fee paid previously with preliminary materials.

o     Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

	(1)		Amount previously paid:

ANNUAL MEETINGS OF CLASS A SHAREHOLDERS AND CLASS B SHAREHOLDERS
OF
APOLLO GROUP, INC.
To be held on February 25, 2008 and January 8, 2008, respectively

AMENDMENT NO. 1
TO
INFORMATION STATEMENT

TABLE OF CONTENTS

ANNUAL MEETINGS OF CLASS A AND CLASS B SHAREHOLDERS
December 28, 2007

To the holders of Class A Common stock and Class B Common stock of Apollo Group:

NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of Class B Common stock (the “Class B Shareholders”) of Apollo Group, Inc. (the “Company”), an Arizona corporation, will be held on Tuesday, January 8, 2008 at 2:00 P.M., local time, in the 4th floor conference room, 4615 East Elwood St., Phoenix, Arizona, 85040, and the Annual Meeting of holders of Class A Common stock (the “Class A Shareholders”) of the Company will be held on Monday, February 25, 2008 at 10:00 A.M., local time, in the Shaffer Conference Center, 4605 East Elwood St., 2nd Floor, Phoenix, Arizona 85040 (together, the “Annual Meeting”) and each meeting to be held for the following purposes:

•

For the Class B Shareholders

	o		To elect the Directors of the Company to serve for a one-year term, each until his or her successor is duly elected.
	o		To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 2007.

•

For the Class A Shareholders

	o		To receive the results of the Annual Meeting of the Class B Shareholders.
	o		To view a presentation of the Company with respect to its business.
	o		To raise questions with the Company.

Only Class B Shareholders of record at the close of business on December 24, 2007 are entitled to notice of, and to attend and vote at, the Annual Meeting of Class B Shareholders or any adjournment or postponement thereof, and only Class A Shareholders of record at the close of business on December 24, 2007 are invited to attend the Annual Meeting of Class A Shareholders and any adjournment or postponement thereof.

Sincerely,

Brian Mueller
President
Phoenix, Arizona

December 28, 2007

ANNUAL MEETINGS OF CLASS A SHAREHOLDERS AND CLASS B SHAREHOLDERS
OF
APOLLO GROUP, INC.

To be held on February 25, 2008 and January 8, 2008, respectively

Footnotes

		OUR DIRECTORS
		Set forth below are the names, ages and experience of the directors of Apollo Group as of November 30, 2007. All of the directors are incumbent nominees, up for re-election at the Annual Meeting of Class B Shareholders, and the Nominating and Governance Committee, consisting solely of independent directors as determined under the rules of The NASDAQ Stock Market LLC, has recommended all of the nominees for election by the holders of Class B Common stock. If elected, the nominees will serve as directors until the next annual meeting of the holders of Class B Common stock of Apollo Group in 2008. As of the date of this Information Statement, the Board of Directors is not aware of any nominee who is unable or who will decline to serve as a director.

		OUR CORPORATE GOVERNANCE PRACTICES
		At Apollo Group, we believe that strong and effective corporate governance procedures and practices are an extremely important part of our corporate culture. In that spirit, we have summarized several of our corporate governance practices below.
Monitoring Board Effectiveness		It is important that our Board of Directors and its Committees are performing effectively and in the best interests of the Company and its shareholders. The Board of Directors and each Committee are responsible for annually assessing their effectiveness in fulfilling their obligations. In addition, our Nominating and Governance Committee is charged with annually reviewing the Board of Directors and its membership.
Conducting Formal Independent Director Sessions		The independent Directors meet regularly in executive session without Apollo Group management or any non-independent Directors.
Hiring Outside Advisors		The Board and each of its Committees may retain outside advisors and consultants of their choosing at the Company’s expense, without management’s consent.
Avoiding Conflicts of Interest		Apollo Group expects its Directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty. Apollo Group’s credibility and reputation depend upon the good judgment, ethical standards and personal integrity of each Director, executive and employee. In order to provide assurances to Apollo Group and its shareholders, Apollo Group has adopted a Code of Business Conduct and Ethics which provides clear conflict of interest guidelines to its employees, as well as an explanation of reporting and investigatory procedures. The Code of Business Conduct and Ethics is available on the Company’s website at:
		http://www.apollogrp.edu/CorporateGovernance/CorporateGovernance.aspx.
Providing Transparency		Apollo Group believes it is important that shareholders understand our governance practices. In order to help ensure transparency of our practices, we have posted information regarding our corporate governance procedures on our website at http://www.apollogrp.edu/CorporateGovernance/CorporateGovernance.aspx.
Communications with the Board of Directors		Although Apollo Group does not have a formal policy regarding communications with the Board of Directors, shareholders may communicate with the Board of Directors by writing to the Company at Apollo Group, Inc., Attention: Investor Relations, 4615 East Elwood Street, Phoenix, Arizona 85040. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

COMPENSATION DISCUSSION AND ANALYSIS

I. Our Compensation Philosophy and Objectives

     The Company’s compensation program for executive officers, which has been endorsed by the Compensation Committee of the Board of Directors, is designed to enhance shareholder value by tying a significant portion of executive officer compensation to the Company’s overall performance, as reflected in the value of the Company’s Class A common stock. In order to achieve that goal, the general objective of the Company is to target total cash compensation (base pay plus bonus) to the 50 ^th percentile of peer companies and to target total compensation (which includes the annualized value of long-term equity awards) to the 75 ^th percentile of peer companies. The Company’s policy is further designed to develop and administer programs that will:

	•		attract and retain key executives critical to the Company’s long-term vision and success,
	•		provide compensation levels that are competitive with others in the Company’s peer group, as that peer group is identified by the Compensation Committee from time to time, and
	•		motivate executives to enhance long-term shareholder value, with emphasis on growth, productivity, profitability and operating margins.

II. Role of the Compensation Committee

A. General

     During the 2007 fiscal year ended August 31, 2007, the Compensation Committee was comprised of three independent members of our Board of Directors. On October 5, 2007, Dr. Herberger replaced Mr. Zimmer on the Compensation Committee and was appointed the Chair of the Compensation Committee. The Compensation Committee was subsequently increased to four independent members on December 14, 2007 when Dr. Kirschner was added to the committee. The Compensation Committee reviews and approves the compensation of the Company’s executive officers, including their base salaries, incentive bonus programs and long-term equity awards, and administers other executive benefit plans in which they participate. The Compensation Committee, in consultation with the independent compensation consultants it has retained, analyzes the reasonableness of the compensation paid to those executives and evaluates the effectiveness of the programs in achieving compensation objectives. Pages 10 through 14 of this Information Statement contains a list of our executive officers.

     The Acting Executive Chairman or other senior executive officers may, from time to time, attend the meetings of the Compensation Committee at which compensation issues involving executive officers are discussed. However, decisions regarding executive officer compensation are made solely by the Compensation Committee based on its deliberations and input from its independent compensation consultants. The Compensation Committee meets solely in executive session to approve the final compensation decisions relating to the Acting Executive Chairman and the President. Decisions regarding the other executive officers are typically made by the Compensation Committee after considering recommendations from the Acting Executive Chairman and the President and the market data analysis provided by the independent compensation consultants (whose role is described in the next section).

     The Compensation Committee’s functions are more fully described in its charter which has been approved by our Board of Directors. The charter can be viewed, together with any future changes that may occur, on our website at www.apollogrp.edu at “INVESTOR RELATIONS—Corporate Governance.”

