Exhibit 10.13

Final

 

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Career Education Corporation

2014 Annual Incentive Award Program

pursuant to the

2008 Incentive Compensation Plan

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ARTICLE 1

PURPOSE AND PERFORMANCE PERIOD

1.1 Purpose. This document is created to set forth the terms and conditions for
certain Grantees who have been selected to participate in the Annual Incentive
Award portion of the Plan for calendar year 2014. To the extent that there is
any conflict between the terms of this document and the terms of the Plan, the
Plan shall control.

1.2 Performance Period. This document is effective for certain Annual Incentive
Awards calculated for Grantees under the Plan relating to calendar year 2014.
The 2014 Annual Incentive Awards earned pursuant to this Program shall be paid
no later than March 15, 2015.

1.3 No Misconduct. If at any time prior to the date the 2014 Annual Incentive
Award is paid by the Company or an Affiliate, a Grantee is determined by the
Administrator to have engaged in Misconduct, then no such Annual Incentive Award
shall be paid to such Grantee.

ARTICLE 2

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Plan. The following words and phrases shall have
the following meanings:

2.1 “Administrator” means a committee consisting of the Senior Vice President
and Chief Financial Officer, the Senior Vice President and General Counsel, and
the Senior Vice President and Chief Human Resources Officer (or their respective
designees), and/or any other officer as determined by the Committee.

2.2 “Affiliate” means any corporation, campus, or other entity that, directly or
indirectly through one or more intermediaries, is owned by the Company.

2.3 “Business Group” means the Career Schools Group, the University Schools
Group or the Transitional Schools Group.

2.4 “Career Schools Group” is the Business Group that includes those schools
that primarily provide instruction in the design and technology, health and
culinary arts fields.

2.5 “Corporate Employee” means an employee of the Company or an Affiliate whose
primary duties relate to corporate-level activities (rather than Business
Group-level, Education Group-level or campus-level activities). Status as a
Corporate Employee will be determined by the Administrator.

2.6 “Covered Management Position” means a position within the Company which the
Company has determined to be covered under 34 C.F.R.
Section 668.14(b)(22)(iii)(C).

2.7 “Education Group” means a subdivision of a Business Group. For purposes of
this Program, (a) the Education Groups within the Career Schools Group include
Career Colleges, Culinary Arts and Regionally Accredited Schools; (b) the
Education Groups within the University Schools Group include AIU and CTU (as
each is defined in Section 2.30); and (c) the Transitional Schools Group (which
serves as its own Education Group and Business Group) consists of those campuses
which have been designated by the Company as in “teach-out.”

2.8 “Eligible Earned Wages” means compensation for services performed in an
incentive-eligible position that is eligible for inclusion when determining a
Grantee’s Annual Incentive Award. Eligible Earned Wages are based on base
earnings during the Performance Period only and exclude any other payments made
during the Performance Period (i.e., teach pay, allowances, reimbursements,
equity grants, bonuses, incentive payments,

 

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short-term disability payments, long-term disability payments, etc.).
Notwithstanding the foregoing, (a) to the extent any individual becomes employed
by the Company or any of its Affiliates on or after November 1, 2014, or first
moves into an incentive-eligible position on or after November 1, 2014, such
individual will not have any Eligible Earned Wages for the Performance Period,
and (b) except as set forth in Section 3.1 hereof, to the extent any individual
does not remain employed by the Company or an Affiliate as of the last day of
the Performance Period, such individual will not have any Eligible Earned Wages
for the Performance Period.

2.9 “Ending Population” means student population on a Company-wide, Business
Group-wide, Education Group-wide or campus-wide basis, as applicable, at the end
of the Performance Period.

2.10 “Ending Population Payout Factor” means the applicable amount, expressed as
a percentage of target payout, that is payable to a Grantee based on actual
Ending Population compared to 2014 plan for Ending Population for the Company
(and its Affiliates), or a Business Group, Education Group or campus, as
applicable. The table for determining the applicable Ending Population Payout
Factor is set forth in the applicable memorandum from the Company setting forth
the criteria for a Grantee’s Award. The Ending Population Payout Factor may not
be less than 0% nor more than 200%.

2.11 “Key Executive Program” means the Career Education Corporation 2014 Annual
Incentive Award Program for Key Executives.

