AMERICAN PUBLIC EDUCATION INC (Form: 10-Q, Received: 08/05/2014 16:02:42)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES AND EXCHANGE ACT OF 1934


		For the quarterly period ended June 30, 2014

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: - 001-33810

AMERICAN PUBLIC EDUCATION, INC.

(Exact name of registrant as specified in its charter)

Delaware	01-0724376
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

111 West Congress Street

Charles Town, West Virginia 25414

(Address, including zip code, of principal executive offices)

(304) 724-3700

(Registrant’s telephone number, including area code)

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 x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

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

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

The total number of shares of common stock outstanding as of August 1, 2014 was 17,254,234.

AMERICAN PUBLIC EDUCATION, INC.

FORM 10-Q

INDEX

	Page
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	19


PART II – OTHER INFORMATION


I tem 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3. Defaults Upon Senior Securities	22
Item 4. Mine Safety Disclosures	22
Item 5. Other Information	22
Item 6. Exhibits	22

SIGNATURES	23

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Balance Sheets (Current Period Unaudited)

(In thousands)

	As of June 30, 2014		As of December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	89,801	$	94,820
Accounts receivable, net of allowance of $19,158 in 2014 and $13,175 in 2013		8,471		9,520
Prepaid expenses		5,511		5,598
Income tax receivable		843		3,215
Deferred income taxes		8,373		3,432
Total current assets		112,999		116,585
Property and equipment, net		94,049		90,733
Notes receivable		6,390		6,000
Investments		12,216		10,597
Goodwill		38,148		38,148
Other assets, net		8,937		9,592
Total assets	$	272,739	$	271,655

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,315	$	11,563
Accrued liabilities		9,559		17,866
Deferred revenue and student deposits		23,216		24,829
Total current liabilities		44,090		54,258
Deferred income taxes		13,932		10,328
Total liabilities		58,022		64,586

Commitments and contingencies (Notes 2, 8)

Stockholders’ equity:
Preferred stock, $.01 par value; Authorized shares - 10,000; no shares issued or outstanding		—		—
Common stock, $.01 par value; Authorized shares - 100,000; 17,254 issued and outstanding in 2014; 17,578 issued and outstanding in 2013		173		176
Additional paid-in capital		166,842		164,913
Retained earnings		47,702		41,980
Total stockholders’ equity		214,717		207,069
Total liabilities and stockholders’ equity	$	272,739	$	271,655

The accompanying notes are an integral part of these consolidated financial statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Income (Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
	(Unaudited)				(Unaudited)
Revenues	$	85,463	$	80,925	$	174,016		$	164,765
Costs and expenses:
Instructional costs and services		30,197		27,207		61,545			55,612
Selling and promotional		16,982		16,045		34,049			32,584
General and administrative		18,491		17,158		38,015			34,637
Depreciation and amortization		3,958		3,312		7,847			6,519
Total costs and expenses		69,628		63,722		141,456			129,352
Income from operations before interest income and income taxes		15,835		17,203		32,560			35,413
Interest income, net		98		88		179			153
Income before income taxes		15,933		17,291		32,739			35,566
Income tax expense		6,173		6,543		12,500			13,394
Equity investment income/(loss), net of taxes		42		2		(1	)		(46	)
Net income	$	9,802	$	10,750	$	20,238		$	22,126
Net Income per common share:
Basic	$	0.56	$	0.61	$	1.16		$	1.25
Diluted	$	0.56	$	0.60	$	1.15		$	1.23
Weighted average number of common shares:
Basic		17,367,328		17,645,682		17,440,207			17,704,678
Diluted		17,472,602		17,835,623		17,626,492			17,948,356

The accompanying notes are an integral part of these consolidated financial statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Six Months Ended June 30,
	2014			2013
	(Unaudited)
Operating activities
Net income	$	20,238		$	22,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,847			6,519
Stock-based compensation		2,424			1,983
Investment loss		1			46
Deferred income taxes		(1,337	)		1,220
Other		60			109
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for bad debt		1,049			2,405
Prepaid expenses and other assets		(261	)		(599	)
Income tax receivable		2,372			4,953
Accounts payable		(248	)		(8,546	)
Accrued liabilities		(8,307	)		3,609
Income taxes payable		—			782
Deferred revenue and student deposits		(1,613	)		33
Net cash provided by operating activities		22,225			34,640
Investing activities
Capital expenditures		(9,215	)		(10,921	)
Equity investment		(1,630	)		(4,000	)
Note receivable		(380	)		—
Capitalized program development costs and other assets		(951	)		(163	)
Net cash used in investing activities		(12,176	)		(15,084	)
Financing activities
Cash paid for repurchase of common stock		(15,756	)		(7,794	)
Cash received from issuance of common stock		361			1,243
Excess tax benefit from stock-based compensation		327			210
Net cash used in financing activities		(15,068	)		(6,341	)
Net increase/(decrease) in cash and cash equivalents		(5,019	)		13,215
Cash and cash equivalents at beginning of period		94,820			114,901
Cash and cash equivalents at end of period	$	89,801		$	128,116
Supplemental disclosure of cash flow information
Income taxes paid	$	11,138		$	6,228

The accompanying notes are an integral part of these consolidated financial statements

AMERICAN PUBLIC EDUCATION, INC.

Notes to Consolidated Financial Statements

1. Nature of the Business

American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company”, is a provider of online and campus-based postsecondary education to approximately 112,000 students through the operations of two subsidiaries:

●

American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military and public safety communities through American Military University, or AMU, and American Public University, or APU. APUS is regionally accredited by the Higher Learning Commission.

●

National Education Seminars, Inc., which is referred to in these financial statements as Hondros College of Nursing, or HCON, provides on-campus nursing education to students at four campuses in Ohio as well as online to serve the needs of the nursing and healthcare community. HCON is nationally accredited by the Accrediting Council of Independent Colleges and Schools. HCON was acquired by APEI on November 1, 2013.

The Company’s institutions are licensed or otherwise authorized to offer postsecondary education programs by state authorities to the extent the Company believes such authorizations are required or are in the process of obtaining such authorization and are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.

Our operations are organized into two reportable segments:

●	American Public Education Segment, or APEI Segment. This segment reflects the historical operations of APEI prior to the acquisition of HCON and reflects operational activities at APUS, other corporate activities, and minority investments.

●	Hondros College of Nursing Segment, or HCON Segment. This segment reflects the operational activities of HCON. The Company acquired HCON on November 1, 2013, and therefore the consolidated results for periods prior to November 1, 2013 do not include any results from HCON.

2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. All intercompany transactions have been eliminated in consolidation. The financial statements do not include all of the information and footnotes required by GAAP for complete financial statement presentations. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company's consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and footnotes in its audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent 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. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is not permitted. Accordingly, the standard will only be effective for the Company for periods beginning on or after January 1, 2017. We will evaluate the impact that the standard will have on our financial condition, results of operations, and disclosures. There have been no other applicable pronouncements since the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Investments

On February 20, 2013, the Company made a $4.0 million investment in preferred stock of Fidelis Education, Inc., or Fidelis Education, representing approximately 21.6% of its fully diluted equity. Fidelis Education is developing a technology platform that will assist working adult students with education advising and career mentoring services as they pursue college degrees. In connection with the investment, the Company is entitled to certain rights, including right to representation on the Board of Directors. The Company accounts for its investment in Fidelis Education under the equity method of accounting. Therefore, t he Company recorded the investment at cost and records its share of earnings or losses in the investee in the periods for which they are reported with a corresponding adjustment in the carrying amount of the investment.

On April 2, 2014, the Company made a $1.5 million investment in preferred stock of Second Avenue Software, Inc. representing approximately 25.9% of its fully diluted equity. Second Avenue Software is a game-based education software company that develops software on a proprietary and “work-for-hire” basis. In connection with the investment, the Company is entitled to certain rights, including right to representation on the Board of Directors. The Company accounts for its investment in Second Avenue Software under the equity method of accounting. Therefore, the Company recorded the investment at cost and will recognize its share of earnings or losses in the investee in the periods for which they are reported with a corresponding adjustment in the carrying amount of the investment.

Notes Receivable

The Company evaluates notes receivable by analyzing the borrower's creditworthiness, cash flows and financial status, and the condition and estimated value of the collateral. The Company considers a note receivable to be impaired when, based upon current information and events, the Company believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Commitments and Contingencies

The Company accrues for costs associated with contingencies including, but not limited to, regulatory compliance and legal matters when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate cost and expenses associated with any such contingency.

From time to time, the Company may be involved in litigation in the normal course of its business. The Company is not aware of any pending or threatened litigation matters the resolution of which, in the opinion of management, will have a material adverse effect on the Company’s business, operations, financial condition or cash flows.

On or about November 18, 2013, a putative class action styled Tabatha Vickery, Bryan Lynn, on behalf of themselves and a similarly situated class v. Hondros College, Inc. and John G. Hondros, was filed in the Court of Common Pleas, Cuyahoga County, Ohio, case no. CV 13 817299. National Education Seminars, Inc., which we refer to as Hondros College of Nursing, or HCON, was not named in the lawsuit, but a then member of HCON’s board of directors, John Hondros, was named in the lawsuit, and the allegations made in the Complaint relate to HCON’s operations and not the operations of the entity named in the lawsuit. The lawsuit asserts claims for fraud and fraudulent inducement, negligent misrepresentation, breach of implied-in-fact contract, promissory estoppel, unjust enrichment, and violation of the Ohio Consumer Sales Practices Act, for, among other things, the alleged provision of false or misleading information to the named plaintiffs and other putative class members in 2011 and 2012 regarding the status of accreditation by National League for Nursing Accrediting Commission of HCON’s Associate Degree in Nursing, or ADN, program offered at its Independence, Ohio campus. The plaintiffs allege that the putative class consists of more than 60 former students who in the summer or fall quarters of 2011 enrolled in the ADN or the licensed practical nursing, or LPN, program at the Independence campus with the intention of pursuing a degree in nursing, but who withdrew from the ADN or LPN program. On February 11, 2014, the plaintiffs filed their First Amended Complaint, which removed Hondros College, Inc. as a defendant and added HCON as a defendant. On February 24, 2014, the defendants filed a motion to dismiss with prejudice the plaintiffs’ First Amended Complaint. On April 1, 2014, the plaintiffs filed their opposition to the motion to dismiss. On April 10, 2014, the defendants filed their reply brief in support of the motion to dismiss. The Company is currently unable to estimate the likelihood or range of reasonably probable loss, if any, for this matter. The Company does not believe, based on currently available information, that the outcome of this proceeding, if adverse to HCON, would have a material adverse effect on the Company’s financial condition.

Concentration

Approximately 35% and 36% of the Company’s revenues for the three and six month periods ended June 30, 2014 were derived from students who received tuition assistance from tuition assistance programs sponsored by the United States Department of Defense, or DoD, compared to approximately 35% and 37% of the Company’s revenues for the three and six month periods ended June 30, 2013. Approximately 18% of the Company’s revenues for the three and six month periods ended June 30, 2014 was derived from students who were eligible for veterans benefits, compared to approximately 17% and 16% of the Company’s revenues for the three and six month periods ended June 30, 2013. Approximately 35% of the Company’s revenues for the three and six month periods ended June 30, 2014 was derived from students using financial aid under the Title IV programs, compared to 36% and 35% for the three and six month periods ended June 30, 2013. A reduction in any of these programs or a change in the benefits allowed to students thereunder could have a significant impact on the Company’s operations.

3. Net Income Per Common Share

Basic net income per common share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share increases the shares used in the per share calculation by the dilutive effects of options and restricted stock. Stock options are not included in the computation of diluted earnings per share when their effect is anti-dilutive. There were 146,909 and 1,197 anti-dilutive stock options excluded from the calculation for the three and six months ended June 30, 2014, respectively, compared to 234,661 and 240,333 anti-dilutive stock options excluded from the calculation for the three and six month periods ended June 30, 2013, respectively.

4. Income Taxes

The Company is subject to U.S. Federal income taxes as well as income taxes of multiple state jurisdictions. For Federal and state tax purposes, the tax years from 2010 to 2013 remain open to examination.

5. Stock-Based Compensation

On March 15, 2011, the Board of Directors adopted the American Public Education, Inc. 2011 Omnibus Incentive Plan, or the “2011 Incentive Plan”, and the Company's stockholders approved the 2011 Incentive Plan on May 6, 2011, at which time the 2011 Incentive Plan became effective. Upon effectiveness of the 2011 Incentive Plan, the Company ceased making awards under the American Public Education, Inc. 2007 Omnibus Incentive Plan, or the “2007 Incentive Plan". The 2011 Incentive Plan allows APEI to grant up to 2,000,000 shares plus any shares of common stock that are subject to outstanding awards under the American Public Education, Inc. 2002 Stock Incentive Plan, or the “2002 Stock Plan”, or the 2007 Incentive Plan that terminate due to expiration, forfeiture, cancellation or otherwise without the issuance of such shares. As of June 30, 2014, there were 467,834 shares subject to outstanding awards under the 2002 Stock Plan and the 2007 Incentive Plan, and 255,944 shares subject to outstanding awards under the 2011 Incentive Plan. Awards under the 2011 Incentive Plan may include the following award types: stock options, which may be either incentive stock options or nonqualified stock options; stock appreciation rights; restricted stock; restricted stock units; dividend equivalent rights; performance shares; performance units; cash-based awards; other stock-based awards, including unrestricted shares; or any combination of the foregoing.

Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for Company employees and the graded-vesting method for members of the Board of Directors and is measured using the Company's stock price on the date of grant. The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model. Prior to 2012, the Company calculated the expected term of stock option awards using the “simplified method” in accordance with Staff Accounting Bulletins No. 107 and 110 because the Company lacked sufficient historical data and was unable to make reasonable expectations regarding the future. The Company also estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original projections. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of the stock prices of peers with similar attributes. In addition, the Company determines the risk-free interest rate by selecting the U.S. Treasury five-year constant maturity, quoted on an investment basis in effect at the time of grant for that business day. Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under FASB ASC Topic 718. In the six month periods ended June 30, 2014 and June 30, 2013 there were no options granted.

Options granted through June 30, 2014 vest ratably over periods of three to five years and expire in seven to ten years from the date of grant. Option activity is summarized as follows (unaudited):

	Number of Options		Weighted Average Exercise Price		Weighted- Average Contractual Life (Yrs)	Aggregate Intrinsic Value (In thousands)
Outstanding, December 31, 2013	501,202		$	28.82
Options granted	—		$	—
Awards exercised	(31,718	)	$	11.37
Awards forfeited	(1,650	)	$	36.04
Outstanding, June 30, 2014	467,834		$	29.98	2.60	$	2,795

Exercisable, June 30, 2014	467,834		$	29.98	2.60	$	2,795

The following table summarizes information regarding stock option exercises (unaudited):

	June 30, 2014		June 30, 2013
	(In thousands)
Proceeds from stock options exercised	$	361	$	1,243
Intrinsic value of stock options exercised	$	858	$	1,145
Tax benefit from exercises	$	142	$	314

The table below summarizes the restricted stock activity for the six months ended June 30, 2014 (unaudited):

	Number of Shares		Weighted-Average Grant Price and Fair Value
Non-vested, December 31, 2013	190,761		$	38.61
Shares granted	157,916		$	43.90
Vested shares	(87,445	)	$	38.73
Shares forfeited	(5,792	)	$	41.95
Non-vested, June 30, 2014	255,440		$	41.76

Stock-based compensation cost charged against income during the three- and six-month periods ended June 30, 2014 and June 30, 2013 is as follows (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)
Instructional costs and services	$	317		$	224		$	608		$	429
Selling and promotional		135			111			260			219
General and administrative		816			633			1,556			1,335
Stock-based compensation expense in operating income		1,268			968			2,424			1,983
Tax benefit		(502	)		(383	)		(960	)		(785	)
Stock-based compensation expense, net of tax	$	766		$	585		$	1,464		$	1,198

As of June 30, 2014, there was $8.7 million of total unrecognized compensation cost, representing unrecognized compensation cost associated with non-vested restricted stock. The total remaining cost is expected to be recognized over a weighted average period of 2.0 years.