B. Interaction with Compensation Consultants

     In making its determinations with respect to executive compensation, the Compensation Committee has historically engaged the services of an independent compensation consulting firm. With respect to 2007 and 2008 fiscal year compensation, the Compensation Committee retained the services of Pearl Meyer & Partners to assist with its review of the compensation package of the Acting Executive Chairman, the President and the other executive officers. In addition, Pearl Meyer & Partners has assisted the Compensation Committee with related projects, such as evaluating non-employee director compensation levels, advising with respect to the design of executive compensation programs, preparing compensation disclosure for inclusion in the Company’s shareholder information statements and performing related tasks.

     The Compensation Committee retains Pearl Meyer & Partners directly, although in carrying out assignments, Pearl Meyer & Partners also interacts with Company management to the extent necessary and appropriate. However, Pearl Meyer & Partners has not been retained to perform any consulting or advisory services for Company management, except for a few limited situations in which market data was provided, with the knowledge of the Compensation Committee, to management with respect to certain executive positions.

C. Special 2007 Fiscal Year Circumstances

     During the fiscal year ended August 31, 2007, the Compensation Committee met numerous times from March through July to discuss and ultimately determine the various elements of the compensation package to be provided each executive officer for that year and the succeeding fiscal year. Since all the members of the Compensation Committee were new to the committee in 2007 and the 2007 fiscal year represented the first year they had engaged in the compensation setting process, the members of the Compensation Committee unanimously concluded that a full review of the compensation programs in effect for the then current executive officers was appropriate. In addition, in several cases during the 2007 fiscal year, an executive officer was first joining the company as an employee or had only recently become an executive officer or there had been significant changes in the responsibility of the officer. As a result, there were no prior internal compensation levels to serve as data points for their compensation packages for the 2007 fiscal year, and the Compensation Committee had to work closely with its independent compensation consultants to analyze the relevant market data and determine the appropriate level of compensation for those individuals.

III. Compensation Structure

A. Pay Elements — Overview

     The Compensation Committee utilizes three main components to compensate the executive officers:

•

Base Salary — fixed pay that takes into account an individual’s duties and responsibilities, experience, expertise and individual performance.

	•		Annual Incentive/Bonus — variable cash compensation that is designed to reward executives, taking into account both Company performance, and, in certain cases, individual performance.
	•		Long-Term Incentives — stock-based awards, including both stock options and restricted stock units (RSUs).

B. Pay Mix

     The Compensation Committee believes that the particular elements of compensation identified above provide a well-proportioned mix of security-oriented compensation, retention value and at-risk compensation which produces short-term and long-term performance incentives and rewards designed to accomplish the Company’s major compensation objectives. By following this portfolio approach, the Compensation Committee provides the executive officer with a measure of security in the minimum level of compensation he or she is eligible to receive through base pay, while the annual and long-term incentive components of the compensation package are designed to motivate the executive officer to focus on the business metrics that will produce a high level of performance for the Company corresponding to increases in shareholder value and long-term wealth creation for the executive, as well as reducing the risk of loss of top executive talent to competitors.

     The various components of the compensation packages for the executive officers are described in more detail below. Those components are weighted heavily toward at-risk pay. When the equity compensation awards made during the 2007 fiscal year and the projected annual target bonuses for the 2008 fiscal year are taken into account, the aggregate base pay for Dr. Sperling and Messrs. Mueller, Cappelli and D’Amico for fiscal year 2008 (the year ending August 31, 2008) are projected to comprise on average approximately 12% of the value of the aggregate compensation opportunities (base pay, target annual incentives, long-term incentives) provided them for that year. This ratio contrasts to approximately a 19% ratio of base salary to aggregate compensation opportunities for comparable positions based on market data derived from proxy statement data for the comparator companies in the peer group identified in Section III.C below and other relevant survey data and calculated at the median level of the compensation data provided for such positions. Such calculation is based on the average annualized value of the long-term equity awards made to those four executive officers in fiscal 2007 but does not include the RSU awards made to Mr. Cappelli and Mr. D’Amico to compensate them for forfeited compensation opportunities at their former employers. With respect to other executive officers, base pay comprises approximately 21% of their projected total compensation opportunities for the 2008 fiscal year. This contrasts to approximately a 40% ratio for comparable positions based on the same market data used for the named executive officers above. This pay mix is consistent with the overall pay-for-performance philosophy for the executive officers.

C. Pay Levels and Benchmarking

     Overall compensation levels for executives are determined based on a number of factors, including the individual’s duties and responsibilities within the Company, the individual’s experience and expertise, the compensation levels for peers within the Company, compensation levels in the marketplace for similar positions, performance of the individual and the Company as a whole, and the level of compensation necessary to recruit the executive in the case of new hires. In determining such compensation levels, the Compensation Committee considers all forms of compensation and benefits.

     In order to determine competitive compensation practices, the Compensation Committee relies on compensation data provided by Pearl Meyer & Partners. The data is derived principally from surveys of compensation practices of comparable companies, including general survey data and data developed from public filings by selected companies that the Compensation Committee considers appropriate comparators for the purposes of developing executive compensation benchmarks. The selection of the comparator companies is periodically reviewed by the Compensation Committee.

     The Compensation Committee worked with its independent compensation consultants to develop a list of comparator companies for the purpose of benchmarking executive compensation. This task was complicated by the fact that the Company is the largest publicly held, for-profit provider of education in the country and much larger than its public company competitors. While the Compensation Committee examined data from the education group peers, it determined that it was more appropriate to benchmark compensation for executive officers against companies that were similar in size when compared to revenues and market capitalization. In choosing peer companies, the Compensation Committee looked for similarly-sized, highly-successful service-based businesses whose executives possessed: sophisticated brand management experience; significant marketing/advertising experience (including the use of the Internet); experience with large employee populations; Internet related content and transaction experience; nationwide retail presence; and consumer, rather than business, service experience. Initially, companies were selected from the consumer, commercial, and financial services industries based on revenue (generally between $1 and $3 billion) and high price-to-sales multiples. Peer companies were then selected based on the criteria listed above. The following companies, along with survey data, were used for benchmarking purposes:

     Autodesk, Inc.

     E*Trade Financial Corp.

     Expedia, Inc.

     Expeditors Int’l of Washington, Inc.

     Fiserv, Inc.

     International Game Technology

     Intuit, Inc.

     Laboratory Corp. of America Holdings

     Sabre Holdings Corp.

     TD Ameritrade Holding Corp.

     The E.W. Scripps Co.

     The Washington Post Co.

     In determining that the selected companies formed an appropriate peer group, the Company compared its financial performance to that of the peer group companies. The Company’s one-year performance (for the fiscal year ended 8/31/06) was above the peer group median for some measures (operating margin and return on equity) and below the peer group median for other measures (revenue growth, operating income growth, and net income growth). Over a five-year period, however, the Company performed at the 75 ^th percentile or above when measured against those companies with respect to all five measures. Total shareholder return over the one-, three-, and five-year periods ending March 30, 2007 was, however, below median (in that regard, it should be noted that the Company’s share price at March 30, 2007 was $43.90, which is substantially below its current price).

     After consideration of the data collected on external competitive levels of compensation and internal relationships within the executive group, the Compensation Committee made decisions regarding each individual executive’s target total compensation opportunities based on Company and individual performance and the need to attract, motivate and retain an experienced and effective management team. The Compensation Committee examined the relationship of each executive’s base salary, target annual incentive opportunity, and long-term equity incentives to the comparable market data at the 50 ^th and 75 ^th percentiles. Total compensation for specific individuals will vary based on a

number of factors in addition to Company and individual performance, including scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a replacement executive.