2.12 “Misconduct” means any one of the following in which a Grantee may engage
prior to or during the Performance Period or any time thereafter, but prior to
the date the 2014 Annual Incentive Award is paid: (a) any act of intentional
misconduct, dishonesty, gross negligence, conscious abandonment, or neglect of
duty; (b) any violation of the Company’s Code of Conduct, policies on
maintaining confidentiality of proprietary information, Code of Ethics or
non-discrimination or anti-harassment policy; (c) any commission of a criminal
activity, fraud, or embezzlement; (d) any failure to reasonably cooperate in any
investigation or proceeding concerning the Company or any of its Affiliates;
(e) any unauthorized disclosure or use of confidential information or trade
secrets; (f) any violation of any enforceable restrictive covenant, such as a
non-compete, non-solicit, or non-disclosure agreement between the Grantee and
the Company or an Affiliate; or (g) any conduct that causes the Grantee to be
ineligible for benefits pursuant the applicable Company severance plan.

2.13 “Operating Expense Management” means the excess of (a) all expenses
incurred by the Company (and its Affiliates), or a Business Group, Education
Group or campus, as applicable, in the process of conducting business as
reported on the Company’s Form 10-K for the year ending on December 31, 2014
(which is prepared in accordance with the generally accepted accounting
principles of the U.S), less (b) the amounts paid pursuant to this Program and
the Key Executive Program. Such amount shall then be subject to such adjustment,
if any, as may be made (i) by the Committee in its sole discretion, or (ii) with
respect to a Business Group, Education Group or campus, by the Administrator in
its sole discretion. In respect of clause (a) of the preceding sentence, to the
extent the information reported on the Form 10-K is not sufficiently specific to
provide data for a specific campus, the campus-level data will be obtained from
the Company’s Finance Department, and will be based on the data used to obtain
the information upon which the information in the Form 10-K is based.

2.14 “Operating Expense Management Payout Factor” means the applicable amount,
expressed as a percentage of target payout, that is payable to a Grantee based
on actual Operating Expense Management compared to 2014 plan for Operating
Expense Management for the Company (and its Affiliates), or a Business Group,
Education Group or campus, as applicable. The table for determining the
applicable Operating Expense Management Payout Factor is set forth in the
applicable memorandum from the Company setting forth the criteria for a
Grantee’s Award. The Operating Expense Management Payout Factor may not be less
than 0% nor more than 200%.

2.15 “Operating Income/Loss” means the aggregate of (a) the earnings of the
Company (and its Affiliates), or a Business Group, Education Group or campus, as
applicable, as reported on the Company’s Form 10-K for the year ending on
December 31, 2014 (which is prepared in accordance with the generally

 

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accepted accounting principles of the U.S), (b) the amounts paid pursuant to
this Program and the Key Executive Program, and (c) such adjustment, if any, as
may be made (i) by the Committee in its sole discretion, or (ii) with respect to
a Business Group, Education Group or campus, by the Administrator in its sole
discretion. In respect of clause (a) of the preceding sentence, to the extent
the information reported on the Form 10-K is not sufficiently specific to
provide data for a specific campus, the campus-level data will be obtained from
the Company’s Finance Department, and will be based on the data used to obtain
the information upon which the information in the Form 10-K is based.

2.16 “Performance Period” means the calendar year ending December 31, 2014.

2.17 “Plan” means the Career Education Corporation 2008 Incentive Compensation
Plan, as amended.

2.18 “Program” means this 2014 Annual Incentive Award Program which is
established under the Plan.

2.19 “Revenue” means (a) the income that is received during the normal course of
business by the Company (and its Affiliates), or a Business Group, Education
Group or campus, as applicable, as reported on the Company’s Form 10-K for the
year ending December 31, 2014 (which is prepared in accordance with the
generally accepted accounting principles of the U.S.), less (b) the CEC
management fee applied. Such amount shall then be subject to such adjustment, if
any, as may be made (i) by the Committee in its sole discretion, or (ii) with
respect to a Business Group, Education Group or campus, by the Administrator in
its sole discretion. In respect of clause (a) of the first sentence of this
Section 2.19, to the extent the information reported on the Form 10-K is not
sufficiently specific to provide data for a specific campus, the campus-level
data will be obtained from the Company’s Finance Department, and will be based
on the data used to obtain the information upon which the information in the
Form 10-K is based.