Note 6. Other Employee Benefits

In November 2007, the Company adopted the American Public Education Employee Stock Purchase Plan, or the ESPP, which was implemented effective July 1, 2008. There were initially 100,000 shares of common stock available for purchase by participating employees under the ESPP. On June 13, 2014, the Company's shareholders approved an amendment to the ESPP to increase the number of shares of the Company’s common stock available for issuance under the plan by 100,000 shares, extend the term of the ESPP to March 7, 2024, and make other administrative changes. Subsequent to the June 13, 2014 shareholder approval, the Company completed its quarterly purchase of shares under the ESPP. As of June 30, 2014, 97,686 shares remained available for purchase under the ESPP, including the 100,000 additional shares recently registered under the plan following the shareholder approval.

Note 7. Segment Information

On November 1, 2013, APEI acquired HCON and subsequently revised the Company’s segment reporting to maintain consistency with the method management uses to evaluate performance and allocate resources, as well as to provide additional information to shareholders. Accordingly, the Company has identified two operating segments that are managed in the following reportable segments:

●	American Public Education Segment, or APEI Segment; and

●	Hondros College of Nursing Segment, or HCON Segment.

In accordance with FASB ASC Topic 280, Segment Reporting , the chief operating decision-maker has been identified as the Chief Executive Officer. The Chief Executive Officer reviews operating results to make decisions about allocating resources and assessing performance for the APEI and HCON segments.

APEI acquired HCON on November 1, 2013. Therefore the consolidated results for periods prior to November 1, 2013 do not include any results from the HCON segment. A summary of financial information by operating segment is as follows (unaudited):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)				(In thousands)
Revenues:
American Public Education Segment	$	78,295	$	80,925	$	159,644	$	164,765
Hondros College of Nursing Segment		7,168		—		14,372		—
Total Revenues	$	85,463	$	80,925	$	174,016	$	164,765
Income from continuing operations before interest income and income taxes:
American Public Education Segment	$	15,052	$	17,203	$	31,079	$	35,413
Hondros College of Nursing Segment		783		—		1,481		—
Total income from continuing operations before interest income and income taxes	$	15,835	$	17,203	$	32,560	$	35,413
Depreciation and Amortization:
American Public Education Segment	$	3,654	$	3,312	$	7,219	$	6,519
Hondros College of Nursing Segment		304		—		628		—
Total Depreciation and Amortization	$	3,958	$	3,312	$	7,847	$	6,519
Capital Expenditures:
American Public Education Segment	$	4,392	$	4,974	$	8,980	$	10,921
Hondros College of Nursing Segment		211		—		235		—
Total Capital Expenditures	$	4,603	$	4,974	$	9,215	$	10,921

A summary of the Company’s consolidated assets by reportable segment is as follows (unaudited):

	Six Months Ended June 30,
	2014		2013
	(In thousands)
Assets
American Public Education Segment	$	221,576	$	250,425
Hondros College of Nursing Segment		51,163		—
Total Assets	$	272,739	$	250,425

Note 8. Subsequent Event

HCON entered into an operating lease agreement with an initial term of 15 years that commenced on July 1, 2014. The operating lease requires monthly base rent payments in the amount of $38,710 for years one to five, $39,632 for years six to ten, and $41,475 for years 11 to 15. The lease also provides for an annual upward rent adjustment for HCON's share of any increase in the landlord’s total building operating costs, provided that HCON's share of any increase related to the landlord’s controllable operating costs cannot exceed 10% per annum. HCON has an option to terminate the lease at the end of the one hundred twentieth (120th) month of the lease term subject to payment of a $263,923 termination fee.

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

The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the consolidated financial statements and related notes that appear elsewhere in this report and the audited financial information and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, or the Annual Report.

Forward-Looking Statements

Some of the statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, or the “Exchange Act”. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission (“SEC”). We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition and results of operations may vary materially from those expressed in our forward-looking statements. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss in this section of this Quarterly Report on Form 10-Q, in the “Risk Factors” section of this Quarterly Report on Form 10-Q, in the “Risk Factors” section of the Annual Report, and in our various filings with the SEC. You should read these factors and the other cautionary statements made in this Quarterly Report on Form 10-Q in combination with the more detailed description of our business in the Annual Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

Background

American Public Education, Inc., or APEI, provides online and on-campus postsecondary education to approximately 112,000 students through two subsidiaries. Our subsidiaries offer programs generally designed to prepare individuals for productive contributions to their professions and society, as well as to potentially advance our students in their current professions or help prepare them for their next career. As of June 30, 2014, our wholly owned operating subsidiaries included the following:

●	American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military and public safety communities through APUS, an online university that includes American Military University, or AMU, and American Public University, or APU. APUS is regionally accredited by the Higher Learning Commission. APUS has approximately 110,600 students and offers 97 degree programs and 94 certificate programs in fields of study related to national security, military studies, intelligence, homeland security, criminal justice, technology, business administration, education, health science, and liberal arts. APUS employs approximately 420 full-time faculty members and 1,870 part-time faculty members who teach our programs offered through APUS. Since APUS's founding as AMU, a distance learning graduate-level institution for military officers seeking an advanced degree in military studies, APUS has gradually broadened its focus to include other military communities, veterans, public safety, and certain other civilian professional communities. In 2002, AMU was reorganized into a single university system, APUS, with two components: AMU, which is focused on educating military students, and APU, which is focused on educating non-military students. As an online institution of higher learning, we believe APUS is well-suited to our students who serve in positions requiring extended and irregular work schedules, are on-call for rapid response missions, participate in extended deployments and exercises, travel or relocate frequently or have limited financial resources. Although APUS's focus has broadened, APUS continues to have an emphasis on its relationship with the military community. As of December 31, 2013, approximately 45% of APUS students self-reported that they serve in the military on active duty. The remainder of APUS students were military-affiliated professionals (such as veterans, reservists or National Guard members), public safety professionals (such as law-enforcement personnel or other first responders) and civilians (mostly working adult students).

●	National Education Seminars, Inc., which we refer to as Hondros College of Nursing, or HCON, provides on-campus nursing education to students at four campuses in the State of Ohio, as well as online, to serve the needs of the nursing and healthcare community. On November 1, 2013, we acquired HCON, which is consistent with our long-term strategic plan to, in part, diversify our education business and expand health science and technology programs. We believe HCON will expand our emphasis on health science programs and potentially serve as a platform for future healthcare school expansion. The HCON acquisition was completed for an adjusted aggregate purchase price of approximately $45 million. The Company assumed no debt in the acquisition of HCON. HCON offers a Diploma in Licensed Practical Nursing and an Associate Degree in Nursing at four campuses in Ohio, which are located in the suburban areas of Cincinnati, Columbus, Dayton and Cleveland. HCON also offers an online Registered Nurse to Bachelor of Science in Nursing completion program, which we refer to as the RN-to-BSN program, predominantly to students in Ohio. The HCON programs are offered to approximately 1,410 students. HCON is nationally accredited by the Accrediting Council of Independent Colleges and Schools and the RN-to-BSN program is accredited by the Commission on Collegiate Nursing Education. HCON’s locations and programs are approved by the Ohio State Board of Career Colleges and Schools and the RN-to-BSN program is approved by the Ohio Board of Regents. In addition, the Diploma in Licensed Practical Nursing and Associate Degree in Nursing programs are approved by the Ohio Board of Nursing. HCON employs approximately 100 full-time faculty members and 40 part-time faculty members who teach our programs offered through HCON.

Both APUS and HCON are licensed or otherwise authorized to offer postsecondary education programs by state authorities to the extent we believe such authorizations are required or are in the process of obtaining such authorization and are certified by the U.S. Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs. As required by ED's change in ownership and control regulations, HCON is operating under a Temporary Provisional Program Participation Agreement which requires HCON to comply with specific conditions while provisionally certified. If ED approves our application for the change in ownership and control of HCON, ED will issue a provisional certification extending for a period expiring not later than the end of the third complete award year following the date of such provisional certification. As part of ED's post-closing review of our acquisition of HCON, we were notified in March 2014 that additional information regarding our consolidated financial status at the time of closing of the acquisition was required prior to ED being able to consider issuance of a final approval. Pursuant to ED's request, this information was submitted to ED in April 2014. In addition, as part of ED's post-closing review of our acquisition of HCON, in May 2014 ED requested additional information regarding the putative class action described above in Note 2 to the Consolidated Financial Statements. Pursuant to ED's request, this information was submitted to ED in June 2014. The potential risks associated with this transaction are further addressed in the risk factors section of the Annual Report.

A requirement of the Higher Education Act, commonly referred to as the “90/10 Rule,” applies to “proprietary institutions of higher education,” which includes for-profit schools like APUS and HCON. Under this rule, a proprietary institution is prohibited from deriving more than 90% of its cash-basis revenue for any fiscal year, as computed for 90/10 Rule purposes, from Title IV programs. Using the applicable formula, in 2013 APUS derived approximately 45.8% and HCON derived approximately 80.5% of cash-basis revenue from Title IV programs. Additional information regarding the 90/10 Rule and potential risks associated with it are further addressed in our Annual Report.

Business Segments

Our operations are organized into two reportable segments:

●	American Public Education Segment, or APEI Segment. This segment reflects the historical operations of APEI prior to the acquisition of HCON and reflects operational activities at APUS, other corporate activities, and minority investments.

●	Hondros College of Nursing Segment, or HCON Segment. This segment reflects the operational activities of HCON. We acquired HCON on November 1, 2013, and therefore the consolidated results for periods prior to November 1, 2013 do not include any results from HCON.

Summary of Results

Net course registrations in our APEI segment decreased 3% for the three and six month periods ended June 30, 2014, over the comparable prior year periods. Enrollment at HCON for both the three and six month periods ended June 30, 2014 increased 17% over the comparable prior year periods.

For the three-month period ended June 30, 2014, our consolidated revenue increased to $85.5 million from $80.9 million, or by 6%, over the comparable prior year period. Our operating margins decreased to 18.5% from 21.2% for the three-month period ended June 30, 2014, over the comparable prior year period. For the six month period ended June 30, 2014, our consolidated revenue increased to $174.0 million from $164.8 million, or by 6%, over the comparable prior year period. Our operating margins decreased to 18.7% from 21.5% for the six-month period ended June 30, 2014, over the comparable prior year period.

For the three-month period ended June 30, 2014, APEI segment revenue decreased to $78.3 million from $80.9 million, or by 3%, over the comparable prior year period. APEI segment operating margins decreased to 19.2% from 21.2% for the three-month period ended June 30, 2014, over the comparable prior year period. For the six-month period ended June 30, 2014, APEI segment revenue decreased to $159.6 million from $164.8 million, or by 3%, over the comparable prior year period. APEI segment operating margins decreased to 19.5% from 21.5% for the six-month period ended June 30, 2014, over the comparable prior year period.

For the three-month period ended June 30, 2014, HCON segment revenue was $7.2 million, and its operating margin was 10.9%. For the six-month period ended June 30, 2014, HCON segment revenue was $14.4 million, and its operating margin was 10.3%.

Critical Accounting Policies

Critical accounting policies are disclosed in our consolidated financial statements and footnotes in the audited financial statements for the year ended December 31, 2013 included in the Annual Report. There have been no significant changes in our critical accounting policies from those disclosed in the Annual Report.

Results of Operations

Below we have included a discussion of our operating results and material changes in our operating results during the three and six month periods ended June 30, 2014 compared to the three and six month periods ended June 30, 2013. Our revenues and operating results normally fluctuate as a result of seasonal or other variations in our enrollments and the level of expenses in our APEI and HCON segments. Our student population varies as a result of new enrollments, graduations, student attrition, the success of our marketing programs, and other reasons that we cannot always anticipate. We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in expenses.

Our consolidated results for three and six months ended June 30, 2014 reflect the operations of HCON, which was acquired by us on November 1, 2013, and our results for the three and six month periods ended June 30, 2013 do not include the results of HCON. For a more detailed discussion by reportable segment, refer to our Analysis of Operating Results by Reportable Segment .

Analysis of Consolidated Statements of Income

For the Consolidated Statements of Income, refer to our Financial Statements: Consolidated Statements of Income . The following table sets forth statements of income data as a percentage of revenues for each of the periods indicated (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Instructional costs and services		35.3			33.6			35.4			33.8
Selling and promotional		19.9			19.8			19.6			19.8
General and administrative		21.6			21.3			21.8			21.0
Depreciation and amortization		4.6			4.1			4.5			3.9

Total costs and expenses		81.4			78.8			81.3			78.5

Income from operations before
Interest income and income taxes		18.5			21.2			18.7			21.5
Interest income, net		0.1			0.1			0.1			0.1


Income from operations before income taxes		18.6			21.3			18.8			21.6
Income tax expense		7.2			8.0			7.2			8.1
Equity investment loss, net of taxes		—			—			—			—

Net Income		11.4	%		13.3	%		11.6	%		13.5	%

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Revenues. Our consolidated revenues for the three months ended June 30, 2014 were $85.5 million, an increase of $4.6 million, or 6%, compared to $80.9 million for the three months ended June 30, 2013. The increase was a result of an increase in revenues related to the inclusion of the results of the HCON segment, partially offset by a revenue decrease in our APEI segment due to a 3% decrease in net course registrations.

Costs and expenses. Costs and expenses for the three months ended June 30, 2014 were $69.6 million, an increase of $5.9 million, or 9%, compared to $63.7 million for the three months ended June 30, 2013. Costs and expenses as a percentage of revenues increased to 81.4% for the three months ended June 30, 2014 from 78.8% for the three months ended June 30, 2013. The increase in costs and expenses were primarily due to the inclusion of the results of the HCON segment for the three months ended June 30, 2014, with such expenses being partially offset by decreased expenses in our APEI segment caused by a decrease in net course registrations and lower payroll costs. Our costs and expenses as a percentage of revenue increased due to the inclusion of the operating results of the HCON segment, which has higher costs and expenses as a percentage of revenue than our APEI segment largely because HCON offers the majority of its courses at physical campuses, which have a higher cost structure than courses delivered fully online. To a lesser degree, our costs and expenses as a percentage of revenue also increased due to lower revenues from our APEI segment not being fully offset by lower costs and expenses in that segment.

Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended June 30, 2014 were $30.2 million, representing an increase of 11% from $27.2 million for the three months ended June 30, 2013. Instructional costs and services expenses as a percentage of revenues were 35.3% for the three months ended June 30, 2014, compared to 33.6% for the three months ended June 30, 2013. The increase in instructional costs and services expenses was primarily the result of the inclusion of the results of the HCON segment for the three months ended June 30, 2014, partially offset by decreases in instructional costs and services expenses in our APEI segment as the result of lower net course registrations. For the three months ended June 30, 2014, instructional costs and services expenses include campus level expenses for the HCON segment.

Selling and promotional expenses. Our selling and promotional expenses for the three months ended June 30, 2014 were $17.0 million, representing an increase of 6% from $16.0 million for the three months ended June 30, 2013. This increase was due to the inclusion of the results of the HCON segment for the three months ended June 30, 2014, and increased advertising expenses in our APEI segment. Selling and promotional expenses as a percentage of revenues were 19.9% for the three months ended June 30, 2014 and 19.8% for the three months ended June 30, 2013.

General and administrative expenses. Our general and administrative expenses for the three months ended June 30, 2014 were $18.5 million, representing an increase of 8% from $17.2 million for the three months ended June 30, 2013. General and administrative expenses as a percentage of revenues increased to 21.6% for the three months ended June 30, 2014 from 21.3% for the three months ended June 30, 2013. The increase in general and administrative expenses was a result of the inclusion of the results of HCON for the three months ended June 30, 2014, and increases in technology related expenses and higher bad debt expense in our APEI segment. For the three months ended June 30, 2014, bad debt expense increased to $4.9 million, or 5.7% of revenue, compared to $3.2 million, or 3.9% of revenue in the prior year period.

Depreciation and amortization. Depreciation and amortization expenses were $4.0 million for the three months ended June 30, 2014, compared with $3.3 million for the three months ended June 30, 2013. This represents an increase of 21%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed-asset base in our APEI segment, and the inclusion of the results of HCON for the three months ended June 30, 2014.

Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense were $1.3 million and $1 million in the aggregate for each of the three months ended June 30, 2014 and June 30, 2013, respectively. This represents an increase of 30.0%. This increase resulted primarily from a higher number of employees eligible for stock-based compensation.