     In making compensation decisions for the named executive officers, the Compensation Committee’s general objective was to set target total cash compensation (base pay plus bonus) for these officers at approximately the 50 ^th percentile of the survey data and target total compensation (which includes the annualized value of long-term equity awards) at approximately the 75 ^th percentile of the survey data. This positioning reflects, among other things, the Company’s strong five-year performance relative to its peer group. Actual compensation decisions for the named executive officers were, however, influenced by a variety of additional factors, including considerations of horizontal equity among the named executive officers, the negotiations that led to the hiring of new named executive officers during the year, and the fact that the value of the stock option and RSU grants originally proposed for certain named executive officers, as measured in terms of the Black-Scholes formulas utilized for comparative compensation purposes, increased during the compensation setting process (which extended over several months) because of increases in the stock price of the Company’s Class A common stock during the process, although the number of shares subject to each award remained constant. Accordingly, while the actual total cash compensation for each named executive officer was at or below the 50 ^th percentile, total direct compensation for a number of the named executive officers for the 2008 fiscal year was above the 75 ^th percentile of the survey data.

D. Compensation Decisions — Details

      (1) Base Salary

     Base salaries are set with regard to the level of the individual’s position within the Company and the individual’s current and sustained performance results. The base salary level, and any increases or decreases to that level, for each executive officer, is reviewed each year by the Compensation Committee, and such adjustments may be based on factors such as the overall performance of the Company, new duties and/or responsibilities assumed by the executive, the overall performance of the executive’s area of responsibility, the executive’s impact on strategic goals, and length of service with the Company. However, there is no specific weighting applied to any one factor in setting the level of base salary, and the process ultimately relies on the subjective exercise of the Compensation Committee’s judgment. Although salaries are generally targeted at market median, based on the Company’s peer group and relevant compensation survey data (as discussed above), the Compensation Committee may also take into account the previous level of base pay, duties that may go beyond the individual’s title, potential as a key contributor, and special recruiting situations.

     The Compensation Committee had previously determined base pay levels for executive officers in May 2006 and decided to continue these base pay levels through August 31, 2007 because they were in line with the relevant market data. Accordingly the deliberations with respect to base pay levels for executive officers conducted during the fiscal year ended August 31, 2007 were with respect to the levels of base pay to be effective as of September 1, 2007. Base pay deliberations during the 2007 fiscal year were conducted over a 3-month period between March and May of that year and culminated in the Compensation Committee setting levels of base pay for executive officers at its May 30, 2007 meeting. The resulting base pay levels became effective as of September 1, 2007, the start of the 2008 fiscal year.

     The Compensation Committee determined base pay levels for the executive officers through a process that took into account recommendations of senior management and input with respect to these recommendations from its compensation consultants. This input, among other things, provided

data to the Compensation Committee as to how the proposed levels of base pay compared to market data with respect to comparable positions. The final levels of base pay that emerged as a result of these deliberations were generally in the 50 ^th percentile range, as determined by market data with respect to comparable positions.

     In addition, several of the named executive officers were hired pursuant to employment agreements during the 2007 fiscal year and the level of salary for these officers was determined as part of the overall process of negotiating employment agreements with them. Each of the employment agreements with the new executive officers was approved by the Compensation Committee and by the Board of Directors. The following named executive officers have employment agreements that specify their level of base salary:

      Dr. John Sperling. In December 1993, the Company entered into an employment agreement with Dr. John G. Sperling. The initial term of the employment agreement was for four years, but the agreement automatically renews for successive one-year periods thereafter. Effective March 1, 2006, the Compensation Committee increased Dr. Sperling’s annual salary to $850,000. This salary is subject to annual review by the Compensation Committee.

      Greg Cappelli. Mr. Cappelli is our Executive Vice President, Global Strategy and Assistant to the Executive Chairman. His employment agreement, which was effective March 31, 2007, has a term of four years and provides for a minimum annual base salary of $500,000.

      Joe D’Amico. Mr. D’Amico is our Executive Vice-President and Chief Financial Officer. Prior to June 15, 2007, he provided services to the Company as the Chief Financial Officer in a consultant capacity pursuant to a service contract between the Company and FTI Palladium Partners. In June 2007, Mr. D’Amico received an offer of employment from the Company to serve as its full-time Chief Financial Officer. Mr. D’Amico decided to accept such offer and accordingly resigned from FTI Palladium Partners on June 15, 2007. His employment agreement with the Company, which was effective June 15, 2007, has a term of three years and provides for a minimum annual base salary of $500,000.

     The following table sets forth the base salaries of our named executive officers as of September 1, 2007 and the base pay previously in effect.

      (2) Annual Cash Incentive Programs

      Bonus Structure for John Sperling and Brian Mueller. The 2007 fiscal year performance targets under the Apollo Executive Annual Bonus Plan, in which Dr. Sperling and Mr. Mueller participated, were set in terms of quarterly financial objectives. The target bonus was set at 100% of each executive’s base pay.

     The amount of the bonus earned by each of them for the 2007 fiscal year was computed by comparing the Company’s revenue and pre-tax income (excluding unusual, non-recurring items and the effects of acquisitions) for each fiscal quarter in the 2007 fiscal year to the corresponding amount for each quarter in the preceding fiscal year. 50% of the bonus is dependent on each component.

     Under the program, if the revenue for any quarter in the 2007 fiscal year was less than the revenue for the corresponding quarter in the preceding fiscal year, no bonus was payable with respect to that performance metric. If the revenue for the applicable 2007 fiscal quarter grew at a rate from 0% to 10% over the revenue for the same quarter in the prior fiscal year, the bonus rose from 0% to 100% of the quarterly target bonus on a pro-rata basis. To the extent revenue for the 2007 fiscal quarter grew at a rate from 10% to 15% over the revenue for the same quarter in the prior fiscal year, the bonus increased from 100% to 125% of the quarterly target bonus on a pro-rata basis. The bonus based on pre-tax income was similarly computed.

     With respect to the 2007 year, the quarterly bonus amounts with respect to the attained levels of revenue and pre-tax income were as follows:

      Bonus for Greg Cappelli . Pursuant to Mr. Cappelli’s employment agreement, his bonus for the 2007 fiscal year was based on his target bonus under that contract, which is 100% of his annual rate of base pay, prorated for the period during which he was employed during that year.

      Bonus for Joe D’Amico . Pursuant to the terms of the negotiated employment agreement between Mr. D’Amico and the Company, he received a guaranteed bonus of $700,000 for the 2007 fiscal year.