2.20 “Revenue Payout Factor” means the applicable amount, expressed as a
percentage of target payout, that is payable to a Grantee based on actual
Revenue compared to 2014 plan for Revenue for the Company (and its Affiliates),
or a Business Group, Education Group or campus, as applicable. The table for
determining the applicable Revenue Payout Factor is set forth in the applicable
memorandum from the Company setting forth the criteria for a Grantee’s Award.
The Revenue Payout Factor may not be less than 0% nor more than 200%.

2.21 “Student Completions” means the students who graduate or otherwise complete
their education program during 2014 expressed as a percentage of the number of
students anticipated to graduate or otherwise complete their education program
within the Performance Period.

2.22 “Student Completions Payout Factor” means the applicable amount, expressed
as a percentage of target payout, that is payable to a Grantee based on year
over year improvements of Student Completions compared to 2013 for the Business
Group, Education Group or campus, as applicable. For Corporate Employee
Grantees, the Student Completions Payout Factor will be determined on a
consolidated basis (i.e., taking into account the Student Completions attainment
of all Business Groups). The table for determining the applicable Student
Completions Payout Factor is set forth in the applicable memorandum from the
Company setting forth the criteria for a Grantee’s Award. The Student
Completions Payout Factor may not be less than 0% nor more than 200%.

2.23 “Student Placement” means the number of students successfully placed in
employment following the completion of their program as reported to the
applicable accreditors.

2.24 “Student Placement Payout Factor” means, for Grantees who are not Corporate
Employee, the applicable amount, expressed as a percentage of target payout,
that is payable to a Grantee based on year over year improvements of student
placements compared to 2013 plan for the Business Group, Education Group or
campus, as applicable. For Corporate Employee Grantees, the Student Placement
Payout Factor will be determined on a consolidated basis (i.e., taking into
account the Student Placement attainment of all Business Groups). The table for
determining the applicable Student Placement Payout Factor is set forth in the
applicable memorandum from the Company setting forth the criteria for a
Grantee’s Award. The Student Placement Payout Factor may not be less than 0% nor
more than 200%.

 

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2.25 “Student Retention” means the actual student retention rates for the
Transitional Schools Group during the Performance Period.

2.26 “Student Retention Payout Factor” means the applicable amount, expressed as
a percentage of target payout, that is payable to a Grantee based on Student
Retention compared to the 2014 plan for the Transitional Schools Group. The
table for determining the applicable Student Retention Payout Factor is set
forth in the applicable memorandum from the Company setting forth the criteria
for a Grantee’s Award. The Student Retention Payout Factor may not be less than
0% nor more than 200%.

2.27 “Target Incentive Percentage” means a Grantee’s target Annual Incentive
Award percentage of Eligible Earned Wages as communicated to the Grantee.

2.28 “Targeted Operating Income/Loss” means the targeted amount of Operating
Income/Loss for the Company (and its Affiliates), or a Business Group, Education
Group or campus, as applicable, for the Performance Period as approved by the
Board in the 2014 operating plan.

2.29 “Transitional Schools Group” is the Business Group that includes those
schools that are designated by the Company as being in “teach-out” status. For
the avoidance of doubt, there are no Education Groups within the Transitional
Schools Group.

2.30 “University Schools Group” is the Business Group that includes American
InterContinental University (“AIU”) and Colorado Technical University (“CTU”).

ARTICLE 3

ELIGIBILITY

3.1 Eligibility. The Grantees for the Performance Period have been designated in
accordance with the Plan. Employees who participate in the Key Executive Program
are not eligible Grantees for purposes of this Program. If an individual is in a
Covered Management Position at any point during the Performance Period, then
such individual will only be eligible for an award or payment under this Program
(subject to the terms hereof) for the portion of the Performance Period in which
he or she was in an incentive-eligible position and was not in a Covered
Management Position. In addition, (a) to the extent an individual is newly hired
by the Company or its Affiliates or first moves into an incentive-eligible
position on or after November 1, 2014, such individual shall not be eligible to
receive an Annual Incentive Award pursuant to this Program, and (b) subject to
Section 1.3 hereof and unless otherwise determined by the Committee, a Grantee
must be employed by the Company or an Affiliate on the last day of the
Performance Period in order to be eligible to receive an Annual Incentive Award
payment hereunder. Notwithstanding the foregoing, and subject to Section 1.3
hereof, if a Grantee’s employment with the Company is terminated by the Company
without Cause as part of a reduction in force on or after October 1, 2014, then
such Grantee shall remain eligible to receive an Annual Incentive Award pursuant
to this Program and such Grantee’s Eligible Earned Wages earned during the
Performance Period prior to his or her termination shall continue to be Eligible
Earned Wages for purposes of this Program. In all cases, to the extent a Grantee
is no longer employed by the Company or an Affiliate on the date the Annual
Incentive Award becomes payable pursuant to this Program (a “Separated
Grantee”), then the Annual Incentive Amount shall only be paid to such Separated
Grantee to the extent the Separated Grantee has executed a release of claims
against the Company and its Affiliates, which release must be in a form
satisfactory to the Administrator, prior to the payment date for such Annual
Incentive Award. In addition, if applicable law requires that any such release
be subject to a revocation period in order to become fully effective, payment of
the Annual Incentive Award to a Separated Grantee shall only be required if,
prior to the payment date for the Annual Incentive Award, the applicable
revocation period for the release has lapsed without any such revocation
occurring.

