Exhibit 10.48

 

Description of ITT Educational Services, Inc.’s 2009 Executive Bonus Parameters,
Payment of 2008 Bonus Compensation, 2009 Executive Salaries, 2009 Executive
Perquisites and 2009 Director Compensation

 

2009 Executive Bonus Parameters

 

On January 19, 2009, the Compensation Committee of our Board of Directors
approved the 2009 Executive Bonus Parameters (the “2009 Executive Bonus
Parameters”) for participation by our executives. Bonuses payable to
participants will be paid in cash and based on a formula that takes into account
our ability to achieve specified targets in 2009 in each of four performance
categories, each weighted equally:

 

•

Our diluted earnings per share (“EPS”) in 2009.

 

•

The percentage increase in total student enrollment at our institutes as of
December 31, 2009 compared to the total student enrollment at our institutes as
of December 31, 2008.

 

•

Our Free Cash Flow in 2009. Free Cash Flow is defined as our net cash flows from
operating activities, less:

 

•

capital expenditures, net (excluding facility purchases); and

 

•

any change in restricted cash.

 

•

The percentage of Employable Graduates (as defined below) from our institutes'
programs of study in the third and fourth calendar quarters of 2008 and first
and second calendar quarters of 2009 who either obtain employment by December
31, 2009, or are already employed, in positions that require the direct or
indirect use of skills taught in their programs of study. Employable Graduates
include all of the graduates from our institutes, except for those graduates
who:

 

•

have been admitted into other programs of study at postsecondary educational
institutions that are scheduled to begin within one academic year following
their graduation;

 

•

possessed visas that did not permit them to work in the United States following
their graduation;

 

•

were personally suffering from a health condition that prevented them from
working;

 

•

were actively engaged in U.S. military service; or

 

•

moved out of the Continental United States with a spouse or parent who was
actively engaged in U.S. military service.

 

Each target level associated with each incremental bonus percentage is
progressively higher and, therefore, more of a challenge to achieve. If we
applied the actual results that we achieved in 2008 with respect to each of
those four performance factors to the 2009 performance categories, the weighted
average performance points under the 2009 performance categories would be 3.00,
for a maximum bonus percentage of 100.0%, compared to 4.50 under the 2008
performance categories, for a maximum bonus percentage of 175.0%. We have
publicly disclosed that the range of $6.25 to $6.45 is our internal goal for our
2009 EPS. The mid-point of that range is the basis for the target level
associated with 2.00 performance points in the EPS performance category of the
2009 Executive Bonus Parameters.

 

The 2009 Executive Bonus Parameters establish for each participant a standard
bonus target percentage of annualized base salary as of December 31, 2009,
ranging from 10% to 100%, with the percentage depending on the participant’s
position. The following table sets forth the standard bonus target percentage of
annualized base salary as of December 31, 2009 for each of the named executive
officers under the 2009 Executive Bonus Parameters. The named executive officers
are those executive officers of ours who will be included as such in the Proxy
Statement for our 2009 Annual Meeting of Shareholders.

 

Named Executive Officer

2009 Standard Bonus Target

Percentage of Annualized Base Salary

Kevin M. Modany

100%

Daniel M. Fitzpatrick

65%

Clark D. Elwood

65%

Eugene W. Feichtner

60%

Glenn E. Tanner

                  60%

 

The maximum bonus percentage under the 2009 Executive Bonus Parameters ranges
from 25% to 200% of the standard bonus target percentage of annualized base
salary as of December 31, 2009 and is based on the weighted average performance
points associated with the actual results achieved with respect to each
performance category. To determine the weighted average performance points, the
sum of the performance points associated with the actual performance in the four
performance categories will be divided by four. The following table sets forth
the maximum bonus percentage associated with each range of weighted average
performance points under the 2009 Executive Bonus Parameters:

 

Weighted Average
Performance Points

Maximum
Bonus Percentage

 

4.76 – 5.00

200.0%

 

 

4.51 – 4.75

187.5%

 

 

4.26 – 4.50

175.0%

 

 

4.01 – 4.25

162.5%

 

 

3.76 – 4.00

150.0%

 

 

3.51 – 3.75

137.5%

 

 

3.26 – 3.50

125.0%

 

 

3.01 – 3.25

112.5%

 

 

2.76 – 3.00

100.0%

 

 

2.51 – 2.75

87.5%

 

 

2.26 – 2.50

75.0%

 