      Bonus for Terri Bishop . Ms. Bishop’s bonus opportunity for the 2007 fiscal year was set at 50% of her annual rate of base salary and was divided into four quarterly bonuses tied to both financial and non-financial performance targets for each quarter. The financial target for each quarter was the maintenance of her departmental expenses at or below the budgeted amount for that quarter. Failure to meet the budgeted target was generally intended to result in loss of the entire bonus, although under certain circumstances it was possible to receive a portion of her target bonus (subject to a minimum penalty of 25%) if the performance objective were not met. Her non-financial performance goals varied from quarter to quarter during the 2007 fiscal year and were primarily set in terms of shareholder communications, public relations endeavors and government relations. Her first quarter goals included (i) the completion of the final phases of a “branding” project for the Company’s educational programs and the reconfiguration of the Company’s lobbyist team and (ii) the completion of an internal research project regarding work-related issues and the development of a strategy to address the identified issues. Second quarter goals were tied to communication endeavors, including the implementation of a specific political and regulatory strategy. Third quarter goals were based on (i) public relations activities relating to certain litigation matters involving the Company, including her oversight of the implementation of the public website providing information to the public with respect to those matters, and (ii) her involvement in certain government affairs and alumni projects. Her non-financial performance goals for the fourth quarter included (i) continued oversight of the public website relating to litigation matters and other related public relations activities and (ii) her continued involvement in government and regulatory affairs projects. Ms. Bishop attained her financial and non-financial performance targets each quarter and accordingly earned 100% of her total bonus opportunity for the 2007 fiscal year. In summary, the bonuses payable to the named executive officers for the fiscal year were the following:

      Bonus Structure for Other Executive Officers. Bonuses for other executive officers for the 2007 fiscal year were generally determined by establishing a target bonus as a percentage of base pay. Specific performance goals were then established for each executive tied to quarterly performance objectives. Bonuses were then computed on a quarterly basis, and the bonus payable for a quarter depended on the degree to which the specified performance goals for that quarter were met. By way of example, if an executive officer’s base pay was $200,000 and his or her target bonus percentage was 50%, he or she could earn a bonus of up to $25,000 for each quarter, depending on his or her achievement of the quarterly performance goals. If the executive had four performance goals for the quarter and they were each equally weighted, the achievement of each goal would result in a bonus of $6,250 for that quarter. The most common target percentage of base pay was 50%, with several executive officers targeted at a lower percentage.

     The performance goals established in the 2007 fiscal year consisted of both financial and non-financial goals. Budgeted consolidated revenue and consolidated profit were set as objectives for several executives. The executive could receive 100%, 75% or 50% of the target bonus, depending on whether the attained level of performance was at 100% or more, 95% or more, or 90% or more of the performance level. For other executive officers, the financial goal was the budgeted profit or loss (for non-revenue producing departments) for their area of responsibility and their failure to meet the budgeted target was generally intended to result in loss of the entire bonus. However, under certain circumstances, it was possible to receive a portion of the targeted bonus (subject to a minimum penalty of 25%) event if the performance goal was not met.

     The non-financial targets for each executive accounted from 15% to 70% of the bonus potential. The specific performance goals were structured to reflect goals unique to the executive’s area of responsibility. The performance goals were all structured as pass-fail objectives in that either the executive met his or her performance goals and received the entire bonus, or he or she received no bonus for the particular performance goal.

      Bonus Plan for the 2008 Fiscal Year.

     At its November 26, 2007 meeting, the Compensation Committee adopted a substantially revised annual bonus plan for the Company’s executive officers to be in effect for the 2008 fiscal year. Both senior management and the Compensation Committee extensively analyzed the 2007 fiscal year bonus plan and concluded that the interests of the Company and its shareholders were better advanced by designing a bonus program for all the executive officers that tied most of the bonus to financial targets that were intended to correlate directly with increases in shareholder value.

     With respect to the Company’s five named executive officers and P. Robert Moya (the Company’s Senior Vice President and General Counsel), the bonus program for the 2008 fiscal year is generally based on the Company’s attainment of certain revenue and operating profit targets, subject to a potential 20% reduction that will be described below. Specifically, there is first established a target bonus for each of these executive officers. The target bonus is 100% of base pay for the six participants, except in the case of Ms. Bishop, where the target is 50% of base pay.

     The actual bonus which each of these officers may earn will range from 0 to 200% of his or her annual target bonus. The actual percentage will be determined based on the Company’s attainment of certain revenue and operating profit goals (as adjusted) which the Compensation Committee has established for the 2008 fiscal year. Specifically, the target, threshold, and maximum goals are the following:

     These goals approximate revenue growth of 6% at threshold, 9% at target, and 12% at maximum, and profit growth of 5% at threshold, 10% at target, and 15% at maximum, when compared to the Company’s financial performance for the 2007 fiscal year. The goals have been set solely for purposes of compensating the named executive officers under a program consistent with the

Company’s pay for performance philosophy and do not necessarily reflect the Company’s anticipated or projected financial results for the 2008 fiscal year and are not intended to serve as guidance to the market.

     To illustrate how the 2008 fiscal year bonus plan will function, suppose an executive officer’s base pay was $400,000 and the target bonus was 100% of base pay. In this case, $200,000 of the potential bonus would be based on attainment of the revenue target and the other $200,000 would be based on attainment of the profit target. If, for example, the revenue target were attained at threshold level (so only 50% of the revenue component were payable) and the profit target were attained at maximum level (so that 200% of the profit component were payable), the executive would be entitled to a potential bonus of $500,000 ($100,000 plus $400,000), prior to the Committee’s application of the non-metric criteria described below. No bonus is awarded for a particular component unless there is at least threshold level attainment of that component. For attainment between threshold and maximum, the payout is determined by straight-line interpolation.

     The plan provides for certain adjustments in computing revenue and operating profit. With respect to the revenue target, generally revenue attributable to acquisitions during the 2008 fiscal year will be excluded. With respect to the operating profit component, the following amounts will generally be excluded: stock-based compensation expense accrued pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004) “Share Based Payment” and any other GAAP expense related to equity compensation awards for the 2008 fiscal year; all acquisition costs expensed for the 2008 fiscal year; income or loss attributable to entities acquired during the 2008 fiscal year; any extraordinary, nonrecurring items as determined in accordance with APB Opinion No. 30; and all amounts (including settlement payments, legal fees, costs and other litigation/settlement expenses) expensed during 2008 in connection with the settlement of the litigation matters referred to in Item 3 of the Company’s 10-K for fiscal year 2007.

     In addition, the Compensation Committee has reserved its discretion to reduce the bonus otherwise payable in an amount up to 20%. The factors to be taken into account for each executive include an assessment of the participant’s performance in relation to the strategic goals of the Company (including, in the case of Mr. D’Amico, whether any material weaknesses are required to be reported in the audited financial statements for 2008) and whether one of the performance metrics has been achieved at less than threshold.

     The bonus program, together with the Executive Officer Performance Incentive Plan pursuant to which the bonus program has been adopted, is subject to approval of the holders of the Company’s Class B common stock.

     With respect to executive officers other than the six named above, a similar bonus program has been established. There are two main differences:

     First, the plan for the other executive officers is based on two six-month cycles, that is, the determination of the bonus payable for the first half of fiscal 2008 is determined on the basis of the level at which the revenue and operating profit targets established for that period are attained. The potential bonus for the second half of fiscal 2008 is computed similarly based on the revenue and operating profit targets set for that particular period.

     Second, generally consistent with the other executive officers having less broadly defined areas of responsibility, specific individual performance goals have been established for the other executive officers. Goals have been established for both the first and second half of fiscal 2008. The bonus otherwise payable to these officers can be reduced by up to 20% (or up to 50% in the case of

two individuals), depending upon the Compensation Committee’s evaluation of the performance of these executive officers against these specific goals.

      (3) Long-Term Incentives

     In previous years the Company provided long-term incentives to the executive officers in the form of stock options. During 2007 the Compensation Committee undertook an extensive examination of the relative advantages and disadvantages of using stock options as the exclusive long-term equity incentive vehicle for executive officers. The Compensation Committee determined that several features made it desirable to use restricted stock units (“RSUs”) as a component of the long-term equity compensation provided executive officers. These factors included (1) the significant accounting charges that result from stock options and the lack of a direct correlation between those accounting charges and the actual value delivered to the executive officers and (2) the fact that grants limited solely to stock options result in a lack of retention incentives unless the market price of the Company’s’ Class A common stock rises above the exercise price. These considerations led the Compensation Committee to conclude that generally long-term incentives should be delivered to executive officers through a combination of stock options and RSUs. The long-term equity incentives for the 2007 fiscal year were generally split between options and RSUs, with 2/3 of the value delivered through options.