Income tax expense. We recognized income tax expense for the three months ended June 30, 2014 and June 30, 2013 of $6.2 million and $6.5 million, respectively, or effective tax rates of 38.6% and 37.8%, respectively.

Net income. Our net income was $9.8 million for the three months ended June 30, 2014, compared to net income of $10.8 million for the three months ended June 30, 2013, a decrease of $1.0 million, or 9.3%. This decrease was related to the factors discussed above.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Revenues. Our consolidated revenues for the six months ended June 30, 2014 were $174.0 million, an increase of $9.2 million, or 6%, compared to $164.8 million for the six months ended June 30, 2013. The increase was a result of an increase in revenues related to the inclusion of the results of the HCON segment, partially offset by a revenue decrease in our APEI segment due to a 3% decrease in net course registrations.

Costs and expenses. Costs and expenses for the six months ended June 30, 2014 were $141.5 million, an increase of $12.2 million, or 9%, compared to $129.3 million for the six months ended June 30, 2013. Costs and expenses as a percentage of revenues increased to 81.3% for the six months ended June 30, 2014 from 78.5% for the six months ended June 30, 2013. The increase in costs and expenses were primarily due to the inclusion of the results of the HCON segment for the six months ended June 30, 2014, with such expenses being partially offset by decreased expenses in our APEI segment caused by a decrease in net course registrations and lower payroll costs. Our costs and expenses as a percentage of revenue increased due to the inclusion of the operating results of the HCON segment, which has higher costs and expenses as a percentage of revenue than our APEI segment largely because HCON offers the majority of its courses at physical campuses, which have a higher cost structure than courses delivered fully online. To a lesser degree, our costs and expenses as a percentage of revenue also increased due to lower revenues from our APEI segment not being fully offset by the lower costs and expenses at that segment. Over time, we will look for opportunities to realize possible operating efficiencies at HCON that could lower the HCON segment’s costs and expenses as a percentage of the segment’s revenue.

Instructional costs and services expenses. Our instructional costs and services expenses for the six months ended June 30, 2014 were $61.5 million, representing an increase of 11% from $55.6 million for the six months ended June 30, 2013. Instructional costs and services expenses as a percentage of revenues were 35.4% for the six months ended June 30, 2014, compared to 33.8% for the six months ended June 30, 2013. The increase in instructional costs and services expenses was primarily the result of the inclusion of the results of the HCON segment for the six months ended June 30, 2014, partially offset by decreases in instructional costs and services expenses in our APEI segment as the result of lower net course registrations. For the six months ended June 30, 2014, instructional costs and services expenses include campus level expenses for the HCON segment.

Selling and promotional expenses. Our selling and promotional expenses for the six months ended June 30, 2014 were $34.0 million, representing an increase of 4% from $32.6 million for the six months ended June 30, 2013. This increase was due to the inclusion of the results of the HCON segment, and an increase in advertising expenses in our APEI segment. Selling and promotional expenses as a percentage of revenues decreased to 19.6% for the six months ended June 30, 2014 from 19.8% for the six months ended June 30, 2013. This decrease was due to the inclusion of the results of the HCON segment for the six months ended June 30, 2014, which has lower selling and promotional expenses as a percentage of revenue than our APEI segment.

General and administrative expenses. Our general and administrative expenses for the six months ended June 30, 2014 were $38.0 million, representing an increase of 10% from $34.6 million for the six months ended June 30, 2013. General and administrative expenses as a percentage of revenues increased to 21.8% for the six months ended June 30, 2014 from 21.0% for the six months ended June 30, 2013. The increase in general and administrative expenses was a result of the inclusion of the results of HCON for the six months ended June 30, 2014, and increases in technology related expenses and higher bad debt expense in our APEI segment. For the six months ended June 30, 2014, bad debt expense increased to $10.0, or 5.7% of revenue, compared to $6.8 million, or 4.1% of revenue in the prior year period.

Depreciation and amortization. Depreciation and amortization expenses were $7.8 million for the six months ended June 30, 2014, compared with $6.5 million for the six months ended June 30, 2013. This represents an increase of 20%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed-asset base in our APEI segment, and the inclusion of the results of HCON for the six months ended June 30, 2014.

Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense were $2.4 million and $1.9 million in the aggregate for each of the six months ended June 30, 2014 and June 30, 2013, respectively. This represents an increase of 22.2%. This increase resulted primarily from a higher number of employees eligible for stock-based compensation.

Income tax expense. We recognized income tax expense for the six months ended June 30, 2014 and June 30, 2013 of $12.5 million and $13.4 million, respectively, or effective tax rates of 38.2% and 37.7%, respectively.

Net income. Our net income was $20.2 million for the six months ended June 30, 2014, compared to net income of $22.1 million for the six months ended June 30, 2013, a decrease of $2.0 million, or 9%. This decrease was related to the factors discussed above.

Analysis of Operating Results by Reportable Segment

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In Thousands)
Revenue:
American Public Education Segment	$	78,295	$	80,925	$	159,644	$	164,765
Hondros College of Nursing Segment		7,168		—		14,372		—
Total Revenue	$	85,463	$	80,925	$	174,016	$	164,765
Income from continuing operations before interest income and income taxes:
American Public Education Segment	$	15,052	$	17,203	$	31,079	$	35,413
Hondros College of Nursing Segment		783		—		1,481		—
Total income from continuing operations before interest income and income taxes	$	15,835	$	17,203	$	32,560	$	35,413

APEI Segment.

For the three months ended June 30, 2014, the $2.6 million decrease to approximately $78.3 million in revenues in our APEI segment was primarily attributable to lower net course registrations. Net course registrations decreased to 96,100 for the three months ended June 30, 2014, a decrease of 3% compared to the same period of 2013. Income from continuing operations before interest income and income taxes was $15.1 million for the three months ended June 30, 2014, a decrease of 12% compared to the same period of 2013. This decrease was a result of the decrease in net course registrations, increases in selling and promotional expenses, increases in technology related expenditures and higher bad debt expense.

For the six months ended June 30, 2014, the $5.1 million decrease to approximately $159.6 million in revenues in our APEI segment was primarily attributable to lower net course registrations. Net course registrations decreased to 202,000 for the six months ended June 30, 2014, a decrease of 3% compared to the same period of 2013. Income from continuing operations before interest income and income taxes was $31.1 million for the six months ended June 30, 2014, a decrease of 12% compared to the same period of 2013 as a result of the decrease in net course registrations, increases in selling and promotional expenses, increases in technology related expenditures, and higher bad debt expense.

HCON Segment.

Our HCON segment reflects the operations of HCON, which was acquired on November 1, 2013. As a result, we have not reported the results of operations for the HCON segment for the three or six months ended June 30, 2013.

For the three months ended June 30, 2014, the HCON segment had $7.2 million in revenue and $783,000 in income from continuing operations before interest income and income taxes. HCON's student enrollment during the period was 1,410, an increase of 17%, compared to the prior period of 2013.

For the six months ended June 30, 2014, the HCON segment had $14.4 million in revenue and $1.5 million in income from continuing operations before interest income and income taxes. HCON's student enrollment during the period was 1,410, an increase of 17%, compared to the prior period of 2013.

Liquidity and Capital Resources

Liquidity

We financed operating activities and capital expenditures during the six months ended June 30, 2014 and June 30, 2013 primarily through cash provided by operations. In the first six months of 2014, we used cash to repurchase stock and for a minority investment in Second Avenue Software, a game-based education software company, while in the first six months of 2013, we used cash to repurchase stock and for a minority investment in Fidelis Education, a company that is developing a technology platform that will assist working adult students with education advising and career mentoring services as they pursue college degrees. Cash and cash equivalents were $89.8 million and $94.8 million at June 30, 2014 and December 31, 2013, respectively, representing a decrease of $5.0 million, or 5%.

We derive a significant portion of our revenues from tuition assistance programs from the DoD. Generally, these funds are received within 60 days of the start of the classes to which they relate. Another significant source of revenue is derived from our participation in Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable class. These factors, together with the number of classes starting each month, affect our operating cash flow.

Our costs and expenses have increased over time with the fluctuations in student enrollment, increased overhead, and the acquisition and operation of HCON, and we expect to fund these costs and expenses through cash generated from operations. Based on our current level of operations, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations and planned capital expenditures for the foreseeable future unless significant future investment opportunities should arise.

Operating Activities

Net cash provided by operating activities was $22.2 million and $34.6 million for the six months ended June 30, 2014 and June 30, 2013, respectively. The decrease in cash provided by operating activities was primarily related to lower net income, and decreases in current liabilities primarily related to a decrease in accrued liabilities.

Investing Activities

Net cash used in investing activities was $12.2 million and $15.1 million for the six months ended June 30, 2014 and June 30, 2013, respectively. This decrease was primarily related to less cash being expended for equity investments and lower capital expenditures in our APEI segment.

Cash used in investing activities for capital expenditures is primarily related to our APEI segment and is for software development, on-going software development related to Partnership At a Distance, our customized student information and services system, buildings to support our operations, and computers and equipment to support staff. In addition, during the six months ended June 30, 2014, our APEI segment made an equity investment in Second Avenue Software for $1.5 million, and during the six months ended June 30, 2013 our APEI segment made an equity investment in Fidelis Education for $4.0 million.

We expect that we will continue to make investments related to strategic opportunities or to enhance our business capabilities, such as our investment in Fidelis Education and Second Avenue Software. Capital expenditures could be higher in the future as a result of the acquisition or lease of existing structures or potential new construction projects and necessary tenant improvements that arise as a result of our ongoing evaluation of our space needs and opportunities for physical growth, as well as a result of expenditures on technology and other business capabilities. We also expect that in the future capital expenditures in our HCON segment may be higher as a percentage of revenue than those in our APEI segment as a result of investments made related to HCON's physical classroom operations. We will continue to explore opportunities to invest in the education industry, which could include purchasing or investing in other education-related companies or companies developing new technologies.

Financing Activities

Net cash used in financing activities was $15.1 million and $6.3 million for the six months ended June 30, 2014 and June 30, 2013, respectively. The increase in cash used in financing activities was primarily related to more cash being expended for the repurchase of our common stock, partially offset by a decrease in the amount of cash received in exchange for the issuance of our common stock.

On May 14, 2012, our Board of Directors authorized a program to repurchase up to $20 million of shares of our common stock. On March 14, 2013, our Board of Directors increased the authorization by $15 million of shares, and on June 13, 2014, our Board of Directors increased the authorization by an additional $15 million of shares. Subject to market conditions, applicable legal requirements and other factors, the repurchases may be made from time to time in open market transactions or privately negotiated transactions. The authorization does not obligate us to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors that we deem appropriate. For the six-month period ended June 30, 2014, we repurchased 416,328 shares under the repurchase program for an aggregate amount of $14.5 million. As of June 30, 2014, approximately $15 million remained authorized for repurchase under the program.

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements, including any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Contractual Commitments

There were no material changes to our contractual commitments outside of the ordinary course of our business during the three months ended June 30, 2014.

For information regarding new HCON operating leases entered into in the ordinary course of business please refer to our Financial Statements: Notes to Consolidated Financial Statements, Subsequent Events .

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to the impact of interest rate changes and may be subject to changes in the market values of future investments. We invest our excess cash in bank overnight deposits. We have no material derivative financial instruments or derivative commodity instruments as of June 30, 2014.

Market Risk

We have no material derivative financial instruments or derivative commodity instruments. We maintain our cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits. We have not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash and cash equivalents. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

Interest Rate Risk

We are subject to risk from adverse changes in interest rates, primarily relating to our investing of excess funds in cash equivalents bearing variable interest rates, which are tied to various market indices. Our future investment income will vary due to changes in interest rates. At June 30, 2014, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows related to investments in cash equivalents.

There has been no material change to our market risk or interest rate sensitivity during the six months ended June 30, 2014.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2014 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2014.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we have been and may be involved in various legal proceedings. We currently have no material legal proceedings pending.

However, on or about November 18, 2013, a putative class action styled Tabatha Vickery, Bryan Lynn, on behalf of themselves and a similarly situated class v. Hondros College, Inc. and John G. Hondros, was filed in the Court of Common Pleas, Cuyahoga County, Ohio, case no. CV 13 817299. National Education Seminars, Inc., which operates as Hondros College of Nursing, or HCON, was not named in the lawsuit, but a then member of HCON’s board of directors, John Hondros, was named in the lawsuit, and the allegations made in the Complaint relate to HCON’s operations and not the operations of the entity named in the lawsuit. The lawsuit asserts claims for fraud and fraudulent inducement, negligent misrepresentation, breach of implied-in-fact contract, promissory estoppel, unjust enrichment, and violation of the Ohio Consumer Sales Practices Act, for, among other things, the alleged provision of false or misleading information to the named plaintiffs and other putative class members in 2011 and 2012 regarding the status of accreditation by National League for Nursing Accrediting Commission of HCON’s Associate Degree in Nursing, or ADN, program offered at its Independence, Ohio campus. The plaintiffs allege that the putative class consists of more than 60 former students who in the summer or fall quarters of 2011 enrolled in the ADN or the licensed practical nursing, or LPN, program at the Independence campus with the intention of pursuing a degree in nursing, but who withdrew from the ADN or LPN program. On February 11, 2014, the plaintiffs filed their First Amended Complaint which removed Hondros College, Inc. as a defendant and added HCON as a defendant. On February 24, 2014, the defendants filed a motion to dismiss with prejudice the plaintiffs’ First Amended Complaint. On April 1, 2014, the plaintiffs filed their opposition to the motion to dismiss. On April 10, 2014, the defendants filed their reply brief in support of the motion to dismiss. We are currently unable to estimate the likelihood or range of reasonably probable loss, if any, for this matter. We do not believe, based on currently available information, that the outcome of this proceeding, if adverse to HCON, would have a material adverse effect on our financial condition.

Item 1A. Risk Factors

An investment in our stock involves a high degree of risk. You should carefully consider the risks set forth in the Risk Factors section of our Annual Report for the year ended December 31, 2013, or the Annual Report, and all of the other information set forth in this Quarterly Report on Form 10-Q and our Annual Report and the additional information in the other reports we file with the Securities and Exchange Commission. If any of the risks contained in those reports actually occur, our business, results of operation, financial condition and liquidity could be harmed, the value of our securities could decline and you could lose all or part of your investment. In addition, you should also consider the risk factors set forth below, which amend and supplement the risks set forth in the Risk Factors section of our Annual Report.

We intend to market APUS programs in international markets, which could subject us to a variety of risks not previously encountered and negatively impact our profitability and liquidity.

We intend to market APUS's programs in international markets, which could subject us to a variety of risks not previously encountered and negatively impact our profitability and liquidity. We have marketed APUS's programs to a limited number of international students in the past, but we intend to increase these efforts in the future. APUS intends to market its programs using foreign agents and other methods. We do not have previous experience marketing APUS's programs through foreign agents and we may be unable to adequately manage risks associated with these planned international efforts, which could adversely affect our ability to successfully attract, retain and serve students in international markets and negatively impact our profitability and liquidity.

These international risks include, but are not limited to, the following:

●	uncertainty of product acceptance by students in international markets;
●	difficulties in staffing and managing international operations;
●	challenges finding, managing, and retaining agent relationships;
●	compliance with foreign regulatory requirements and unforeseen changes in such regulatory requirements;
●	political and economic instability in the countries in which we market;
●	potentially adverse tax consequences; and
●	compliance with certain U.S. laws and regulations such as the Foreign Corrupt Practices Act.

The DoD's revised Memorandum of Understanding includes terms and conditions that impose extensive new regulatory requirements on APUS with respect to participation in DoD tuition assistance programs.