 

2.01 – 2.25

62.5%

 

 

1.76 – 2.00

50.0%

 

 

1.51 – 1.75

41.7%

 

 

1.26 – 1.50

33.3%

 

 

1.01 – 1.25

25.0%

 

 

The annual bonus parameters are typically based on our primary financial and
operating goals for the ensuing year. While the bonus parameters reflect our
financial and operating goals, as opposed to the individual executive’s
performance goals, achievement of our financial and operating goals depends on,
and is affected by, each executive’s performance with respect to his or her
individual goals. The Compensation Committee may, in its sole discretion, modify
the bonus parameters at any time prior to the payment of the annual bonus awards
under the parameters. A participant’s annual bonus award may be more or less
than the participant’s potential award as calculated under the formula. A
participant’s actual annual bonus award is based on a discretionary assessment
of the participant’s individual performance and contribution toward achieving
the specified targets in the four performance categories that is made by the
Compensation Committee upon the recommendation of our Chief Executive Officer,
except for our Chief Executive Officer’s annual bonus award, which is made by
the Committee without a recommendation from our Chief Executive Officer. The
total amount available for the payment of bonuses for each year is capped at an
amount equal to the cumulative sum of the products of each participant’s bonus
percentage multiplied by each participant’s annualized base salary as of the end
of the year.

 

Payment of 2008 Bonus Compensation

 

On January 19, 2009, the Compensation Committee of our Board of Directors
approved the payment of a 2008 annual bonus award in cash to each of our named
executive officers, as follows:

--------------------------------------------------------------------------------

 

Named Executive Officer

2008 Annual Bonus Amount

Kevin M. Modany

$1,181,250

 

Daniel M. Fitzpatrick

$299,250

 

Clark D. Elwood

$269,500

 

Eugene W. Feichtner

$235,813

 

Glenn E. Tanner

$145,688

 

 

2009 Executive Salaries

 

On January 19, 2009, the Compensation Committee of our Board of Directors
authorized a salary increase for our named executive officers effective March
30, 2009. The following table sets forth the annualized base salary information
for each of our named executive officers as of March 30, 2009:

 

Named Executive Officer

2009 Annualized Base Salary

Kevin M. Modany

$725,000

 

Daniel M. Fitzpatrick

$305,000

 

Clark D. Elwood

$300,000

 

Eugene W. Feichtner

$275,000

 

Glenn E. Tanner

$230,000

 

 

2009 Executive Perquisites

 

On January 19, 2009, the Compensation Committee of our Board of Directors also
approved the following executive perquisites in 2009 for our named executive
officers:

 

•

for Mr. Modany, the use of a company car;

 

•

for Mr. Modany, an allowance to be used for tax return preparation and financial
planning of up to 2% of annualized base salary as of March 30, 2009;

 

•

for Messrs. Fitzpatrick, Elwood, Feichtner and Tanner, an allowance to be used
for tax return preparation and financial planning of up to 1% of annualized base
salary as of March 30, 2009; and

 

•

for each of our named executive officers:

 

•

tickets to sporting, theater and other events;

 

•

enhanced disability benefits; and

 

•

an annual physical examination.

 

The aggregate incremental cost to us in 2009 for providing all of the 2009
perquisites described above is not expected to exceed $125,000.

 

2009 Director Compensation

 

The compensation for non-employee Directors on our Board of Directors in 2009
consists of:

 

•

an annual retainer of $60,000 payable in one installment on January 5, 2009, at
the election of each non-employee Director, in cash or shares of our common
stock in increments of 25% each;

 

•

no separate meeting fees;

 

•

a grant under the 2006 ITT Educational Services, Inc. Equity Compensation Plan
of restricted stock units (“RSUs”) with a time-based period of restriction that:

 

•

has a value of $100,000, plus the value associated with any fractional RSU
necessary to cause the grant to be for a whole number of RSUs, pursuant to which
the value is determined based on the closing market price of a share of our
common stock on the effective date of the grant;

 

•

is effective on the tenth business day following our 2009 Annual Meeting of
Shareholders;

 

•

has a time-based period of restriction of three years; and

 

•

is settled on the first business day following the last day of the period of
restriction by the delivery of one share of our common stock for each RSU in the
grant.

 

We also reimburse Directors for reasonable, out-of-pocket travel expense related
to attending our Board of Directors and its committee meetings and other
business of the Board.