     In determining the amount of long-term incentive awards to be made to the executive officers, the Compensation Committee took into account the levels of long-term incentive compensation and total compensation provided to executive officers at the peer group companies. The Compensation Committee also took into account the fact that the Company does not provide any defined benefit pension benefits or other retirement benefits to the executive officers (except Dr. Sperling), other than the 401(k) Savings Plan available to all Company employees, and that for most executive officers of the Company the long-term incentive awards will serve as a primary source for the accumulation of substantial resources to fund their retirement income. In addition, the executive officers will have to retain a significant portion of the shares acquired through these long-term awards in order to comply with the stock ownership guidelines discussed below in Section VIII.

     For the 2007 fiscal year, the Compensation Committee decided to structure the long-term incentive awards as multi-year grants that would be in lieu of a series of separate grants made to the executive officers over the next several years. The Compensation Committee thought such multi-year awards appropriate in the light of certain significant events that had occurred over the preceding 18 months, including the need to restate prior financial statements and delay the release of current financial statements, significant litigation against the Company, and the resignation of several non-employee directors and executive officers associated with these events. Under such circumstances the Compensation Committee concluded that a multi-year grant was both an appropriate incentive and a signal that the Company had transitioned to a more stable environment. A multi-year grant was also considered more consistent with the structure of the stock option grant made to Mr. Cappelli under the terms of his employment agreement. Accordingly, in computing the size of the grants, the Compensation Committee utilized market data for the peer group to compute the size of the grants for Dr. Sperling and Mr. Mueller based on the annual grants that would otherwise be made to them over a four-year period and to compute the size of the grant to the other executive officers based on grants over a two-year period. Mr. D’Amico’s grant was determined as part of the negotiation process surrounding his employment agreement and was also structured as a multi-year grant measured over a three-year period of employment.

     The long-term equity incentives granted to the named executive officers with respect to the 2007 fiscal year were the following:

           (a) Option grants

     In general, the stock option grants made to the executive officers during the 2007 fiscal year will vest in four equal annual installments over a four-year period of service measured from the grant date (or, for Mr. Cappelli, over a four-year period measured from his hire date) and have a maximum term of six years. However, the option grant made to Mr. D’Amico will vest in three equal annual installments over a three-year period measured from his hire date and will have a maximum term of four years. All options will immediately vest upon certain changes in control or ownership of the Company, and the options awarded to certain executive officers have additional vesting acceleration provisions tied to the termination of their employment under certain circumstances. Otherwise, the unvested portion of the option will be forfeited upon the executive officer’s cessation of employment prior to the completion of the applicable vesting schedule.

           (b) RSU grants

     Each RSU represents the right to receive a share of the Company’s Class A common stock when the vesting requirements for that unit have been satisfied. The RSUs awarded to the executive officers during the 2007 fiscal year, including the RSU awards made to Messrs. Cappelli and D’Amico pursuant to their employment agreements, have both performance-vesting and service-vesting components. Accordingly, none of the awarded RSUs will vest unless the Company’s net income, after tax expense, for the 2008 fiscal year is at least $250 million, excluding all acquisition

costs and other extraordinary items. This performance-vesting component will allow the RSUs to qualify as performance-based compensation that is not subject to the deduction limits of section 162(m) of the Internal Revenue Code ( see IX below). If that performance goal is met, then each of the executive officers will generally vest in his or her RSU award in four equal installments over a four-year period of service measured from September 1, 2007 (or, for Mr. Cappelli, over a four-year period measured from his hire date and, for Mr. D’Amico, over a three-year period measured from his hire date). However, all the RSUs will immediately vest upon certain changes in control or ownership of the Company, and certain executive officers have additional vesting acceleration provisions tied to the termination of their employment under certain circumstances.

      (4) Other Executive Benefits, including Perquisites and Retirement Benefits

     Executives are entitled to the same employee benefits generally available to all full-time employees (subject to fulfilling any minimum service period). This would include elements such as the vacation and health and welfare benefits generally available to all employees and participation in the Company’s 401(k) Savings Plan and Employee Stock Purchase Plan. In designing these elements, the Company seeks to provide an overall level of benefits that are competitive with those offered by similar companies in the markets in which the Company operates.

     In addition, certain perquisites are made available to certain named executive officers. These include the use of Company-provided automobiles (including reimbursement of fuel and maintenance costs), personal tax consulting services, housing allowances, reimbursement of certain personal travel expenses and, for a portion of the 2007 fiscal year, use of Company-paid pilots on certain personal flights taken by Dr. Sperling on planes leased at his own expense. In light of the important contributions which Dr. Sperling and Mr. D’Amico have made to the Company and are expected to continue to make in the future and in the context of their overall compensation packages, the Company believes that the personal travel perquisites provided to those two named executive officers represent reasonable costs to the Company. The Company also believes that the remaining perquisites provided to its named executive officers are common among executives of other companies with which the Company competes for executive talent. In addition, the use of such perquisites (in lieu of salary increases to compensate for the loss of those benefits) avoids the increased costs that would otherwise occur with respect to certain other benefits based on the level of an executive’s base salary. Further details regarding these benefits are contained in the Summary Compensation Table and accompanying footnotes that appear later in this Information Statement.

     The Company believes that these particular plans and programs provide a valuable recruiting and retention mechanism for its executives and enable the Company to compete more successfully for qualified executive talent.

F.

Conclusion

     The final level and mix of compensation determined by the Compensation Committee for the 2007 and 2008 fiscal years was considered within the context of both the objective data from its competitive assessment of compensation and performance, as well as discussion of the subjective factors as outlined above. The Compensation Committee believes that each of the compensation packages for the named executive officers is within the competitive range of practices when compared to the objective comparative data, even where subjective factors have influenced the compensation decisions.

IV.

Timing of Equity Grants

     In previous years certain stock options were mispriced in that the exercise prices were based on the fair market value of the Company’s Class A common stock on dates subsequently determined not to be the correct measurement dates for determining the compensation cost of those options for financial accounting purposes. The Company’s Form 10-K for the fiscal year ended August 31, 2006, describes in detail the circumstances that led to such mispricing.

     In order to avoid the possibility of future mispricing issues, the Compensation Committee Charter has been amended to limit the dates on which equity awards may be made. Specifically, the charter currently provides:

	•		All equity awards made by the Compensation Committee (other than new hire grants or formulaic grants) will occur during an open window period beginning with the second and ending no later than the tenth business day following the release of the annual or quarterly financial results or the release of any other significant information relating to the Company’s operations, financial condition or business.
	•		Grants to new hires may be authorized by the Compensation Committee at such times as the Committee deems appropriate, including prior to the commencement of employment, but no such grant will have an effective date or be priced prior to the actual commencement date of employment.

     Section 409A of the Internal Revenue Code (and equivalent provisions of certain state income tax laws) imposes a penalty tax on optionees who are granted stock options with below-market exercise prices to the extent those options vest after December 31, 2004. In order to avoid the application of section 409A to certain options granted to the Company’s executive officers and Board members that were determined to be misspriced, the Company entered into agreements with them in December 2006, pursuant to which (i) the exercise price of those options would be increased to the fair market value of the underlying shares on the actual grant dates for those options or (ii) those options would be exercised during the 2007 calendar year. Such action was required to be and was taken before December 31, 2006 with respect to any optionees who were executive officers or Board members at the time the option grants were made to them.