Under a DoD final rule, effective January 7, 2013, each institution participating in DoD tuition assistance programs is required to sign a Memorandum of Understanding, or MOU, outlining certain commitments and agreements between the institution and DoD prior to accepting funds from DoD tuition assistance programs. Since August 14, 2013, DoD has issued a series of proposed revisions to the MOU. On July 7, 2014, the DoD released a revised MOU (the "2014 MOU") and institutions were informed that they are required to sign the 2014 MOU on or before September 5, 2014 in order to continue to participate in DoD tuition assistance programs. The 2014 MOU contains many requirements and limitations that were not contained in previous MOU's to which APUS was a party. Pursuant to the 2014 MOU, among other requirements, institutions must: provide meaningful information to students about the financial cost of attendance; comply with requirements related to readmission policies for servicemembers; abide by new limitations on the use of funds derived from tuition assistance; provide additional academic and student support services; disclose information about transfer of credit; in certain circumstances, return tuition assistance funds to DoD when a student withdraws; offer to service members loan counseling before private student loans are offered; and comply with ED's Title IV "program integrity" rules, including rules related to incentive payments, misrepresentation, and state authorization. We cannot predict how DoD will interpret and enforce these requirements or what type of immediate sanctions, if any, will be implemented before an institution loses the ability to participate in DoD tuition assistance programs for failure to comply with certain provisions of the 2014 MOU. The 2014 MOU also provides that an institution may only participate in DoD tuition assistance programs if it is accredited by an accrediting agency recognized by the U.S. Department of Education, approved for Veteran's Administration funding, and a participant in Title IV programs. If we fail to comply with the requirements of the 2014 MOU, we will not be able to participate in DoD tuition assistance programs, which could have a significant adverse effect on our results of operations.

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

Repurchases

During the six-month period ending June 30, 2014, we repurchased 416,328 shares of our common stock, par value $0.01 per share. The chart below provides further detail as to our repurchases during the period (unaudited):

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3)
January 1, 2014	—	—		—	—	$	9,417,721
January 20, 2014	—	—		—	147,284	$	9,417,721
January 1, 2014 – January 31, 2014	—	—		—	—	$	9,417,721
February 1, 2014 – February 28, 2014	—	—		—	147,284	$	9,417,721
March 1, 2014 – March 31, 2014	40,000	$	35.26	40,000	107,284	$	9,417,721
April 1, 2014 - April 30, 2014	185,000	$	34.60	185,000	14,784	$	6,217,221
May 1, 2014 - May 31, 2014	139,568	$	35.11	139,568	—	$	1,836,055
June 1, 2014 - June 30, 2014	51,760	$	34.95	51,760	—	$	27,043
June 30, 2014	—	—		—	—	$	15,027,043
Total	416,328	$34.88		416,328	—	$	15,027,043

(1)

On December 9, 2011, our Board of Directors approved a stock repurchase program for its common stock, under which we may annually purchase up to the cumulative number of shares issued or deemed issued under our equity incentive and stock purchase plans. Repurchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions based on business and market conditions. The stock repurchase program may be suspended or discontinued at any time, and will be funded using our available cash.

(2)

On May 14, 2012, our Board of Directors authorized a program to repurchase up to $20 million of shares of our common stock. On March 14, 2013, our Board of Directors increased this authorization by $15 million of shares and on June 13, 2014, our Board of Directors increased the authorization by an additional $15 million of shares. Subject to market conditions, applicable legal requirements and other factors, the repurchases may be made from time to time in open market transactions or privately negotiated transactions. The authorization does not obligate us to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors that we deem appropriate.

(3)

During the six months ended June 30, 2014, we were deemed to have repurchased 28,291 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants. These repurchases were not part of the Board authorized stock repurchase program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Ite m 5. Other Information

On August 1, 2014, we entered into an employment agreement with Carol Gilbert, our Executive Vice President, Programs and Marketing, an amended and restated employment agreement with Karan Powell, the Provost and Executive Vice President of American Public University System, Inc., an employment agreement with Richard W. Sunderland, Jr., our Executive Vice President and Chief Financial Officer, and an amended and restated employment agreement with Sharon van Wyk, our Executive Vice President and Chief Operations Officer. We refer to these four agreements as the “Employment Agreements”. The terms of the Employment Agreements are until March 31, 2017. Each Employment Agreement automatically renews at the end of its term unless we give prior notice of the intent not to renew the agreement.

The Employment Agreements, which are being filed as exhibits to this Quarterly Report on Form 10-Q, have provisions in them that provide for base salary, participation in our annual incentive plan and the payments that are due to the executives in the event of the termination of their respective employment. The Employment Agreements provide that equity awards vest in the event of a change of control where the executive’s employment is terminated by us without cause or by the executive with good reason during the twelve-month period following that change of control, as defined in the Amended Agreements.

In the Employment Agreements, each executive has agreed not to compete with us nor solicit our employees for alternative employment during the term of his agreement and for a specified period after termination of employment.

Item 6. Exhibits

Exhibit No.	Exhibit Description

10.1	Employment Agreement dated August 1, 2014, by and among American Public University System, Inc., American Public Education, Inc. and Carol Gilbert.
10.2	Amended and Restated Employment Agreement dated August 1, 2014, by and among American Public University System, Inc., American Public Education, Inc. and Karan Powell.
10.3	Employment Agreement dated August 1, 2014, by and among American Public University System, Inc., American Public Education, Inc. and Richard W. Sunderland, Jr.
10.4	Amended and Restated Employment Agreement dated August 1, 2014, by and among American Public University System, Inc., American Public Education, Inc. and Sharon van Wyk.
31.01	Certification of Chief Executive officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-101.INS **	XBRL Instance Document
EX-101.SCH **	XBRL Taxonomy Extension Schema Document
EX-101.CAL **	XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEF **	XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB **	XBRL Taxonomy Extension Label Linkbase Document
EX-101.PRE **	XBRL Taxonomy Extension Presentation Linkbase Document

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.

		AMERICAN PUBLIC EDUCATION, INC.
	/s/ Dr. Wallace E. Boston	August 5, 2014
	Dr. Wallace E. Boston
	President and Chief Executive Officer
	(Principal Executive Officer)


	/s/ Richard W. Sunderland Jr.	August 5, 2014
	Richard W. Sunderland, Jr.
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Principal Accounting Officer)

Exhibit 10.1

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.

AMERICAN PUBLIC EDUCATION, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”), entered into as of this 1st day of August, 2014, by and among American Public University System, Inc., a West Virginia corporation (the “ Company ”), American Public Education, Inc., a Delaware corporation (the “ Parent ”) and Carol Gilbert (the “ Executive ”).

WHEREAS, the Company is a wholly owned subsidiary of Parent; and

WHEREAS, the Company desires to continue the Executive’s employment, and the Executive desires to continue being employed by the Company, on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

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

2. Term . The employment of the Executive by the Company as provided in Section 1 hereof shall be deemed to have commenced prior to the date hereof. Unless sooner terminated as hereinafter set forth, the term of this Agreement shall end on March 31, 2017; provided , however , that this Agreement will automatically renew for additional one (1)-year periods (each a “ Renewal Term ”) on each anniversary thereafter unless the Company and Parent deliver to the Executive written notice of intent not to renew at least thirty (30) days prior to the expiration of the term or any Renewal Term. If this Agreement is renewed for one (1) or more Renewal Terms, such Renewal Term shall be on the basis stated herein. For the avoidance of doubt, the parties hereby acknowledge and agree that the Executive’s employment will not automatically terminate or end solely as a result of the expiration of the Agreement at the end of the term or any Renewal Term.

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

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

5. Compensation .

Base Salary . The Company shall pay to the Executive an annual base salary (the “ Base Salary ”) at the rate of $277,000 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Compensation Committee of the Board (the “ Compensation Committee ”). If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the employment term hereunder, except that the Company may reduce the Executive’s Base Salary at any time as part of a general salary reduction applied to all employees of the Company with annual salaries in excess of $150,000 (the “ Senior Executive Group ”) in which case the Executive’s reduced Base Salary shall be the Base Salary for the remainder of the employment term hereunder. Any such reduction in the Executive’s Base Salary shall be no more than the lesser of the median of the percentage of salary reductions applied to the Senior Executive Group or twenty percent (20%). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

Annual Bonus . The Executive shall be eligible to receive a bonus of up to fifty percent (50%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion (the “ Annual Bonus ”), based upon the achievement of certain performance goals established by the Compensation Committee for each year. The Executive will also be eligible to receive an additional percentage of up to twenty percent (20%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion, based upon the achievement of certain “stretch” performance goals established by the Compensation Committee for each year. Any such bonus shall be paid by March 15 of the year following the year of performance.

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

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

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

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

7. Confidential Information .

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

Reasonable Restrictions . The Executive acknowledges that the restrictions contained in Section 7(a) hereof are reasonable and necessary, in view of the nature of the Company’s or Parent business, in order to protect the legitimate interests of the Company or Parent, and that any violation thereof would result in irreparable injury to the Company or Parent. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 7(a) hereof, the Company or Parent shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any confidential information. Nothing herein shall be construed as prohibiting the Company or Parent from pursuing any other remedies available to it for breach or threatened breach, including, without limitation, recovery of damages from the Executive.

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

8. Non-Competition .

Non-Competition . The Executive covenants and agrees that, during the Executive’s employment hereunder and for a period of one (1) year thereafter (to the extent permitted by law), the Executive will not at any time, in the United States or any other jurisdiction in which the Company, the Parent or their respective corporate controlled affiliates is engaged or has reasonably firm plans to engage in business, whether as a principal, investor, employee, consultant, independent contractor, officer, director, board member, manager, partner, agent, or otherwise, alone or in association with any other person, firm, corporation, or business organization, work for, become employed by, engage in, carry on, provide services to, or assist in any manner (whether or not for compensation or gain) a person or entity that engages in any business in which the Company, the Parent, or any of their corporate controlled affiliates is engaged (a “ Competing Business ”), where Executive’s position or service for such Competing Business relates to Executive’s positions with or the types of services performed by the Executive for the Company, the Parent, or any of their corporate controlled affiliates, or is otherwise competitive with the Company’s, the Parent’s, or any of their corporate controlled affiliates’ products or services; provided, however, that the foregoing will not prohibit the Executive from serving on a board of directors (or comparable bodies) of other entities where the Parent has given prior permission. Notwithstanding the foregoing, the ownership by the Executive of less than one percent (1%) of the outstanding stock of any corporation listed on a national securities exchange shall not be deemed a violation of this Section 8(a).

Injunctive Relief . The Company shall be entitled to injunctive relief to protect its rights under this Section 9 without the necessity of posting a bond. In the event the restrictions against engaging in a competitive activity contained in Section 8(a) hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, Section 8(a) hereof shall be interpreted to extend only over the maximum period of time for which it may be enforceable and over the maximum geographical area as to which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, all as determined by the court in the action.

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

9. Termination of Employment .

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

b.	By the Company . The Company or Parent may terminate the Executive’s employment hereunder under the following circumstances:

The Company or Parent may terminate the Executive’s employment hereunder for “Disability.” For purposes of this Agreement, “ Disability ” shall mean the Executive shall have been unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for more than three (3) consecutive months.

ii.

The Company or Parent may terminate the Executive’s employment hereunder for “Cause.” For purposes of this Agreement, “ Cause ” shall mean (A) refusal by the Executive to follow a lawful written order of the Chief Executive Officer, Chairman of the Board or the Board, (B) the Executive’s engagement in conduct materially injurious to the Company or Parent or their respective reputations, (C) dishonesty of a material nature that relates to the performance of the Executive’s duties under this Agreement, (D) the Executive’s conviction for any crime involving moral turpitude or any felony, or (E) the Executive’s continued failure to perform her duties under this Agreement (except due to the Executive’s incapacity as a result of physical or mental illness) to the satisfaction of the Board for a period of at least thirty (30) consecutive days after written notice is delivered to the Executive specifically identifying the manner in which the Executive has failed to perform her duties.

iii.	The Company or Parent may terminate the Executive’s employment hereunder at any time other than for Disability or Cause, for any reason or for no reason at all.

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

the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position as contemplated by Section 3 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

ii.

any material failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company or Parent promptly after receipt of notice thereof given by the Executive, provided , that in no event will a failure to pay the Annual Bonus by March 15 of the year following the performance year be considered a material failure by the Company or Parent to comply with this Agreement;

iii.

after a Change of Control (as defined in Section 11), the Executive does not continue as the Executive Vice President, Programs and Marketing of American Public University System, or any other office she holds at the time of the Change of Control, of the most senior resulting entity succeeding to the business of the Company; or

iv.	any material failure by the Company or Parent to comply with and satisfy Section 15(c) of this Agreement.

In order to constitute Good Reason, Executive must provide notice to the Company and Parent of the existence of the condition within ninety (90) days of the initial existence. None of the foregoing events shall constitute Good Reason if the Executive consents in writing to such event. The Executive further understands and agrees that none of the foregoing events shall constitute Good Reason unless the Company or Parent fails to cure such asserted grounds for Good Reason within thirty (30) days of its receipt of notice from the Executive. In order to terminate her employment, if at all, for Good Reason, Executive must terminate employment within thirty (30) days of the end of the cure period if the breach has not been cured.

Notice of Termination . Any termination of the Executive’s employment by the Company, the Parent or the Executive (other than pursuant to Section 9(a) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 12 hereof. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

Date of Termination . For purposes of this Agreement, the “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated pursuant to Section 9(b)(i) hereof, thirty (30) days after Notice of Termination, provided , that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during this thirty (30)-day period; (iii) if the Executive’s employment is terminated pursuant to Section 9(b)(ii) or 9(b)(iii) hereof, the date specified in the Notice of Termination; (iv) if the Executive terminates the Executive’s employment for Good Reason pursuant to Section 9(c) hereof, the date specified in the Notice of Termination, provided , however , that such date must occur after the cure period provided in Section 9(c); and (v) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination. Notwithstanding the foregoing, the Executive will be deemed to have a Date of Termination for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “ Code ”).

10. Compensation Upon Termination .

If the Executive’s employment is terminated by the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of the estate, (i) the Executive’s full Base Salary through the Date of Termination to the extent not theretofore paid, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, and (iii) all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(b) “Annual Bonus” and Section 5(c) “Other Benefits” hereof (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as the “Base Amounts”), at the time these payments are due and the Company and Parent shall have no further obligations to the Executive under this Agreement.

If the Company terminates the Executive’s employment for Disability as provided in Section 9(b)(i) hereof, the Company shall pay the Executive the following amounts and the Company and Parent shall have no further obligations to the Executive, provided , that in the case of payments to be made pursuant to section (ii) below, on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

an amount equal to the sum of (A) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (x) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period through the Date of Termination, for an Annual Bonus) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, (the sum of the amounts described in clauses (A), (B), and (C) shall be hereinafter referred to as the “ Accrued Obligations ”) in a lump sum in cash within thirty (30) days of the Date of Termination; and

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the Executive Vice President, Programs and Marketing were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination; provided , that payments made to the Executive under this section shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any payment, provided , further , that any such reduction shall be done in a manner that complies with Section 409A of the Code.

If the Company terminates the Executive’s employment for Cause as provided in Section 9(b)(ii) hereof or if the Executive terminates the Executive’s employment other than for Good Reason, the Company shall pay the Executive the Base Amounts, and the Company and Parent shall have no further obligations to the Executive under this Agreement.

Except where payments are required to be made under Section 10(f), if the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 9(c) hereof, the Company shall pay the Executive the following amounts and the Company and Parent shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

i.	the Accrued Obligations in a lump sum in cash within thirty (30) days of the Date of Termination;

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor Executive Vice President, Programs and Marketing were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination;

iii.

for twelve (12) months after the Date of Termination, or any longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer employees of the Company and its affiliated companies, as if the Executive’s employment had not been terminated; provided , however , that the Company may elect, with respect to some or all of such benefits, that in lieu of the continuation of such benefits, the Company may pay to the Executive a lump sum payment, less applicable withholdings for federal, state, and local taxes, equal to twelve (12) months’ premiums (at the rate and level of coverage applicable at the time of the Executive’s termination) under the Company’s welfare benefit plans, practices, policies and programs (at the rate and level of coverage applicable at the time of the Executive’s termination) for the benefits for which this election is made; provided , further , that if such a lump sum payment is not permissible without incurring taxes under Section 409A of the Code, the Company may elect to make twelve (12) monthly payments to the Executive to aggregate to the amounts that would otherwise have been paid a lump sum; and provided , further , that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under the other plan during the applicable period of eligibility; and

iv.

to the extent not theretofore paid or provided, for twelve (12) months after the Date of Termination, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (these other amounts and benefits shall be hereinafter referred to as the “ Other Benefits ”).