 

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ARTICLE 4

AWARD AMOUNT

4.1 Annual Incentive Award Weightings. The following table identifies the Annual
Incentive Award element weightings based on the performance components and
Grantee classification for Grantees who are Corporate Employees and for Grantees
who are part of the Career Schools Group, University Schools Group and the
Transitional Schools Group.

 

      Enroll and Educate     Place              

Business Segement

  

AIP Type

   Revenue     Operating
Expense     Ending
Population     Retention     Completion     Placement     Individual     Total  

Corporate

   President & Chief Executive Officer*      25 %      25 %              50 %   
  100 %     Sr Leader**      20 %      20 %      30 %        5 %      5 %     
20 %      100 %     Other Participant      10 %      10 %      20 %        5 % 
    5 %      50 %      100 % 

University

   Sr leader**      20 %      20 %      30 %        10 %        20 %      100 % 
   Campus President      15 %      15 %      30 %        10 %        30 %     
100 %     Other Participant      10 %      10 %      20 %        10 %        50
%      100 % 

Career Schools

   Sr Leader**      15 %      15 %      30 %        10 %      10 %      20 %   
  100 %     Campus President      10 %      10 %      35 %        10 %      15
%      20 %      100 %     Other Participant      5 %      5 %      20 %       
10 %      10 %      50 %      100 % 

Transitional Schools

   All Participants        34 %        33 %        33 %        100 % 

 

* Although not a Grantee pursuant to this Program, the President and Chief
Executive Officer is included herein to facilitate the Committee’s intention to
exercise its negative discretion under the Key Executive Program in accordance
with this Program.

 

** Sr Leader is defined as all individuals in a salary grade E61 and above.

For Grantees performing services during the Performance Period in multiple
Grantee classifications, the percentages set forth in the tables above may be
subject to proration pursuant to Section 5.2 hereof.

4.2 Revenue Performance Component. In respect of the Revenue performance
component, each Grantee will be eligible to receive a payment equal to the
result of applying the following formula to such Grantee:

 

A x B x C x D:

Where:

“A”

  equals such Grantee’s Eligible Earned Wages;

“B”

  equals such Grantee’s Target Incentive Percentage;

“C”

  equals the percentage set forth in the applicable box set forth in the
“Revenue” column in the table in Section 4.1 hereof (subject to Section 4.8);
and

“D”

  equals such Grantee’s Revenue Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Revenue performance component will be made. For the avoidance of
doubt, no portion of the Annual Incentive Award of a Grantee who is in the
Transitional Schools Group will be based on the Revenue performance component.

 

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4.3 Operating Expense Management Component. In respect of the Operating Expense
Management performance component, each Grantee will be eligible to receive a
payment equal to the result of applying the following formula to such Grantee:

 

E x F x G x H:

Where:

“E”

equals such Grantee’s Eligible Earned Wages;

“F”

equals such Grantee’s Target Incentive Percentage;

“G”

equals the percentage set forth in the applicable box set forth in in the
“Operating Expense” column in the table in Section 4.1 hereof (subject to
Section 4.8); and

“H”

equals such Grantee’s Operating Expense Management Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Operating Expense Management performance component will be made.

4.4 Ending Population Component. In respect of the Ending Population performance
component, each Grantee will be eligible to receive a payment equal to the
result of applying the following formula to such Grantee:

 

I x J x K x L:

Where:

“I”

equals such Grantee’s Eligible Earned Wages;

“J”

equals such Grantee’s Target Incentive Percentage;

“K”

equals the percentage set forth in the applicable box in the “Ending Population”
column set forth in the table in Section 4.1 hereof (subject to Section 4.8);
and

“L”

equals such Grantee’s Ending Population Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Ending Population performance component will be made. For the
avoidance of doubt, no portion of the Annual Incentive Award of a Grantee who is
in the Transitional Schools Group will be based on the Ending Population
performance component.