     In July 2007, the Company entered into another set of agreements with its executive officers relating to certain mispriced option grants which were made to them before they became executive officers. Pursuant to those agreements, the exercise price of certain options held by the affected executive officers was increased to the lower of (i) the fair market value per share of our Class A common stock on the actual grant date determined for those options for financial accounting purposes or (ii) the fair market value per share on the date of the agreement, but in no event lower than the existing exercise price in effect for that option. The increased exercise price was necessary in order to avoid adverse tax consequences to such executive officers under Section 409A of the Internal Revenue Code. Under the terms of the applicable agreement, each executive officer will receive a cash bonus from the Company in January 2008 equal to the total increase to the exercise price in effect for his or her amended options. However, Mr. Mueller is the only named executive officer who will receive such a cash bonus. The number of option shares affected by his agreement was 53,828 and the cash bonus he will receive in 2008 to compensate him for the aggregate increase in the exercise price of those option shares will be $30,144.

     The number of aggregate affected shares with respect to the executive officers other than named executive officers was 26,373 and the aggregate amount of cash bonuses and increase in exercise price was $67,797.

     The Compensation Committee believed that the July 2007 agreements were fair and reasonable in light of the fact that the Company implemented a similar program in June 2007 for all employees (other than the executive officers) who held options subject to the section 409A and that none of the executive officers who were parties to the July 2007 agreements were involved in the practices or procedures that resulted in the misdating and misspricing of their option grants.

V.

Adjustment or Recovery of Awards

     The Company has no specific policies to adjust or recoup prior awards. However, under Section 304 of the Sarbanes-Oxley Act of 2002 (also known as the Public Company Accounting Reform and Investor Protection Act of 2002), if the Company is required to restate its financials due to material noncompliance with any financial reporting requirements as a result of misconduct, the Securities and Exchange Commission may bring enforcement actions against the CEO and CFO to require them to reimburse the Company for (1) any bonus or other incentive-based or equity-based compensation received during the 12 months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of securities of the Company during that 12-month period.

VI.

Consideration of Prior Amounts Realized

     The Company’s philosophy is to reward executives for future performance. Accordingly, prior stock compensation gains (option gains or restricted stock or restricted stock units awarded in prior years) are not considered in setting future compensation levels.

VII.		Employment Agreements and Post-Termination Payments
A.		Employment Agreements and Severance Arrangements

     The Company has employment agreements with the following named executive officers: Dr. Sperling and Messrs. Cappelli, and D’Amico. These agreements are summarized in the section of the Information Statement below entitled “Employment Agreements,” and the severance arrangements contained in those agreements are summarized in the section of the Information Statement below entitled “Potential Payments upon Termination or Change in Control.” The Company does not maintain any employment agreements or severance arrangements with any other executive officers, except for Mr. Moya (his employment agreement is an exhibit to the Company’s Form 10-K for fiscal year 2007). The employment agreement with Dr. Sperling was originally executed in December 1993 and has been continually renewed through successive one-year extensions since the expiration date of the original term in December 1997. The employment agreements with Messrs. Cappelli, and D’Amico were each the result of an arm’s-length negotiation between the Company and the executive officer, and the compensation packages provided under those agreements were determined by the Compensation Committee to be fair and reasonable on the basis of the comparative compensation data provided by its independent compensation consultants.

B.

Retirement Programs

     The only general program maintained by the Company that provides retirement benefits is the Apollo 401(k) Savings Plan, a defined contribution plan. However, the Company has entered into a defined-benefit type retirement arrangement with Dr. Sperling which is described below under “Executive Compensation, Pension Benefits.”

C.

Payments Due Upon Termination and/or a Change in Control

     The Company’s supplemental benefit plans and all of its equity compensation plans call for accelerated vesting of options and RSUs in the event of a change in control of the Company. The Compensation Committee believes that this is an appropriate outcome because (1), in some change in control situations, equity of the target company is cancelled (in which case immediate acceleration is necessary in order to preserve the value of the award), and (2), as previously discussed, the Company relies primarily on long-term incentive awards to provide the named executive officers with the opportunity to accumulate substantial resources to fund their retirement income, and the Compensation Committee believes that a change in control event is an appropriate liquidation point for awards designed for such purpose.

     Calculations and further explanation of the payments due the named executive officers upon termination of employment and/or a change in control are found under the portion of the Executive Compensation section of this document entitled “Potential Payments Upon Terminations or Change in Control”.

VIII.

Stock Ownership Guidelines and Hedging Policies

     The Company has adopted share ownership guidelines for its executive officers. Messrs. Mueller and Cappelli are expected to hold shares of the Company’s Class A common stock (including shares underlying their RSU awards ) with a market value equal to five times their base salary, Mr. D’Amico is expected to hold shares of Class A common stock (including shares underlying his RSU awards) with a market value equal to three times his base salary, and the other executive officers are expected to hold shares (including RSU awards) with a market value equal to two or three times their base salary. These guidelines are to be satisfied over a five-year period, dating from the May 30, 2007 Compensation Committee meeting at which they were adopted.

     The Company does not have any policy policies prohibiting executives from holding Company securities in a margin account or pledging Company securities as collateral for a loan.

IX.

Impact of Tax and Accounting

     As a general matter, the Compensation Committee takes into the account the various tax and accounting implications of compensation vehicles employed by the Company.

     When determining amounts of long-term incentive grants to executives and employees, the Compensation Committee examines the accounting cost associated with the grants. Under Statement of Financial Accounting Standard 123 (revised 2004) (“SFAS 123R”), grants of stock options and RSUs result in an accounting charge for the Company. The accounting charge is equal to the grant date fair value of those securities. For RSUs the accounting cost is generally equal to the fair market value of the underlying shares of Class A common stock on the date of award. That cost is then amortized over the requisite service period. With respect to stock options, the Company calculates the grant date fair value of the option based on the Black-Scholes formula (with an adjustment for possible forfeitures) and amortizes that value as a compensation expense over the vesting period.

     Section 162(m) of the Internal Revenue Code disallows an income tax deduction to publicly-traded companies such as the Company for compensation paid to the CEO and certain other executive officers to the extent that compensation exceeds $1 million per officer in any taxable year and does not otherwise qualify as performance-based compensation. The Company’s existing equity compensation plans, including the 2000 Stock Incentive Plan, are structured so that the compensation deemed paid to an executive officer in connection with the exercise of stock options granted under those plans should qualify as performance-based compensation not subject to the $1 million limitation. However, the Company has had to apply revised measurement dates to certain stock

option grants for financial accounting purposes, and the options with those revised measurement dates may not qualify as performance-based compensation for purposes of Section 162(m). Accordingly, the compensation deemed paid when those options are exercised may be subject to the Section 162(m) limitation. In addition, other awards made under those plans may or may not qualify as performance-based compensation. The RSU awards made during the 2007 fiscal year should qualify as performance-based compensation because none of those awards will vest unless the Company attains a pre-established net income target for the 2008 fiscal year.