If within one hundred and eighty (180) days after a Change of Control (as defined in Section 11), the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 9(c) hereof, the Company shall pay the Executive the following amounts and the Company and Parent shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

an amount equal to the sum of (A) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (x) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period through the Date of Termination, for an Annual Bonus) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the effective date of termination of the Executive’s employment (the “ Change of Control Date of Termination ”), and the denominator of which is 365, and (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, in a lump sum in cash within thirty (30) days of the Change of Control Date of Termination;

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent the Company and Executive performance were satisfying the performance targets, adjusted for the short period), in a lump sum in cash within sixty (60) days of the Change of Control Date of Termination, provided , that if Executive’s Change of Control Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will be paid on the first payroll date in the year after the Change of Control Date of Termination;

iii.

iv.	to the extent not theretofore paid or provided, for twelve (12) months after the Date of Termination, the Company shall timely pay or provide to the Executive Other Benefits.

in the event that it is determined that any payment, benefit, or distribution described in this Section 10(e) or in Section 11 made by the Company, by any of its affiliates, by any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Section 10(e), Section 11 or otherwise (the “ Total Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “ Excise Tax ”), then the payments due under this Agreement shall be reduced so that the Total Payments will not result in the imposition of such Excise Tax. The payment reduction contemplated by the preceding sentence shall be implemented by determining the “Parachute Payment Ratio” (as defined below) for each “parachute payment” within the meaning of Section 280G of the Code, and then reducing the “parachute payments” in order beginning with the “parachute payment” with the highest Parachute Payment Ratio. For “parachute payments” with the same Parachute Payment Ratio, such “parachute payments” shall be reduced based on the time of payment of such “parachute payments” with amounts having later payment dates being reduced first. For “parachute payments” with the same Parachute Payment Ratio and the same time of payment, such “parachute payments” shall be reduced on a pro rata basis (but not below zero) prior to reducing “parachute payments” with a lower Parachute Payment Ratio. For purposes hereof, the term “ Parachute Payment Ratio ” shall mean a fraction the numerator of which is the value of the applicable “parachute payment” for purposes of Section 280G of the Code and the denominator of which is the intrinsic value of such “parachute payment.” For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) the entire amount of the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2) and as subject to the Excise Tax, unless and to the extent, in the written opinion of the Company’s independent accountants and reasonably acceptable to Executive, such payments (in whole or in part) are not subject to the Excise Tax; and (B) the value of any noncash benefits or any deferred payment or benefit (constituting a part of the Total Payments) shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4). Notwithstanding the foregoing, if (Y) the Total Payments exceed three (3) times the Executive’s “base amount” as defined within Section 280G and (Z) the Executive would receive at least $50,000 more on a net after-tax basis if the Total Payments were not reduced pursuant to this section (after payment of the Excise Tax), then the Company will not reduce the Total Payments and Executive shall be responsible for the Excise Tax related thereto. For purposes of determining the net after-tax benefit, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of the federal income taxation applicable to individuals (without taking into account surtaxes or loss or reduction of deductions) for the calendar year in which the Date of Termination occurs and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive’s residence on the Date of Termination.

f.	No Duty to Mitigate . The Executive shall not be required to mitigate amounts payable pursuant to Section 10 hereof by seeking other employment.

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

11. Acceleration of Equity Awards . All equity awards granted to the Executive under any equity incentive plan maintained for Company or Parent employees that are outstanding immediately prior to the following events shall be vested and fully exercisable as follows: (a) upon termination of the Executive’s employment by the Executive’s death as provided in Section 9(a) hereof, (b) upon termination of the Executive’s employment by the Company or Parent for Disability as provided in Section 9(b)(i) hereof, or (c) upon termination of the Executive’s employment by the Company as provided in Section 9(b)(iii) in the twelve (12)-month period following a Change of Control or by the Executive for Good Reason as provided in Section 9(c) in the twelve (12)-month period following a Change of Control; provided , that for purposes of clauses (a) and (b) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in a pro-rated amount equivalent to the portion of the performance period that has passed and assuming achievement of the performance conditions for that period at the “target” level, and for purposes of clause (c) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in full at the “target” level. This Agreement is intended to amend all equity awards grants previously awarded to the Executive to modify vesting as described above to the extent vesting would not otherwise accelerate under the terms of such equity awards. For purposes of this Agreement, “ Change of Control ” means (i) the dissolution or liquidation of the Parent or a merger, consolidation, or reorganization of the Parent with one (1) or more other entities in which the Parent is not the surviving entity, (ii) a sale of substantially all of the assets of the Parent to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Parent is the surviving entity) which results in any person or entity owning fifty percent (50%) or more of the combined voting power of all classes of stock of the Parent, provided , that if an event is a “Change of Control” as defined in this Agreement but is not a “change in control event” as defined in Section 409A of the Code, any payments which are the same as the payments the Executive would have received under Section 10(d) if there had not been a “Change of Control” will be paid at the time and in the manner specified in Section 10(d).

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

a.	If to the Company:

American Public University System, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

b.	If to the Parent:

American Public Education, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

If to the Executive, to the Executive’s address set forth on the signature page to this Agreement, or to the home address of the executive in the official records of the Company; or, in the case of the Company or Parent, to such other address as the Company or Parent may designate in a notice to the other. Each notice, demand, request or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of delivery) or at such time as delivery is refused by the addressee upon presentation

13. Severability . The invalidity or unenforceability of any one (1) or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.

14. Survival . It is the express intention and agreement of the parties hereto that the provisions of Sections 7 and 8 hereof shall survive the termination of employment of the Executive and the expiration of this Agreement. It is the express intention and agreement of the parties hereto that the provisions of Section 10(d) shall survive the expiration of this Agreement for a period of twelve (12) months. In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

15. Successors and Assigns .

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

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

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

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

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

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

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

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

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

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

It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax imposed pursuant to Section 409A of the Code. To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Agreement with the goal of giving the Executive the economic benefits described herein in a manner that does not result in such tax being imposed.

For purposes of Section 409A, the Executive’s right to receive installment payments pursuant to this Agreement including, without limitation, each severance payment and COBRA continuation reimbursement shall be treated as a right to receive a series of separate and distinct payments.

Any amount that the Executive is entitled to be reimbursed under this Agreement will be reimbursed to the Executive as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred. Any right to reimbursement or in kind benefits will not be subject to liquidation or exchange for another benefit. The amount of the expenses eligible for reimbursement during any taxable year will not affect the amount of expenses eligible for reimbursement in any other taxable year.

Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

AMERICAN PUBLIC EDUCATION, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

THE EXECUTIVE:


/s/ Carol Gilbert
Carol Gilbert

APPENDIX A

FORM OF RELEASE

THIS RELEASE (“Release”) is entered into this [_____] day of [_____], 20[__], by and among American Public University System, Inc., a West Virginia corporation (the “Company”), American Public Education, Inc., a Delaware corporation (the “Parent”) and Carol Gilbert (the “Executive”).

WHEREAS, the Company, the Parent and the Executive are parties to that certain Executive Employment Agreement, dated as of [________], 2014 (the “Employment Agreement”), which provides that certain severance payments and other benefits be made and provided by the Company to the Executive following termination of the Executive’s employment under certain circumstances; and

WHEREAS, as a condition of receiving such severance payments and in accordance with the terms of the Employment Agreement, the Executive has agreed to enter into this Release;

1. Separation and Payment. The Executive performed her duties in accordance with the Employment Agreement through [_______]. The Executive’s Date of Termination (as such term is defined in Section 9(e) of the Employment Agreement) is [_______]. The Executive shall be entitled to the compensation and benefits set forth in Section 10 of the Employment Agreement, subject to compliance with the terms of the Employment Agreement and this Release. Other than the payments referred to in Section 10 of the Employment Agreement, the Executive has been paid all compensation due and owing to her under this Release and under any employment or other contract the Executive has or may have had with the Company (including but not limited to the Employment Agreement) or from any other source of entitlement, including all wages, salary, bonuses, incentive payments, profit-sharing payments, leave, severance pay or other benefits.

2. Release. On behalf of himself and her agents, heirs, executors, administrators, successors and assigns, the Executive hereby releases and forever discharges the Company, and any and all of the affiliates (excluding members), officers, directors, employees, agents, counsel, and successors and assigns of the Company, from any and all complaints, claims, demands, damages, lawsuits, actions, and causes of action, whether known, unknown or unforeseen, arising out of or in connection with any event, transaction or matter occurring or existing prior to or at the time of her execution of this Release, which she has or may have against any of them for any reason whatsoever in law or in equity, under federal, state, local, or other law, whether the same be upon statutory claim, contract, tort or other basis, including without limitation any and all claims arising from or relating to her employment or the termination of her employment and any and all claims relating to any employment contract (including but not limited to her Employment Agreement), any employment statute or regulation, or any employment discrimination law, including without limitation the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1866 and the Equal Pay Act of 1963, all as amended, all state and local laws, regulations and ordinances prohibiting discrimination in employment, and other laws and regulations relating to employment, including but not limited to the Family and Medical Leave Act and the Fair Labor Standards Act, all as amended. The Executive agrees, without limiting the generality of the above release, not to file any claim or lawsuit seeking damages or other relief and asserting any claims that are lawfully released in this paragraph. The Executive further hereby irrevocably and unconditionally waives any and all rights to recover any relief and damages concerning the claims that are lawfully released in this paragraph. The Executive represents and warrants that she has not previously filed or joined in any such claims against the Company or any of its affiliates, and that she has not given or sold any portion of any claims released herein to anyone else, and that she will indemnify and hold harmless the persons and entities released herein from all liabilities, claims, demands, costs, expenses and/or attorneys’ fees incurred as a result of any such assignment or transfer. THE EXECUTIVE HEREBY ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A GENERAL RELEASE (EXCEPT AS PROVIDED HEREIN) AND THAT BY SIGNING THIS RELEASE, THE EXECUTIVE IS SIGNING AND AGREEING TO THIS RELEASE. Notwithstanding any term or provision of this Release or the Employment Agreement to the contrary, and specifically notwithstanding the foregoing releases, this Release does not relate to, and the Executive does not release, any rights the Executive may have with respect to any of the following: (a) any claim of the Executive for the payments and benefits due to her under the Employment Agreement and this Release; (b) any contribution, indemnity, or other claim the Executive may have under the Charter or Bylaws of the Company (or any successor or similar provision), under any applicable policy of insurance, or under applicable law as a result of any action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that the Executive is or was a director, officer, executive or agent of the Company or serves or served any other enterprise at the request of the Company; (b) any claim relating solely to the validity of this Release under the ADEA, as amended; (d) any non-waivable right to file a change with the U.S. Equal Employment Opportunity Commission; or (e) any rights that may not be waived as a matter of law.

3. No Admission . The Parties agree that nothing contained in this Release shall constitute or be treated as an admission of liability or wrongdoing by either of them.

4. No Obligation to Hire . The Executive agrees that neither the Company nor the Parent nor any of their subsidiaries or affiliates have any obligation to hire, reemploy or reinstate the Executive in the future. The Executive agrees that she will not apply for employment with the Company, the Parent or any of their respective subsidiaries or affiliates.

5. Cooperation and Non-Disparagement . The Executive agrees to cooperate with the Company and the Parent to the extent reasonably requested by the Company or the Parent for the purpose of transitioning her duties and responsibilities. Such cooperation shall include, but is not limited to, at the Company’s or the Parent’s request during the six (6) months following her Date of Termination, the Executive making himself available by telephone to answer questions regarding any matter or project in which she was involved while employed by the Company or the Parent. The Executive further agrees that, other than as may be required by law or as part of a governmental investigation or proceeding, she shall make no statements disparaging the Company, the Parent or any of their subsidiaries, affiliates, officers, directors, employees, or any of their business practices.

6. Modification; Severability. The Parties agree that if a court of competent jurisdiction finds that any term of this Release is for any reason excessively broad in scope, duration, or otherwise, such term shall be construed or modified in a manner to enable it to be enforced to the maximum extent possible. Further, the covenants in this Release shall be deemed to be a series of separate covenants and agreements. If, in any judicial proceeding, a court of competent jurisdiction shall refuse to enforce any of the separate covenants deemed included herein, then at the option of the Company, wholly unenforceable covenants shall be deemed eliminated from this Release for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding.

7. Certain Representations. The Parties represent and acknowledge that in executing this Release such Party does not rely and has not relied upon any representation or statement made by the other Party or the other Party’s agents, representatives or attorneys with regard to the subject matter, basis or effect of this Release or otherwise.

8. Entire Agreement. This Release, together with the Employment Agreement contains the entire agreement between the Parties relating to the subject matter of this Release, and may not be altered or amended except by an instrument in writing signed by both Parties hereto.

9. Assignment. This Release and the rights and obligations of the Parties hereunder may not be assigned by either Party without the prior written consent of the other Party.

10. Binding Agreement. This Release shall be binding upon and inure to the benefit of the Parties and their respective representatives, successors and permitted assigns.

11. Waiver. Neither the waiver by either Party of a breach of or default under any of the provisions of this Release, nor the failure of such Party, on one (1) or more occasions, to enforce any of the provisions of this Release or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder.

12. Further Assurances. The Parties agree to take or cause to be taken such further actions as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms, and conditions of this Release.

13. Governing Law. This Release, for all purposes, shall be construed in accordance with the laws of the State of West Virginia without regard to conflicts of law principles. Subject to paragraph 14 below, any action or proceeding by either of the Parties to enforce this Release shall be brought only in a state or federal court located in the State of West Virginia, and the Parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.

14. Arbitration. Any controversy, dispute or claim arising out of or relating to this Release, including the obligations to make payments pursuant to the Employment Agreement, any modification or extension hereof, or any breach hereof (including the question whether any particular matter is arbitrable hereunder) shall be settled exclusively by arbitration, in the District of Columbia in accordance with the rules of the American Arbitration Association then in force (the “Rules”). Such arbitration shall be effected by arbitrator(s) appointed by the American Arbitration Association in accordance with the Rules. The Parties hereto agree to abide by all awards and decisions rendered in an arbitration proceeding in accordance with the foregoing, and all such awards and decisions may be filed by the prevailing Party with any court having jurisdiction over the person or property of the other Party as a basis for judgment and the issuance of execution thereon. The fees of the arbitrator(s) and related expenses of arbitration shall be apportioned among the Parties as determined by the arbitrator(s). Unless otherwise agreed by the Parties to the arbitration, all hearings shall be held, and all submissions shall be made by the Parties, within thirty (30) days of the date of the selection of the last arbitrator, and the decisions of the arbitrator(s) shall be made within thirty (30) days of the later of the date of the closing of the hearings or the date of the final submissions by the Parties. The Parties consent to the jurisdiction of the Courts of the District of Columbia and of the United States District Court for the District of Columbia, for all purposes in connection with the arbitration. The Parties consent that any process or notice of motion or other application to either of said courts, and any paper in connection with arbitration, may be served by certified mail, return receipt requested, or by personal service, or in such other manner as may be permissible under the rules of the applicable court or arbitration tribunal, provided that a reasonable time for appearance is allowed.

15. Acknowledgment. With respect to the Release in paragraph 2 above , Executive agrees and understands that she is specifically releasing all claims under the Age Discrimination in Employment Act (29 U.S.C. § 621 et seq. ), as amended. The Executive acknowledges that she has read and understands this Release and executes it voluntarily and without coercion. The Executive further acknowledges that she has had full opportunity to consult with an attorney prior to executing this Release, and that she has been advised in writing herein to do so. In addition, the Executive has been given twenty-one (21) days, to consider, execute, and deliver this Release to the Chairman of the Board of Directors of the Parent at the Parent’s principal business address, unless the Executive voluntarily chooses to execute this Release before the end of the twenty-one (21)-day period. The Executive understands that she has seven (7) days following her execution of this Release to revoke it in writing, and that this Release is not effective or enforceable until after this seven (7)-day period. For such revocation to be effective, notice must be delivered to the Parent at the Parent’s principal business address, addressed to the attention of the Chairman of the Board of Directors, no later than the end of the seventh calendar day after the date by which the Executive signed this Release. The Executive expressly agrees that, in the event she revokes this Release, this Release shall be null and void and have no legal or binding effect whatsoever, and she shall not be entitled to the payments described in paragraph 1 above , other than the Base Amounts, including pursuant to the Employment Agreement. The Parties recognize that she may elect to sign this Release prior to the expiration of the twenty-one (21)-day consideration period specified herein, and the Executive agrees that if she elects to do so such election is knowing and voluntary and comes after full opportunity to consult with an attorney.