4.5 Student Completions Component. In respect of the Student Completions
performance component, each Grantee will be eligible to receive a payment equal
to the result of applying the following formula to such Grantee:

 

M x N x O x P:

Where:

“M”

equals such Grantee’s Eligible Earned Wages;

“N”

equals such Grantee’s Target Incentive Percentage;

“O”

equals the percentage set forth in the applicable box in the “Completion” column
set forth in the table in Section 4.1 hereof (subject to Section 4.8); and

“P”

equals the Grantee’s Student Completions Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Student Completions performance component will be made. For the
avoidance of doubt, no portion of the Annual Incentive Award of a Grantee who is
in the Transitional Schools Group will be based on the Student Completions
performance component.

 

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4.6 Student Placement Component. In respect of the Student Placement performance
component, each Grantee will be eligible to receive a payment equal to the
result of applying the following formula to such Grantee:

 

Q x R x S x T:

Where:

“Q”

equals such Grantee’s Eligible Earned Wages;

“R”

equals such Grantee’s Target Incentive Percentage;

“S”

equals the percentage set forth in the applicable box in the “Placement” column
set forth in the table in Section 4.1 hereof (subject to Section 4.8); and

“T”

equals the Student Placement Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Student Placement performance component will be made.

4.7 Student Retention Component. In respect of the Student Retention performance
component, each Grantee will be eligible to receive a payment equal to the
result of applying the following formula to such Grantee:

 

U x V x W x X:

Where:

“U”

equals such Grantee’s Eligible Earned Wages;

“V”

equals such Grantee’s Target Incentive Percentage;

“W”

equals the percentage set forth in the applicable box in the “Retention” column
set forth in the table in Section 4.1 hereof; and

“X”

equals the Student Retention Payout Factor.

Notwithstanding the foregoing, to the extent that the Company’s Operating
Income/Loss is more than 20% below Targeted Operating Income/Loss, no payment
based on the Student Retention performance component will be made. For the
avoidance of doubt, the Student Retention performance component applies only to
Grantees in the Transitional Schools Group.

4.8 Aggregated Factors. Depending on the organization level of a Grantee (as
determined pursuant to the table below), the relevant payout factors used for
purposes of Sections 4.2, 4.3, 4.4, 4.5, and 4.6 above may be consolidated based
on performance at two different organization levels as set forth in the table
below.

 

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Organization Level

  

Participants

   Company     Business
Group     Education
Group     Campus  

Corporate

        100 %       

University Schools

           

Business Group

   Chief University Officer *      50 %      50 %         Business Group
participants      25 %      75 %     

Education Group

   Education Group participants        25 %      75 %   

Campus

   Campus-based participants        25 %      75 %   

Career Schools

           

Business Group

   Chief Career Schools Officer *      50 %      50 %         Business Group
participants      25 %      75 %     

Education Group

   Education Group participants        25 %      75 %   

Campus

   Campus-based participants          25 %      75 % 

Transitional Schools

   All participants        100 %     

 

* Although not Grantees pursuant to this Program, the Chief University Officer
and Chief Career Schools Officer are included herein to facilitate the
Committee’s intention to exercise its negative discretion under the Key
Executive Program in accordance with this Program.

To the extent the performance of more than one organization level applies, then
in order to determine the relevant payout, the formula set forth in Section 4.2,
4.3, 4.4, 4.5 or 4.6 above shall be performed at both levels, and the result
shall be weighted appropriately pursuant to the table above as determined by the
Committee or Administrator, as applicable.

4.9 Individual Goals Component. In respect of the individual performance
component, each Grantee will be eligible to receive a payment based on the
percentage set forth in the applicable box set forth in the “Individual” column
in the table in Section 4.1 hereof, calculated as set forth in this Section 4.9.
In 2014, achievement of target performance with respect to individual
performance goals will result in a 50% payout for Grantees who are Corporate
Employees or who are part of the Career Schools Group and a 100% payout for
Grantees who are part of the University Schools Group. The individual
performance component of a Grantee’s Annual Incentive Award shall be determined
based upon a Grantee’s achievement of the individual goals, and weighting of
such goals, established by the Grantee’s manager or department head, as
applicable, and recorded in the Company’s performance management system as the
Grantee’s “AIP Goals” for the Performance Period. Notwithstanding the foregoing,
(a) the individual performance component shall not apply to Grantees in the
Transitional Schools Group, and (b) to the extent the Company does not meet the
threshold for payment set forth for the Revenue performance component in
Section 4.2, Grantees shall not be eligible for payment based on the individual
goals performance component.