     Neither the cash incentive program implemented for Dr. Sperling and Mr. Mueller for the 2007 fiscal year nor the cash incentive programs for the other executive officers were designed to provide bonus payments that would qualify as performance-based compensation under Section 162(m). However, except for Dr. Sperling, the bonuses paid to the executive officers for the 2007 fiscal year were fully deductible by the Company, because the total non-performance based compensation for each such officer for that year did not exceed the $1 million limit. For Dr. Sperling, the portion of his bonuses for the 2007 fiscal year which was not deductible because of such limit was approximately $456,000.

     The Compensation Committee will continue to consider steps that might be in the Company’s best interests to comply with Section 162(m). However, in establishing the cash and equity incentive compensation programs for the executive officers, the Compensation Committee believes that the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole or primary factor. The Compensation Committee believes that cash and equity incentive compensation must be maintained at the requisite level to attract and retain the executive officers essential to the Company’s financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that Apollo Group specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

     We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2007.

Submitted by:		Roy A. Herberger Jr., Chair*
		Dino J. DeConcini
		K. Sue Redman
		George Zimmer*
		Members of the Compensation Committee

SUMMARY COMPENSATION INFORMATION

The following table provides certain summary information concerning the compensation earned for services rendered in all capacities to the Company and its subsidiaries for the fiscal year ended August 31, 2007 by the Company’s Principal Executive Officer, Principal Financial Officer, former Principal Financial Officer and each of the Company’s three other most highly compensated executive officers whose total compensation for fiscal year 2007 was in excess of $100,000 and who were serving as executive officers at the end of fiscal year 2007. No other executive officers who would have otherwise been includable in such table on the basis of total compensation for fiscal year 2007 have been excluded by reason of their termination of employment or change in executive status during that year. The listed individuals shall be hereinafter referred to as the “named executive officers.”

(4)		The shares covered by this option vest in four successive equal annual installments upon the optionee’s completion of each year of service with the Company over the four year period measured from September 1, 2007, subject to accelerated vesting in the event of a change in control of the Company.
(5)		Mr. Mueller and Ms. Bishop each agreed in December 2006 to an amendment that adjusted the per share exercise price in effect for certain of their options to a price per share equal to the fair market value per share of the Company’s Class A common stock on the revised measurement date determined for that option for financial accounting purposes. The amendment was effected on May 22, 2007, and the exercise prices of Mr. Mueller’s and Ms. Bishop’s options were accordingly increased from $63.79 per share to $72.61 and $71.21 per share, respectively. For financial statement purposes, the transaction was treated as a cancellation of the original option and a grant of a new option with a higher exercise price and did not result in any incremental fair value for the amended option.
(6)		Mr. Mueller and Ms. Bishop each agreed on July 28, 2007 to an amendment that adjusted the per share exercise price in effect for certain of their options to a price per share equal to the lower of (i) the fair market value per share of the Company’s Class A common stock on the revised measurement date determined for that option for financial accounting purposes or (ii) $60.75, the closing price per share of such common stock on July 28, 2007, but in no event lower than the existing price in effect for that option. The exercise prices of certain options held by Mr. Mueller and all of the options held by Ms. Bishop did not change as a result of the amendment. To compensate Mr. Mueller for the increased exercise prices in effect for the balance of his amended stock options, the Company will pay him a cash bonus in January 2008 in the amount of $30,144, the total increase to the exercise prices in effect for his amended options. For financial statement purposes, the transaction is recorded as an exchange of each option for a new option with an increased exercise price (and the options with the increased exercise prices are therefore reflected in the table above as new grants during fiscal year 2007), and the Company must recognize additional compensation expense equal to the incremental fair value resulting from the deemed exchange. Both the increase in the exercise price and the offsetting cash bonus are taken into account in determining the net incremental fair value. For options as to which the exercise price was not amended, the transaction was treated as a cancellation of the original option and the grant of an identical option and did not result in any incremental fair value for that option.
(7)		The shares covered by this option will vest in three equal annual installments upon Mr. D’Amico’s completion of each year of service with the Company over the three-year period measured from June 15, 2007, subject to full or partial acceleration upon a change in control of the Company or his termination of service under certain circumstances.
(8)		The shares covered by this option will vest in four equal annual installments upon Mr. Cappelli’s completion of each year of service with the Company over the four-year period measured from April 2, 2007, subject to full or partial acceleration upon a change in control of the Company or his termination of service under certain circumstances.
(9)		Ms. Bishop’s non-equity incentive award for the 2007 fiscal year was tied to the attainment of certain financial and non-financial objectives for each fiscal quarter within that year. Such objectives were set quarterly after the start of each applicable fiscal quarter.

Additional Grants of Plan-Based Awards

Following the close of the 2007 Fiscal Year, Mr. Cappelli was awarded the following equity grants under the Company’s 2000 Stock Incentive Plan:

     (i) A stock option grant on September 4, 2007 for 149,711 shares of the Company’s Class A common stock at an exercise price of $59.00 per share, the fair market value of the Class A common stock on the grant date. The option will vest and become exercisable for the option shares in four successive equal annual installments upon his completion of each year of service with the Company over the four year period measured from April 2, 2007, subject to full or partial acceleration upon a change in control of the Company or his termination of service under certain circumstances.

     (ii) A restricted stock unit award on September 4, 2007 covering 113,896 shares of the Company’ Class A common stock. Each restricted stock unit represents the right to receive one share of the Company’s Class A common stock following the satisfaction of the applicable performance and service vesting requirements. Should the performance objective be attained, then the restricted stock units will vest in four successive equal annual installments upon his completion of each year of service with the Company over the four year period measured from April 2, 2007, subject to full or partial acceleration upon a change in control of the Company or his termination of service under certain circumstances.

     (iii) A stock option grant on October 5, 2007 for 1,058 shares of the Company’s Class A common stock at an exercise price of $63.67 per share, the fair market value of the Class A common stock on the grant date. The option will vest and become exercisable for the option shares in four successive equal annual installments upon his completion of each year of service with the Company over the four year period measured from April 2, 2007, subject to full or partial acceleration upon a change in control of the Company or his termination of service under certain circumstances.

    (1) These particular options were granted on June 23, 2006 and will vest in four successive equal annual installments upon the optionee’s completion of each year of service over the four year period measured from February 28, 2006. However, the option will vest and become immediately exercisable for all the option shares on an accelerated basis if certain operational goals are achieved or a change in control of the Company occurs. The table below provides additional information with respect to these options:

    (2) These particular options were granted on July 3, 2007 and will vest in four successive equal annual installments upon the optionee’s completion of each year of service over the four year period measured from September 1, 2007. These options will vest and become immediately exercisable for all the option shares on an accelerated basis in the event of a change in control of the Company.

    (3) These particular options were originally granted on November 1, 2005, but the grant dates subsequently were adjusted to reflect the revised measurement date used for financial accounting purposes. The options will vest in four successive equal annual installments upon the optionee’s completion of each year of service over the four year period measured from August 31, 2005. The options will vest and become immediately exercisable for all the option shares on an accelerated basis in the event of a change in control of the Company. The table below provides additional information with respect to these options:

     (4)   These particular options were originally granted on August 6, 2004, but the grant dates were subsequently adjusted to September 23, 2004 to reflect the revised measurement dates used for financial accounting purposes. The options were then cancelled and regranted on July 28, 2007 with the same terms and conditions as the original grant. They were originally scheduled to vest in four successive equal annual installments upon the optionee’s completion of each year of service over the four year period measured from August 31, 2004, with the vesting to accelerate if certain operational goals were achieved or a change in control of the Company were to occur. As a result of the achievement of those operational goals, the vesting of these options accelerated so that 50% of the options vested on August 31, 2005, an additional 25% vested on August 31, 2007, and the remaining 25% will vest upon the optionee’s continuation in service through August 31, 2008. The table below provides additional information with respect to these options:

     (5)   These particular options were granted on July 3, 2007 and will vest in three successive equal annual installments upon Mr. D’Amico’s completion of each year of service over the three year period measured from June 15, 2007. However, the option will vest and become immediately exercisable for all the option shares on an accelerated basis in the event of a change in control of the Company and may vest as to a portion of the shares on an accelerated basis upon his termination of service under certain circumstances.