[ Signature page follows ]

IN WITNESS WHEREOF, the undersigned have duly executed this Release, or have caused this Release to be duly executed on their behalf, as of the day and year first hereinabove written.

	AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


	By:
		Name:
		Title:

	AMERICAN PUBLIC EDUCATION, INC.


	By:
		Name:
		Title:

	THE EXECUTIVE:



	Carol Gilbert

Exhibit 10.2

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.

AMERICAN PUBLIC EDUCATION, INC.

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”), entered into as of this 1st day of Aug 2014, amends and restates that certain Executive Employment Agreement entered into as of November 4, 2011, by and among American Public University System, Inc., a West Virginia corporation (the “ Company ”), American Public Education, Inc., a Delaware corporation (the “ Parent ”) and Karan H. Powell (the “ Executive ”).

WHEREAS, the Company is a wholly owned subsidiary of Parent; and

WHEREAS, the Company desires to continue the Executive’s employment, and the Executive desires to continue being employed by the Company, on the terms and conditions set forth herein.

2. Term . The employment of the Executive by the Company as provided in Section 1 hereof shall be deemed to have commenced on November 4, 2011. Unless sooner terminated as hereinafter set forth, the term of this Agreement shall end on March 31, 2017; provided , however , that this Agreement will automatically renew for additional one (1)-year periods (each a “ Renewal Term ”) on each anniversary thereafter unless the Company and Parent deliver to the Executive written notice of intent not to renew at least thirty (30) days prior to the expiration of the term or any Renewal Term. If this Agreement is renewed for one (1) or more Renewal Terms, such Renewal Term shall be on the basis stated herein. For the avoidance of doubt, the parties hereby acknowledge and agree that the Executive’s employment will not automatically terminate or end solely as a result of the expiration of the Agreement at the end of the term or any Renewal Term.

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

5. Compensation .

Base Salary . The Company shall pay to the Executive an annual base salary (the “ Base Salary ”) at the rate of $280,000 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Compensation Committee (the “ Compensation Committee ”) of the Board. If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the employment term hereunder, except that the Company may reduce the Executive’s Base Salary at any time as part of a general salary reduction applied to all employees of the Company with annual salaries in excess of $150,000 (the “ Senior Executive Group ”) in which case the Executive’s reduced Base Salary shall be the Base Salary for the remainder of the employment term hereunder. Any such reduction in the Executive’s Base Salary shall be no more than the lesser of the median of the percentage salary reductions applied to the Senior Executive Group or twenty percent (20%). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

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

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

7. Confidential Information .

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

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

8. Non-Competition .

Non-Competition . The Executive covenants and agrees that, during the Executive’s employment hereunder and for a period of one (1) year thereafter (to the extent permitted by law), the Executive will not at any time, in the United States or any other jurisdiction in which the Company, the Parent or their respective corporate controlled affiliates is engaged or has reasonably firm plans to engage in business, whether as a principal, investor, employee, consultant, independent contractor, officer, director, board member, manager, partner, agent, or otherwise, alone or in association with any other person, firm, corporation, or business organization, work for, become employed by, engage in, carry on, provide services to, or assist in any manner (whether or not for compensation or gain) a person or entity that engages in any business in which the Company, the Parent, or any of their corporate controlled affiliates is engaged (a “ Competing Business ”), where Executive’s position or service for such Competing Business relates to Executive’s positions with or the types of services performed by the Executive for the Company, the Parent, or any of their corporate controlled affiliates, or is otherwise competitive with the Company’s, the Parent’s, or any of their corporate controlled affiliates’ products or services provided, however, that the foregoing will not prohibit the Executive from (i) serving on a board of directors (or comparable bodies) of other entities where the Parent has given prior permission, (ii) after the occurrence of both a Change of Control (as defined in Section 11) and the termination of the Executive’s employment, being employed by (A) a campus-based institution of higher education that derives no more than twenty percent (20%) of its revenues from online education, provided, that the Executive is not predominantly engaged in supporting the online education, or (B) an online learning company that does not provide higher education, or (iii) serving as a faculty member, “scholar in residence” or similar academic position, provided, that the Executive does not engage in administrative matters, other than to a de minimis extent. Notwithstanding the foregoing, the ownership by the Executive of less than one percent (1%) of the outstanding stock of any corporation listed on a national securities exchange shall not be deemed a violation of this Section 8(a).

Injunctive Relief . In the event the restrictions against engaging in a competitive activity contained in Section 8(a) hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, Section 8(a) hereof shall be interpreted to extend only over the maximum period of time for which it may be enforceable and over the maximum geographical area as to which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, all as determined by the court in the action.

9. Termination of Employment .

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

b.	By the Company . The Company or Parent may terminate the Executive’s employment hereunder under the following circumstances:

ii.

iii.	The Company or Parent may terminate the Executive’s employment hereunder at any time other than for Disability or Cause, for any reason or for no reason at all.

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

ii.

iii.	after a Change of Control (as defined in Section 11), the Executive does not continue as the Provost of American Public University System, or any other office she holds at the time of the Change of Control, of the most senior resulting entity succeeding to the business of the Company; or

iv.	any material failure by the Company or Parent to comply with and satisfy Section 15(c) of this Agreement.

10. Compensation Upon Termination .

If the Executive’s employment is terminated by the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of the estate, (i) the Executive’s full Base Salary through the Date of Termination to the extent not theretofore paid, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, and (iii) all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(b) “Annual Bonus” and Section 5(c) “Other Benefits” hereof (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as the “ Base Amounts ”), at the time these payments are due and the Company shall have no further obligations to the Executive under this Agreement.

If the Company terminates the Executive’s employment for Disability as provided in Section 9(b)(i) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that in the case of payments to be made pursuant to section (ii) below, on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the provost were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination; provided , that payments made to the Executive under this section shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any payment, provided , further , that any such reduction shall be done in a manner that complies with Section 409A of the Code.

If the Company terminates the Executive’s employment for Cause as provided in Section 9(b)(ii) hereof or if the Executive terminates the Executive’s employment other than for Good Reason, the Company shall pay the Executive the Base Amounts, and the Company shall have no further obligations to the Executive under this Agreement.

Except where payments are required to be made under Section 10(e), if the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 9(c) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

i.	the Accrued Obligations in a lump sum in cash within thirty (30) days of the Date of Termination;

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor provost were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination;

iii.

iv.

If within one hundred and eighty (180) days after a Change of Control (as defined in Section 11), the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 9(c) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

an amount equal to the sum of (A) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (x) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period through the Date of Termination, for an Annual Bonus) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the effective date of termination of the Executive’s employment (the “ Change of Control Date of Termination ”), and the denominator of which is 365, and (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, in a lump sum in cash within thirty (30) days of the Change of Control Date of Termination;

ii.

iii.

iv.	to the extent not theretofore paid or provided, for twelve (12) months after the Date of Termination, the Company shall timely pay or provide to the Executive Other Benefits.

in the event that it is determined that any payment, benefit, or distribution described in this Section 10(e) or in Section 11 made by the Company, by any of its affiliates, by any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code) or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Section 10(e), Section 11 or otherwise (the “ Total Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “ Excise Tax ”), then the payments due under this Agreement shall be reduced so that the Total Payments will not result in the imposition of such Excise Tax. The payment reduction contemplated by the preceding sentence shall be implemented by determining the “Parachute Payment Ratio” (as defined below) for each “parachute payment” within the meaning of Section 280G of the Code, and then reducing the “parachute payments” in order beginning with the “parachute payment” with the highest Parachute Payment Ratio. For “parachute payments” with the same Parachute Payment Ratio, such “parachute payments” shall be reduced based on the time of payment of such “parachute payments” with amounts having later payment dates being reduced first. For “parachute payments” with the same Parachute Payment Ratio and the same time of payment, such “parachute payments” shall be reduced on a pro rata basis (but not below zero) prior to reducing “parachute payments” with a lower Parachute Payment Ratio. For purposes hereof, the term “ Parachute Payment Ratio ” shall mean a fraction the numerator of which is the value of the applicable “parachute payment” for purposes of Section 280G of the Code and the denominator of which is the intrinsic value of such “parachute payment.” For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) the entire amount of the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2) and as subject to the Excise Tax, unless and to the extent, in the written opinion of the Company’s independent accountants and reasonably acceptable to Executive, such payments (in whole or in part) are not subject to the Excise Tax; and (B) the value of any noncash benefits or any deferred payment or benefit (constituting a part of the Total Payments) shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4). Notwithstanding the foregoing, if (Y) the Total Payments exceed three (3) times the Executive’s “base amount” as defined within Section 280G and (Z) the Executive would receive at least $50,000 more on a net after-tax basis if the Total Payments were not reduced pursuant to this section (after payment of the Excise Tax), then the Company will not reduce the Total Payments and Executive shall be responsible for the Excise Tax related thereto. For purposes of determining the net after-tax benefit, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of the federal income taxation applicable to individuals (without taking into account surtaxes or loss or reduction of deductions) for the calendar year in which the Date of Termination occurs and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive’s residence on the Date of Termination.

f.	No Duty to Mitigate . The Executive shall not be required to mitigate amounts payable pursuant to Section 10 hereof by seeking other employment.

11. Acceleration of Equity Awards . All equity awards granted to the Executive under any equity incentive plan maintained for Company or Parent employees that are outstanding immediately prior to the following events shall be vested and fully exercisable as follows: (a) upon termination of the Executive’s employment by the Executive’s death as provided in Section 9(a) hereof, (b) upon termination of the Executive’s employment by the Company or Parent for Disability as provided in Section 9(b)(i) hereof, or (c) upon termination of the Executive’s employment by the Company as provided in Section 9(b)(iii) in the twelve (12)-month period following a Change of Control or by the Executive for Good Reason as provided in Section 9(c) in the twelve (12)-month period following a Change of Control; provided , that for purposes of clauses (a) and (b) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in a pro-rated amount equivalent to the portion of the performance period that has passed and assuming achievement of the performance conditions for that period at the “target” level, and for purposes of clause (c) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in full at the “target” level. This Agreement is intended to amend all equity awards previously awarded to the Executive to modify vesting as described above to the extent vesting would not otherwise accelerate under the terms of such equity award grants. For purposes of this Agreement, “ Change of Control ” means (i) the dissolution or liquidation of the Parent or a merger, consolidation, or reorganization of the Parent with one (1) or more other entities in which the Parent is not the surviving entity, (ii) a sale of substantially all of the assets of the Parent to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Parent is the surviving entity) which results in any person or entity owning fifty percent (50%) or more of the combined voting power of all classes of stock of the Parent, provided , that if an event is a “Change of Control” as defined in this Agreement but is not a “change in control event” as defined in Section 409A of the Code, any payments which are the same as the payments the Executive would have received under Section 10(d) if there had not been a “Change of Control” will be paid at the time and in the manner specified in Section 10(d).

a.	If to the Company:

American Public University System, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

b.	If to the Parent:

American Public Education, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

15. Successors and Assigns .

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

17. Amendment; Waiver . This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one (1) or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder.

21. Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

AMERICAN PUBLIC EDUCATION, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

THE EXECUTIVE:


/s/ Karan H. Powell
Karan H. Powell

APPENDIX A

FORM OF RELEASE

WHEREAS, the Company, the Parent and the Executive are parties to that certain Amended and Restated Executive Employment Agreement, dated as of [________], 2014 (the “Employment Agreement”), which provides that certain severance payments and other benefits be made and provided by the Company to the Executive following termination of the Executive’s employment under certain circumstances; and

WHEREAS, as a condition of receiving such severance payments and in accordance with the terms of the Employment Agreement, the Executive has agreed to enter into this Release;

3. No Admission . The Parties agree that nothing contained in this Release shall constitute or be treated as an admission of liability or wrongdoing by either of them.

9. Assignment. This Release and the rights and obligations of the Parties hereunder may not be assigned by either Party without the prior written consent of the other Party.

10. Binding Agreement. This Release shall be binding upon and inure to the benefit of the Parties and their respective representatives, successors and permitted assigns.

[ Signature page follows ]

IN WITNESS WHEREOF, the undersigned have duly executed this Release, or have caused this Release to be duly executed on their behalf, as of the day and year first hereinabove written.

	AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


	By:
		Name:
		Title:

	AMERICAN PUBLIC EDUCATION, INC.


	By:
		Name:
		Title:

	THE EXECUTIVE:



	Karan H. Powell

Exhibit 10.3

AMERICAN PUBLIC EDUCATION, INC.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”), entered into as of this 1st day of August 2014, by and among American Public University System, Inc., a West Virginia corporation (the “ Company ”), American Public Education, Inc., a Delaware corporation (the “ Parent ”) and Richard W. Sunderland, Jr. (the “ Executive ”).

WHEREAS, the Company is a wholly owned subsidiary of the Parent; and

WHEREAS, the Company desires to continue the Executive’s employment, and the Executive desires to continue being employed by the Company, on the terms and conditions set forth herein.

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

2. Term . The employment of the Executive by the Company as provided in Section 1 hereof commenced on January 1, 2014. Unless sooner terminated as hereinafter set forth, the term of this Agreement shall end on March 31, 2017; provided , however , that this Agreement will automatically renew for additional one (1)-year periods (each a “ Renewal Term ”) on each anniversary thereafter unless the Company and Parent deliver to the Executive written notice of intent not to renew at least thirty (30) days prior to the expiration of the term or any Renewal Term. If this Agreement is renewed for one (1) or more Renewal Terms, such Renewal Term shall be on the basis stated herein. For the avoidance of doubt, the parties hereby acknowledge and agree that the Executive’s employment will not automatically terminate or end solely as a result of the expiration of the Agreement at the end of the term or any Renewal Term.

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

5. Compensation .

Base Salary . The Company shall pay to the Executive an annual base salary (the “ Base Salary ”) at the rate of $300,000 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Compensation Committee of the Board (the “ Compensation Committee ”). If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the employment term hereunder, except that the Company may reduce the Executive’s Base Salary at any time as part of a general salary reduction applied to all employees of the Company with annual salaries in excess of $150,000 (the “ Senior Executive Group ”) in which case the Executive’s reduced Base Salary shall be the Base Salary for the remainder of the employment term hereunder. Any such reduction in the Executive’s Base Salary shall be no more than the lesser of the median of the percentage salary reductions applied to the Senior Executive Group or twenty percent (20%). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

Annual Bonus . The Executive shall be eligible to receive a bonus of up to fifty percent (50%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion (the “ Annual Bonus ”), based upon the achievement of certain performance goals established by the Compensation Committee for each year. The Executive will also be eligible to receive an additional percentage of up to thirty percent (30%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion, based upon the achievement of certain “stretch” performance goals established by the Compensation Committee for each year. Any such bonus shall be paid by March 15 of the year following the year of performance.

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

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

7. Relocation Expenses . The Company will pay or reimburse the Executive for the customary and reasonable moving expenses incurred by the Executive in connection with any subsequent relocation of Executive’s place of performance pursuant to Section 4 of this Agreement.

8. Confidential Information .

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

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

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

9. Non-Competition .

Non-Competition . The Executive covenants and agrees that, during the Executive’s employment hereunder and for a period of eighteen (18) months thereafter (to the extent permitted by law), the Executive will not at any time, in the United States or any other jurisdiction in which the Company. the Parent or their respective corporate controlled affiliates is engaged or has reasonably firm plans to engage in business, whether as a principal, investor, employee, consultant, independent contractor, officer, director, board member, manager, partner, agent, or otherwise, alone or in association with any other person, firm, corporation, or business organization, work for, become employed by, engage in, carry on, provide services to, or assist in any manner (whether or not for compensation or gain) a person or entity that engages in any business in which the Company, the Parent, or any of their corporate controlled affiliates is engaged (a “ Competing Business ”), where Executive’s position or service for such Competing Business relates to Executive’s positions with or the types of services performed by the Executive for the Company, the Parent, or any of their corporate controlled affiliates, or is otherwise competitive with the Company’s, the Parent’s, or any of their corporate controlled affiliates’ products or services; provided , however , that the foregoing will not prohibit the Executive from serving on a board of directors (or comparable bodies) of other entities where the Parent has given prior permission. Notwithstanding the foregoing, the ownership by the Executive of less than one percent (1%) of the outstanding stock of any corporation listed on a national securities exchange shall not be deemed a violation of this Section 9(a).