4.10 Adjustment. The individual performance component of each Grantee’s Annual
Incentive Award (determined without application of this Section 4.10) is subject
to adjustment by managers. Such adjustment may be negative for those Grantees
who do not achieve the applicable goals, and positive for those Grantees who
demonstrate outstanding accomplishments. The individual performance component
may not result in a payment less than 0% nor more than 200% of the payout amount
for achievement of target performance as calculated as set forth in Section 4.9.
For purposes of applying this Section 4.10, any positive adjustment made to the
individual performance component of the Annual Incentive Award of one Grantee
must result in a dollar-for-dollar negative adjustment to the individual
performance component of the Annual Incentive Award of one or more other
Grantees so that, in the aggregate, the application of the adjustment described
in this Section 4.10 to all the Grantees shall not result in any additional cost
to the Company and its Affiliates for the group of Grantees over which a
particular manager retains authority.

 

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ARTICLE 5

MISCELLANEOUS

5.1 Miscellaneous. The Committee may modify or terminate this Program at any
time and for any reason, effective at such date as the Committee may determine,
without the approval of the Grantees or stockholders of the Company. Without
limiting the foregoing, the Committee reserves the right to adjust Ending
Population, the Ending Population Payout Factor, Revenue, the Revenue Payout
Factor, Operating Expense Management, the Operating Expense Management Payout
Factor, Student Completions, the Student Completions Payout Factor, Student
Placement, the Student Placement Payout Factor, Student Retention, the Student
Retention Payout Factor, the applicable individual goals, or any other related
classification or determination for any and all Grantees for any reason,
including if, in the Committee’s sole discretion, any unforeseen or unplanned
event results in a positive or negative impact on the performance of the Company
(or its Affiliates) during the Performance Period or its overall financial
position. All such modifications or terminations to this Program shall be
binding on all Grantees.

5.2 Proration. For a Grantee who moves between two or more incentive-eligible
positions (whether at the corporate, Business Group, Education Group or campus
level), during the Performance Period, a proration may be applied to determine
the amount due to such Grantee pursuant to Article 4 hereof. To the extent it
applies, such proration shall be determined in the discretion of the
Administrator, and shall be based on relevant factors, which may include, but
shall not be limited to, (a) the relative time spent by such Grantee working at
each level, and (b) the extent to which corporate, a Business Group, Education
Group or a campus was charged for the services of such Grantee. Unless otherwise
determined by the Administrator, such proration will be based on whole months
(rather than a day-by-day basis), and for purposes of such proration, actions
taken prior to the fifteenth day of any month will be deemed to have happened on
the first day of that month, while action taken on or after the fifteenth day of
any month will be deemed to have happened on the first day of the following
month.

5.3 Compliance With Laws. This Program was created to comply with the “incentive
compensation” provisions of the Higher Education Act, 20 U.S.C.§ 1094(a)(20),
and with the implementing regulations of the U.S. Department of Education
(“ED”), located at 34 C.F.R.§ 668.14(b)(22). The Company is aware that the ED
regulations changed, effective July 1, 2011, and this Program has been created
to comply with changed regulations that took effect July 1, 2011. All provisions
of this Program will be interpreted and applied so as to be consistent with that
statute and those regulations. If at any time the Committee determines that any
potential compensation action would, or in the Committee’s sole discretion
might, violate that statute or those regulations, the Committee may in its sole
discretion elect not to pay such compensation. If the statute or regulations
change or if ED provides guidance that changes the Committee’s understanding of
how the statute and regulations will be applied, the Committee will make
appropriate changes to this Program, or may terminate this Program, in its sole
discretion, with or without advance notice to the Grantees. The Committee
reserves the right to modify any element of this Program, to decline to make any
payments under this Program, or to terminate this Program in its entirety, at
any time for any reason, in its sole discretion, with or without advance notice
to the Grantees.

 

Program Effective January 1, 2014   Page 10 of 10