     (6)   These particular options were granted on May 25, 2007 and will vest in four successive equal annual installments upon Mr. Cappelli’s completion of each year of service over the four year period measured from April 2 2007. However, the option will vest and become immediately exercisable for all the option shares on an accelerated basis in the event of a change in control of the Company and may vest as to a portion of the shares on an accelerated basis upon his termination of service under certain circumstances.

     (7)   These particular restricted stock units were awarded on July 3, 2007 and have both performance-vesting and service-vesting components. Should the performance objective be attained, then the restricted stock units will vest in four successive equal annual installments upon the officer’s completion of each year of service over the four year period measured from September 1, 2007, subject to accelerated vesting upon a change in control or ownership of the Company.

     (8)   These particular restricted stock units were granted on July 3, 2007 and have both performance-vesting and service-vesting components. Should the performance objective be attained, then the restricted stock units will vest in three successive equal annual installments upon Mr. D’Amico’s completion of each year of service over the three year period measured from June 15, 2007, subject to accelerated vesting upon a change in control or ownership of the Company.

OPTION EXERCISES AND STOCK VESTED

No stock options or appreciation rights were exercised by the named executive officers during the 2007 fiscal year. None of those officers held any stock appreciation rights as of August 31, 2007 and none of their stock awards vested during the 2007 fiscal year.

     (1)   Pursuant to the deferred compensation agreement dated December 31, 1993, Dr. Sperling will, upon his termination of employment with the Company, receive a lifetime annuity equal to the highest annual rate of base salary in effect for him in any of the last three calendar years preceding the calendar year in which his employment terminates. The annuity will be payable in equal monthly installments. In addition, upon Dr. Sperling’s death, his designated beneficiary will be paid an amount equal to three times the highest annual rate of base salary in effect for him in any of the three calendar years during the three-year period immediately preceding the calendar year in which his employment terminates. Such death benefit will be payable in 36 equal monthly installments, with the first such installment due on the first day of the month following the month of Dr. Sperling’s death.

      ( 2)    Based on an $850,000 annual lifetime annuity, as determined as of the close of the 2007 fiscal year.

		The stock option award will vest in three successive equal annual installments upon Mr. D’Amico’s completion of each year of employment with the Company over the three-year period measured from June 15, 2007. The restricted stock unit award will not vest unless the Company’s attains at least a specified level of net income, after tax expense, for the 2007 fiscal year. If such performance goal is attained, then the restricted stock units will also vest in three successive equal annual installments upon Mr. D’Amico’s completion of each year of employment with the Company over the three-year period measured from June 15, 2007. Each award will be subject to accelerated vesting in whole or in part upon certain changes in control of the Company or the termination of Mr. D’Amico’s employment under certain prescribed circumstances.
		On March 31, 2007, the Company entered into an employment agreement with Gregory W. Cappelli, pursuant to which he is employed as Executive Vice President, Global Strategy. The employment agreement has an initial term of four years measured from Mr. Cappelli’s start date of April 2, 2007 and will be subject to successive one-year renewals thereafter, unless either party provides timely notice of non-renewal. During the term of the employment agreement, Mr. Cappelli will be entitled to an annual rate of base salary of not less than $500,000 and a target bonus not less than 100% of such base salary.
		Pursuant to his agreement Mr. Cappelli became entitled to the following equity compensation awards:
		(i) On May 25 2007, Mr. Cappelli was granted a stock option for 1,000,000 shares of Class A common stock with an exercise price per share of $48.47, the closing price per share on the grant date, and a maximum term of six years (the “Initial Option Grant”).
		(ii) On September 4, 2007, Mr. Cappelli was granted a supplemental stock option for 149,711 shares of Class A common stock with an exercise price per share of $59.00, the closing price per share on the grant date, and a maximum term of six years (the “Equalization Grant”). The number of shares subject to the Equalization Grant was determined pursuant to a formula set forth in his employment agreement which took into account the difference between the actual Black-Scholes-Merton value of the Initial Option Grant made on May 25 2007 and the Black-Scholes-Merton value which would have resulted had that option been granted on March 30, 2007, the date Mr. Cappelli’s employment agreement with the Company was executed.
		(iii) On September 4, 2007, Mr. Cappelli was awarded restricted stock units covering 113,896 shares of the Company’s Class A common stock. The number of shares was determined by dividing $5,000,000 by the closing price of the Class A common stock on the March 30, 2007 execution date of his employment agreement. Each restricted stock unit represents the right to receive one share of such Class A common stock following the satisfaction of the applicable performance vesting and service vesting components of that award.

		(iv) On October on October 5, 2007, Mr. Cappelli was granted an option for for an additional 1,058 shares of the Company’s Class A common stock at an exercise price of $63.67 per share, the fair market value of the Class A common stock on the grant date. The option (the “Supplemental Option”) was intended to supplement his Equalization Grant because of a discrepancy subsequently identified in the calculation of the Black-Sholes-Merton value as of the September 4, 2007 Equalization Grant.
		The Initial Option Grant, the Equalization Grant and the Supplemental Grant will each vest in a series of four successive equal annual installments upon Mr. Cappelli’s completion of each year of employment with the Company over the four-year period measured from his April 2, 2007 start date. The restricted stock unit award will not vest unless the Company’s attains at least a specified level of net income, after tax expense, for the 2007 fiscal year. If such performance goal is attained, then the restricted stock units will also vest in four successive equal annual installments upon Mr. Cappelli’s completion of each year of employment with the Company over the four-year period measured from April 2, 2007. Each award will be subject to accelerated vesting in whole or in part upon certain changes in control of the Company or the termination of Mr. Cappelli’s employment under certain prescribed circumstances.
		Pursuant to the terms of their employment agreements, should (i) the Company terminate Mr. D’Amico’s or Mr. Cappelli’s employment without cause (ii) Mr. D’Amico or Mr. Cappelli resign for good reason, (iii) Mr. D’Amico or Mr. Cappelli resign for any reason within a 30-day period beginning six months after the closing of a change in control of the Company or (iv) the Company fail to renew the applicable employment agreement, then the affected individual will become entitled to the following severance benefits upon his delivery of a general release to the Company:
		(i) a cash amount equal to two times his annual base salary and target bonus, payable over the one-year period measured from his termination date;
		(ii) 100% vesting of his restricted stock unit award and accelerated vesting of his options up to 50% of the unvested portion or (if greater) the portion that would have vested had he completed an additional 12 months of employment; and
		(iii) continued health care coverage under the Company’s group health plan at the Company’s expense for a period not to exceed 18 months.
		In the event Mr. D’Amico’s or Mr. Cappelli’s employment terminates due to death or disability, the affected individual or his estate will be paid his target bonus, pro-rated for his actual period of employment during the year in which his employment terminates, and each of his unvested equity award will partially vest on an accelerated basis as if the vesting schedule for that award had been in the form of successive equal monthly installments over the applicable vesting period (for Mr. Cappelli, such pro-rated vesting of his