Injunctive Relief . The Company shall be entitled to injunctive relief to protect its rights under this Section 9 without the necessity of posting a bond. In the event the restrictions against engaging in a competitive activity contained in Section 9(a) hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, Section 9(a) hereof shall be interpreted to extend only over the maximum period of time for which it may be enforceable and over the maximum geographical area as to which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable, all as determined by the court in the action.

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

10. Termination of Employment .

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

b.	By the Company . The Parent may terminate the Executive’s employment hereunder under the following circumstances:

The Parent may terminate the Executive’s employment hereunder for “Disability.” For purposes of this Agreement, “ Disability ” shall mean the Executive shall have been unable to perform all of the Executive’s duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for more than three (3) consecutive months.

ii.

The Parent may terminate the Executive’s employment hereunder for “Cause.” For purposes of this Agreement, “ Cause ” shall mean (A) refusal by the Executive to follow a lawful written order of the Chief Executive Officer of the Parent, Chairman of the Board or the Board, (B) the Executive’s engagement in conduct materially injurious to the Company or Parent or their respective reputations, (C) dishonesty of a material nature that relates to the performance of the Executive’s duties under this Agreement, (D) the Executive’s conviction for any crime involving moral turpitude or any felony, or (E) the Executive’s continued failure to perform his duties under this Agreement (except due to the Executive’s incapacity as a result of physical or mental illness) to the satisfaction of the Board for a period of at least thirty (30) consecutive days after written notice is delivered to the Executive specifically identifying the manner in which the Executive has failed to perform his duties.

iii.	The Parent, in the sole discretion of the Board, may terminate the Executive’s employment hereunder at any time other than for Disability or Cause, for any reason or for no reason at all.

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

the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position as contemplated by Section 3 of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Parent or the Company promptly after receipt of notice thereof given by the Executive;

ii.

any material failure by the Company or the Parent to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company or Parent promptly after receipt of notice thereof given by the Executive, provided , that in no event will a failure to pay the Annual Bonus by March 15 of the year following the performance year be considered a material failure by the Company or Parent to comply with this Agreement;

iii.	after a Change of Control (as defined in Section 12), the Executive does not continue as the Chief Financial Officer, or any other office he holds at the time of the Change of Control, of the most senior resulting entity succeeding to the business of the Parent; or

iv.	any material failure by the Company or Parent to comply with and satisfy Section 16(c) of this Agreement.

In order to constitute Good Reason, Executive must provide notice to the Company and Parent of the existence of the condition within ninety (90) days of the initial existence. None of the foregoing events shall constitute Good Reason if the Executive consents in writing to such event. The Executive further understands and agrees that none of the foregoing events shall constitute Good Reason unless the Company or Parent fails to cure such asserted grounds for Good Reason within thirty (30) days of its receipt of notice from the Executive. In order to terminate his employment, if at all, for Good Reason, Executive must terminate employment within thirty (30) days of the end of the cure period if the breach has not been cured.

Notice of Termination . Any termination of the Executive’s employment by the Parent or the Executive (other than pursuant to Section 10(a) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 13 hereof. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

Date of Termination . For purposes of this Agreement, the “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated pursuant to Section 10(b)(i) hereof, thirty (30) days after Notice of Termination, provided , that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during this thirty (30)-day period; (iii) if the Executive’s employment is terminated pursuant to Section 10(b)(ii) or 10(b)(iii) hereof, the date specified in the Notice of Termination; (iv) if the Executive terminates the Executive’s employment for Good Reason pursuant to Section 10(c) hereof, the date specified in the Notice of Termination, provided , however , that such date must occur after the cure period provided in Section 10(c); and (v) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination. Notwithstanding the foregoing, the Executive will be deemed to have a Date of Termination for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “ Code ”) .

11. Compensation Upon Termination .

If the Executive’s employment is terminated by the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of the estate, (i) the Executive’s full Base Salary through the Date of Termination to the extent not theretofore paid, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, and (iii) all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(b) “Annual Bonus” and Section 5(c) “Other Benefits” hereof (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as the “ Base Amounts ”), at the time these payments are due and the Company and Parent shall have no further obligations to the Executive under this Agreement.

If the Parent terminates the Executive’s employment for Disability as provided in Section 10(b)(i) hereof, the Company shall pay the Executive the following amounts and the Company and the Parent shall have no further obligations to the Executive, provided , that in the case of payments to be made pursuant to section (ii) below, on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the eighteen (18)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor chief financial officer were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of eighteen (18) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination; provided , that payments made to the Executive under this section shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any payment, provided , further , that any such reduction shall be done in a manner that complies with Section 409A of the Code.

If the Parent terminates the Executive’s employment for Cause as provided in Section 10(b)(ii) hereof or if the Executive terminates the Executive’s employment other than for Good Reason, the Company shall pay the Executive the Base Amounts, and the Company and Parent shall have no further obligations to the Executive under this Agreement.

Except where payments are required to be made under Section 11(f), if the Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 10(c) hereof, the Company shall pay the Executive the following amounts and the Company and the Parent shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

i.	the Accrued Obligations in a lump sum in cash within thirty (30) days of the Date of Termination;

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the eighteen (18)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor chief financial officer were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of eighteen (18) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination;

iii.

iv.

If within one hundred and eighty (180) days after a Change of Control (as defined in Section 12), the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 10(c) hereof, the Company shall pay the Executive the following amounts and the Company and the Parent shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

an amount equal to the sum of (A) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (x) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period through the Date of Termination, for an Annual Bonus) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the effective date of termination of the Executive’s employment (the “ Change of Control Date of Termination”), and the denominator of which is 365, and (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, in a lump sum in cash within thirty (30) days of the Change of Control Date of Termination;

ii.

an amount equal to the sum of (A) two (2) times the Executive’s Base Salary and (B) two (2) times the Annual Bonus (to the extent the Company and Executive performance were satisfying the performance targets, adjusted for the short period), in a lump sum in cash within sixty (60) days of the Change of Control Date of Termination, provided , that if Executive’s Change of Control Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will be paid on the first payroll date in the year after the Change of Control Date of Termination;

iii.

iv.	to the extent not theretofore paid or provided, for twelve (12) months after the Date of Termination, the Company shall timely pay or provide to the Executive Other Benefits.

in the event that it is determined that any payment, benefit, or distribution described in this Section 11(e) or in Section 12 made by the Company, by any of its affiliates, by any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code) or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Section 11(e), Section 12 or otherwise (the “ Total Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “ Excise Tax ”), then the payments due under this Agreement shall be reduced so that the Total Payments will not result in the imposition of such Excise Tax. The payment reduction contemplated by the preceding sentence shall be implemented by determining the “Parachute Payment Ratio” (as defined below) for each “parachute payment” within the meaning of Section 280G of the Code, and then reducing the “parachute payments” in order beginning with the “parachute payment” with the highest Parachute Payment Ratio. For “parachute payments” with the same Parachute Payment Ratio, such “parachute payments” shall be reduced based on the time of payment of such “parachute payments” with amounts having later payment dates being reduced first. For “parachute payments” with the same Parachute Payment Ratio and the same time of payment, such “parachute payments” shall be reduced on a pro rata basis (but not below zero) prior to reducing “parachute payments” with a lower Parachute Payment Ratio. For purposes hereof, the term “ Parachute Payment Ratio ” shall mean a fraction the numerator of which is the value of the applicable “parachute payment” for purposes of Section 280G of the Code and the denominator of which is the intrinsic value of such “parachute payment.” For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) the entire amount of the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2) and as subject to the Excise Tax, unless and to the extent, in the written opinion of the Company’s independent accountants and reasonably acceptable to Executive, such payments (in whole or in part) are not subject to the Excise Tax; and (B) the value of any noncash benefits or any deferred payment or benefit (constituting a part of the Total Payments) shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4). Notwithstanding the foregoing, if (Y) the Total Payments exceed three (3) times the Executive’s “base amount” as defined within Section 280G and (Z) the Executive would receive at least $50,000 more on a net after-tax basis if the Total Payments were not reduced pursuant to this section (after payment of the Excise Tax), then the Company will not reduce the Total Payments and Executive shall be responsible for the Excise Tax related thereto. For purposes of determining the net after-tax benefit, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of the federal income taxation applicable to individuals (without taking into account surtaxes or loss or reduction of deductions) for the calendar year in which the Date of Termination occurs and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive’s residence on the Date of Termination.

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

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

12. Acceleration of Equity Awards . All equity awards granted to the Executive under any equity incentive plan maintained for Company or Parent employees that are outstanding immediately prior to the following events shall be vested and fully exercisable as follows: (a) upon termination of the Executive’s employment by the Executive’s death as provided in Section 10(a) hereof, (b) upon termination of the Executive’s employment by the Company or Parent for Disability as provided in Section 10(b)(i) hereof, or (c) upon termination of the Executive’s employment by the Company as provided in Section 10(b)(iii) in the twelve (12)-month period following a Change of Control or by the Executive for Good Reason as provided in Section 10(c) in the twelve (12)-month period following a Change of Control; provided , that for purposes of clauses (a) and (b) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in a pro-rated amount equivalent to the portion of the performance period that has passed and assuming achievement of the performance conditions for that period at the “target” level, and for purposes of clause (c) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in full at the “target” level. This Agreement is intended to amend all equity awards previously awarded to the Executive to modify vesting as described above to the extent vesting would not otherwise accelerate under the terms of such equity award grants. For purposes of this Agreement, “ Change of Control ” means (i) the dissolution or liquidation of the Parent or a merger, consolidation, or reorganization of the Parent with one (1) or more other entities in which the Parent is not the surviving entity, (ii) a sale of substantially all of the assets of the Parent to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Parent is the surviving entity) which results in any person or entity owning fifty percent (50%) or more of the combined voting power of all classes of stock of the Parent, provided , that if an event is a “Change of Control” as defined in this Agreement but is not a “change in control event” as defined in Section 409A of the Code, any payments which are the same as the payments the Executive would have received under Section 11(d) if there had not been a “Change of Control” will be paid at the time and in the manner specified in Section 11(d).

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

a.	If to the Company:

American Public University System, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

b.	If to the Parent:

American Public Education, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

14. Severability . The invalidity or unenforceability of any one (1) or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect.

15. Survival . It is the express intention and agreement of the parties hereto that the provisions of Sections 8 and 9 hereof shall survive the termination of employment of the Executive and the expiration of this Agreement. It is the express intention and agreement of the parties hereto that the provisions of Section 11(d) shall survive the expiration of this Agreement for a period of eighteen (18) months. In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

16. Successors and Assigns .

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

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

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

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

18. Amendment; Waiver . This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the parties hereto. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one (1) or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder.

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

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

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

22. Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

23. Limitations Under Code Section 409A . Anything in this Agreement to the contrary notwithstanding, if (a) on the date of termination of Executive’s employment with the Company or a subsidiary, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Code, (b) if Executive is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (c) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (d) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code as a result of such termination, the Executive would receive any payment that, absent the application of this Section 23, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (x) six (6) months after the Executive’s termination date, (y) the Executive’s death or (z) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment).

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

AMERICAN PUBLIC EDUCATION, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

THE EXECUTIVE:


/s/ Richard W. Sunderland, Jr.
Richard W. Sunderland, Jr.

APPENDIX A

FORM OF RELEASE

WHEREAS, as a condition of receiving such severance payments and in accordance with the terms of the Employment Agreement, the Executive has agreed to enter into this Release;

1. Separation and Payment. The Executive performed his duties in accordance with the Employment Agreement through [_______]. The Executive’s Date of Termination (as such term is defined in Section 10(e) of the Employment Agreement) is [_______]. The Executive shall be entitled to the compensation and benefits set forth in Section 11 of the Employment Agreement, subject to compliance with the terms of the Employment Agreement and this Release. Other than the payments referred to in Section 11 of the Employment Agreement, the Executive has been paid all compensation due and owing to him under this Release and under any employment or other contract the Executive has or may have had with the Company (including but not limited to the Employment Agreement) or from any other source of entitlement, including all wages, salary, bonuses, incentive payments, profit-sharing payments, leave, severance pay or other benefits.

2. Release. On behalf of himself and his agents, heirs, executors, administrators, successors and assigns, the Executive hereby releases and forever discharges the Company, and any and all of the affiliates (excluding members), officers, directors, employees, agents, counsel, and successors and assigns of the Company, from any and all complaints, claims, demands, damages, lawsuits, actions, and causes of action, whether known, unknown or unforeseen, arising out of or in connection with any event, transaction or matter occurring or existing prior to or at the time of his execution of this Release, which he has or may have against any of them for any reason whatsoever in law or in equity, under federal, state, local, or other law, whether the same be upon statutory claim, contract, tort or other basis, including without limitation any and all claims arising from or relating to his employment or the termination of his employment and any and all claims relating to any employment contract (including but not limited to his Employment Agreement), any employment statute or regulation, or any employment discrimination law, including without limitation the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1866 and the Equal Pay Act of 1963, all as amended, all state and local laws, regulations and ordinances prohibiting discrimination in employment, and other laws and regulations relating to employment, including but not limited to the Family and Medical Leave Act and the Fair Labor Standards Act, all as amended. The Executive agrees, without limiting the generality of the above release, not to file any claim or lawsuit seeking damages or other relief and asserting any claims that are lawfully released in this paragraph. The Executive further hereby irrevocably and unconditionally waives any and all rights to recover any relief and damages concerning the claims that are lawfully released in this paragraph. The Executive represents and warrants that he has not previously filed or joined in any such claims against the Company or any of its affiliates, and that he has not given or sold any portion of any claims released herein to anyone else, and that he will indemnify and hold harmless the persons and entities released herein from all liabilities, claims, demands, costs, expenses and/or attorneys’ fees incurred as a result of any such assignment or transfer. THE EXECUTIVE HEREBY ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A GENERAL RELEASE (EXCEPT AS PROVIDED HEREIN) AND THAT BY SIGNING THIS RELEASE, THE EXECUTIVE IS SIGNING AND AGREEING TO THIS RELEASE. Notwithstanding any term or provision of this Release or the Employment Agreement to the contrary, and specifically notwithstanding the foregoing releases, this Release does not relate to, and the Executive does not release, any rights the Executive may have with respect to any of the following: (a) any claim of the Executive for the payments and benefits due to his under the Employment Agreement and this Release; (b) any contribution, indemnity, or other claim the Executive may have under the Charter or Bylaws of the Company (or any successor or similar provision), under any applicable policy of insurance, or under applicable law as a result of any action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that the Executive is or was a director, officer, executive or agent of the Company or serves or served any other enterprise at the request of the Company; (b) any claim relating solely to the validity of this Release under the ADEA, as amended; (d) any non-waivable right to file a change with the U.S. Equal Employment Opportunity Commission; or (e) any rights that may not be waived as a matter of law.

3. No Admission . The Parties agree that nothing contained in this Release shall constitute or be treated as an admission of liability or wrongdoing by either of them.

4. No Obligation to Hire . The Executive agrees that neither the Company nor the Parent nor any of their subsidiaries or affiliates have any obligation to hire, reemploy or reinstate the Executive in the future. The Executive agrees that he will not apply for employment with the Company, the Parent or any of their respective subsidiaries or affiliates.

5. Cooperation and Non-Disparagement . The Executive agrees to cooperate with the Company and the Parent to the extent reasonably requested by the Company or the Parent for the purpose of transitioning his duties and responsibilities. Such cooperation shall include, but is not limited to, at the Company’s or the Parent’s request during the six (6) months following his Date of Termination, the Executive making himself available by telephone to answer questions regarding any matter or project in which he was involved while employed by the Company or the Parent. The Executive further agrees that, other than as may be required by law or as part of a governmental investigation or proceeding, he shall make no statements disparaging the Company, the Parent or any of their subsidiaries, affiliates, officers, directors, employees, or any of their business practices.

9. Assignment. This Release and the rights and obligations of the Parties hereunder may not be assigned by either Party without the prior written consent of the other Party.

10. Binding Agreement. This Release shall be binding upon and inure to the benefit of the Parties and their respective representatives, successors and permitted assigns.

15. Acknowledgment. With respect to the Release in paragraph 2 above , Executive agrees and understands that he is specifically releasing all claims under the Age Discrimination in Employment Act (29 U.S.C. § 621 et seq. ), as amended. The Executive acknowledges that he has read and understands this Release and executes it voluntarily and without coercion. The Executive further acknowledges that he has had full opportunity to consult with an attorney prior to executing this Release, and that he has been advised in writing herein to do so. In addition, the Executive has been given twenty-one (21) days, to consider, execute, and deliver this Release to the Chairman of the Board of Directors of the Parent at the Parent’s principal business address, unless the Executive voluntarily chooses to execute this Release before the end of the twenty-one (21)-day period. The Executive understands that he has seven (7) days following his execution of this Release to revoke it in writing, and that this Release is not effective or enforceable until after this seven (7)-day period. For such revocation to be effective, notice must be delivered to the Parent at the Parent’s principal business address, addressed to the attention of the Chairman of the Board of Directors, no later than the end of the seventh calendar day after the date by which the Executive signed this Release. The Executive expressly agrees that, in the event he revokes this Release, this Release shall be null and void and have no legal or binding effect whatsoever, and he shall not be entitled to the payments described in paragraph 1 above , other than the Base Amounts, including pursuant to the Employment Agreement. The Parties recognize that he may elect to sign this Release prior to the expiration of the twenty-one (21)-day consideration period specified herein, and the Executive agrees that if he elects to do so such election is knowing and voluntary and comes after full opportunity to consult with an attorney.

[ Signature page follows ]

IN WITNESS WHEREOF, the undersigned have duly executed this Release, or have caused this Release to be duly executed on their behalf, as of the day and year first hereinabove written.

	AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


	By:
		Name:
		Title:

	AMERICAN PUBLIC EDUCATION, INC.


	By:
		Name:
		Title:

	THE EXECUTIVE:



	Richard W. Sunderland, Jr.

Exhibit 10.4

AMERICAN PUBLIC EDUCATION, INC.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”), entered into as of this 1st day of August 2014 amends and restates that certain Executive Employment Agreement dated August 24, 2009, by and among American Public University System, Inc., a West Virginia corporation (the “ Company ”), American Public Education, Inc., a Delaware corporation (the “ Parent ”) and Sharon van Wyk (the “ Executive ”).

WHEREAS, the Company is a wholly owned subsidiary of the Parent; and

WHEREAS, the Company desires to continue the Executive’s employment, and the Executive desires to continue being employed by the Company, on the terms and conditions set forth herein.

2. Term . The employment of the Executive by the Company as provided in Section 1 hereof commenced on August 3, 2009. Unless sooner terminated as hereinafter set forth, the term of this Agreement shall end on March 31, 2017; provided , however , that this Agreement will automatically renew for additional one (1)-year periods (each a “ Renewal Term ”) on each anniversary thereafter unless the Company and Parent deliver to the Executive written notice of intent not to renew at least thirty (30) days prior to the expiration of the term or any Renewal Term. If this Agreement is renewed for one (1) or more Renewal Terms, such Renewal Term shall be on the basis stated herein. For the avoidance of doubt, the parties hereby acknowledge and agree that the Executive’s employment will not automatically terminate or end solely as a result of the expiration of the Agreement at the end of the term or any Renewal Term.

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

5. Compensation .

Base Salary . The Company shall pay to the Executive an annual base salary (the “ Base Salary ”) at the rate of $332,000 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Compensation Committee (the “ Compensation Committee ”) of the Board. If the Executive’s Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the employment term hereunder, except that the Company may reduce the Executive’s Base Salary at any time as part of a general salary reduction applied to all employees of the Company with annual salaries in excess of $150,000 (the “ Senior Executive Group ”) in which case the Executive’s reduced Base Salary shall be the Base Salary for the remainder of the employment term hereunder. Any such reduction in the Executive’s Base Salary shall be no more than the lesser of the median of the percentage salary reductions applied to the Senior Executive Group or twenty percent (20%). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company’s payroll procedures.

Annual Bonus . The Executive shall be eligible to receive a bonus of up to fifty percent (50%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion (the “ Annual Bonus ”), based upon the achievement of certain performance goals established by the Compensation Committee for each year. The Executive will also be eligible to receive an additional percentage of up to thirty percent (30%) of the Executive’s Base Salary for each year as determined by the Compensation Committee in its sole discretion, based upon the achievement of certain “stretch” performance goals established by the Compensation Committee for each year. Any such bonus shall be paid by March 15 of the year following the year of performance.

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

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

8. Confidential Information .

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

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

9. Non-Competition .

Non-Competition . The Executive covenants and agrees that, during the Executive’s employment hereunder and for a period of one (1) year thereafter (to the extent permitted by law), the Executive will not at any time, in the United States or any other jurisdiction in which the Company. the Parent or their respective corporate controlled affiliates is engaged or has reasonably firm plans to engage in business, whether as a principal, investor, employee, consultant, independent contractor, officer, director, board member, manager, partner, agent, or otherwise, alone or in association with any other person, firm, corporation, or business organization, work for, become employed by, engage in, carry on, provide services to, or assist in any manner (whether or not for compensation or gain) a person or entity that engages in any business in which the Company, the Parent, or any of their corporate controlled affiliates is engaged (a “ Competing Business ”), where Executive’s position or service for such Competing Business relates to Executive’s positions with or the types of services performed by the Executive for the Company, the Parent, or any of their corporate controlled affiliates, or is otherwise competitive with the Company’s, the Parent’s, or any of their corporate controlled affiliates’ products or services; provided , however , that the foregoing will not prohibit the Executive from (i) serving on a board of directors (or comparative bodies) of other entities where the Parent has given prior permission, (ii) after the occurrence of both a Change of Control (as defined in Section 11) and the termination of the Executive’s employment, being employed by (A) a campus-based institution of higher education that derives no more than twenty percent (20%) of its revenues from online education, provided, that the Executive is not predominantly engaged in supporting the online education, or (B) an online learning company that does not provide higher education, or (iii) serving as a faculty member, “scholar in residence” or similar academic position, provide, that the Executive does not engage in administrative matters, other than to a de minimis extent. Notwithstanding the foregoing, the ownership by the Executive of less than one percent (1%) of the outstanding stock of any corporation listed on a national securities exchange shall not be deemed a violation of this Section 9(a).

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

10. Termination of Employment .

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

b.	By the Company . The Company or Parent may terminate the Executive’s employment hereunder under the following circumstances:

ii.

iii.	The Parent, in the sole discretion of the Board, may terminate the Executive’s employment hereunder at any time other than for Disability or Cause, for any reason or for no reason at all.

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

ii.

iii.	after a Change of Control (as defined in Section 12), the Executive does not continue as the Chief Operations Officer, or any other office she holds at the time of the Change of Control, of the most senior resulting entity succeeding to the business of the Company; or

iv.	any material failure by the Company or Parent to comply with and satisfy Section 16(c) of this Agreement.

Notice of Termination . Any termination of the Executive’s employment by the Company, the Parent or the Executive (other than pursuant to Section 10(a) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 13 hereof. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

Date of Termination . For purposes of this Agreement, the “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by the Executive’s death, the date of the Executive’s death; (ii) if the Executive’s employment is terminated pursuant to Section 10(b)(i) hereof, thirty (30) days after Notice of Termination, provided , that the Executive shall not have returned to the performance of the Executive’s duties on a full-time basis during this thirty (30)-day period; (iii) if the Executive’s employment is terminated pursuant to Section 10(b)(ii) or 10(b)(iii) hereof, the date specified in the Notice of Termination; (iv) if the Executive terminates the Executive’s employment for Good Reason pursuant to Section 10(c) hereof, the date specified in the Notice of Termination, provided , however , that such date must occur after the cure period provided in Section 10(c); and (v) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination. Notwithstanding the foregoing, the Executive will be deemed to have a Date of Termination for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “ Code ”) .

11. Compensation Upon Termination .

If the Executive’s employment is terminated by the Executive’s death, the Company shall pay to the Executive’s estate, or as may be directed by the legal representatives of the estate, (i) the Executive’s full Base Salary through the Date of Termination to the extent not theretofore paid, (ii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, and (iii) all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any incentive compensation plan or program of the Company pursuant to Section 5(b) “Annual Bonus” and Section 5(c) “Other Benefits” hereof (the sum of the amounts described in clauses (i), (ii) and (iii) shall be hereinafter referred to as the “ Base Amounts ”), at the time these payments are due and the Company shall have no further obligations to the Executive under this Agreement.

If the Company terminates the Executive’s employment for Disability as provided in Section 10(b)(i) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that in the case of payments to be made pursuant to section (ii) below, on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor chief operations officer were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination; provided , that payments made to the Executive under this section shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any payment, provided , further , that any such reduction shall be done in a manner that complies with Section 409A of the Code.

If the Company terminates the Executive’s employment for Cause as provided in Section 10(b)(ii) hereof or if the Executive terminates the Executive’s employment other than for Good Reason, the Company shall pay the Executive the Base Amounts, and the Company shall have no further obligations to the Executive under this Agreement.

Except where payments are required to be made under Section 11(e), if the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 10(c) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

i.	the Accrued Obligations in a lump sum in cash within thirty (30) days of the Date of Termination;

ii.

an amount equal to the sum of (A) the Executive’s Base Salary and (B) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period, after the Date of Termination to the end of the calendar year for an Annual Bonus and as to the remainder of the twelve (12)-month period following the Date of Termination, only if net income has increased from the same period in the prior year and the performance targets established for the successor chief operations officer were being satisfied for that period), in substantially equal proportionate installments in accordance with the Company’s normal payroll practices for a period of twelve (12) months, commencing within sixty (60) days following Executive’s Date of Termination, provided , that if Executive’s Date of Termination occurs within sixty (60) days prior to the end of a calendar year, payments will commence in the year after the Date of Termination, and in all cases, the first payment shall include all payments Executive would have received if payments had been continuous after the Date of Termination;

iii.

iv.

If within one hundred and eighty (180) days after a Change of Control (as defined in Section 12), the Company or Parent terminates the Executive’s employment other than for Cause or Disability or the Executive terminates the Executive’s employment for Good Reason as provided in Section 10(c) hereof, the Company shall pay the Executive the following amounts and shall have no further obligations to the Executive, provided , that, in the case of (ii) through (iv), on or before the sixtieth day following the Date of Termination, the Executive executes a release of claims substantially in the form attached hereto as Appendix A and all revocation periods applicable to such release have expired without the release being revoked:

an amount equal to the sum of (A) the Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, (B) the product of (x) the Annual Bonus (to the extent Company and Executive performance were satisfying the performance targets, adjusted for the short period through the Date of Termination, for an Annual Bonus) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the effective date of termination of the Executive’s employment (the “ Change of Control Date of Termination”), and the denominator of which is 365, and (C) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case, to the extent not theretofore paid, in a lump sum in cash within thirty (30) days of the Change of Control Date of Termination;

ii.

iii.

iv.	to the extent not theretofore paid or provided, for twelve (12) months after the Date of Termination, the Company shall timely pay or provide to the Executive Other Benefits.

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

12. Acceleration of Equity Awards . All equity awards granted to the Executive under any equity incentive plan maintained for Company or Parent employees that are outstanding immediately prior to the following events shall be vested and fully exercisable as follows: (a) upon termination of the Executive’s employment by the Executive’s death as provided in Section 10(a) hereof, (b) upon termination of the Executive’s employment by the Company or Parent for Disability as provided in Section 10(b)(i) hereof, or (c upon termination of the Executive’s employment by the Company as provided in Section 10(b)(iii) in the twelve (12)-month period following a Change of Control or by the Executive for Good Reason as provided in Section 10(c) in the twelve (12)-month period following a Change of Control; provided , that for purposes of clauses (a) and (b) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in a pro-rated amount equivalent to the portion of the performance period that has passed and assuming achievement of the performance conditions for that period at the “target” level, and for purposes of clause (c) any equity awards that are subject to performance conditions for a performance period not yet completed will be deemed to be vested and exercisable in full at the “target” level. This Agreement is intended to amend all equity awards previously awarded to the Executive to modify vesting as described above to the extent vesting would not otherwise accelerate under the terms of such equity award grants. For purposes of this Agreement, “ Change of Control ” means (i) the dissolution or liquidation of the Parent or a merger, consolidation, or reorganization of the Parent with one (1) or more other entities in which the Parent is not the surviving entity, (ii) a sale of substantially all of the assets of the Parent to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Parent is the surviving entity) which results in any person or entity owning fifty percent (50%) or more of the combined voting power of all classes of stock of the Parent, provided , that if an event is a “Change of Control” as defined in this Agreement but is not a “change in control event” as defined in Section 409A of the Code, any payments which are the same as the payments the Executive would have received under Section 11(d) if there had not been a “Change of Control” will be paid at the time and in the manner specified in Section 11(d).

a.	If to the Company:

American Public University System, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

b.	If to the Parent:

American Public Education, Inc.

111 West Congress Street

Charles Town, WV 25414

Telecopy: (304) 724-3801

Attention: Chief Executive Officer

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

16. Successors and Assigns .

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

22. Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.

AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

AMERICAN PUBLIC EDUCATION, INC.


By:	/s/ Dr. Wallace E. Boston
	Name:	Dr. Wallace E. Boston
	Title:	President and Chief Executive Officer

THE EXECUTIVE:


/s/ Sharon van Wyk
Sharon van Wyk

APPENDIX A

FORM OF RELEASE

WHEREAS, as a condition of receiving such severance payments and in accordance with the terms of the Employment Agreement, the Executive has agreed to enter into this Release;

1. Separation and Payment. The Executive performed her duties in accordance with the Employment Agreement through [_______]. The Executive’s Date of Termination (as such term is defined in Section 10(e) of the Employment Agreement) is [_______]. The Executive shall be entitled to the compensation and benefits set forth in Section 11 of the Employment Agreement, subject to compliance with the terms of the Employment Agreement and this Release. Other than the payments referred to in Section 11 of the Employment Agreement, the Executive has been paid all compensation due and owing to her under this Release and under any employment or other contract the Executive has or may have had with the Company (including but not limited to the Employment Agreement) or from any other source of entitlement, including all wages, salary, bonuses, incentive payments, profit-sharing payments, leave, severance pay or other benefits.

3. No Admission . The Parties agree that nothing contained in this Release shall constitute or be treated as an admission of liability or wrongdoing by either of them.

9. Assignment. This Release and the rights and obligations of the Parties hereunder may not be assigned by either Party without the prior written consent of the other Party.

10. Binding Agreement. This Release shall be binding upon and inure to the benefit of the Parties and their respective representatives, successors and permitted assigns.

[ Signature page follows ]

IN WITNESS WHEREOF, the undersigned have duly executed this Release, or have caused this Release to be duly executed on their behalf, as of the day and year first hereinabove written.

	AMERICAN PUBLIC UNIVERSITY SYSTEM, INC.


	By:
		Name:
		Title:

	AMERICAN PUBLIC EDUCATION, INC.


	By:
		Name:
		Title:

	THE EXECUTIVE:



	Sharon van Wyk

Exhibit 31.01

CERTIFICATIONS

I, Wallace E. Boston, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Public Education, Inc.;

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;

The registrant's other certifying officer 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:

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;

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

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 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.

August 5, 2014	/s/ Dr. Wallace E. Boston, Jr.
	Dr. Wallace E. Boston, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.02

CERTIFICATIONS

I, Richard W. Sunderland, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Public Education, Inc.;

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;

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

5.	The registrant's other certifying officer 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.

August 5, 2014	/s/ Richard W. Sunderland, Jr.
	Richard W. Sunderland, Jr.
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of American Public Education, Inc. (the “registrant”) on Form 10-Q for the fiscal quarter ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Wallace E. Boston, Jr. and Richard W. Sunderland, Jr., President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge, on the date hereof:

(1)	The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

August 5, 2014




/s/ Dr. Wallace E. Boston, Jr.
Dr. Wallace E. Boston, Jr.
President and Chief Executive Officer





/s/ Richard W. Sunderland, Jr.
Richard W. Sunderland, Jr.
Executive Vice President and Chief Financial Officer