Document:

ceco-ex102_149.htm

Final

Approved by the Compensation Committee on 2/13/17

Exhibit 10.2 

 

 

 

 

 

 

 
 
Career Education Corporation

2017 Annual Incentive Award Program

pursuant to the

2016 Incentive Compensation Plan

 

ARTICLE 1

PURPOSE AND PERFORMANCE PERIOD

 

1.1Purpose.  This document is created to set forth the terms and conditions for certain Participants who have been selected to participate in the Annual Incentive Award portion of the Plan for calendar year 2017.  To the extent that there is any conflict between the terms of this document and the terms of the Plan, the Plan shall control.  

 

1.2Performance Period.  This document is effective for certain Annual Incentive Awards calculated for Participants under the Plan relating to calendar year 2017.  The 2017 Annual Incentive Awards earned pursuant to this Program shall be paid no later than March 15, 2018.

 

1.3No Misconduct.   If at any time prior to the date the 2017 Annual Incentive Award is paid by the Company or an Affiliate, a Participant is determined by the Administrator to have engaged in Misconduct, then no such Annual Incentive Award shall be paid to such Participant.

 

 

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 Chief Financial Officer, the General Counsel and the Chief Human Resources Officer (or their respective designees), and/or any other executive 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“AIP EBITDA” means the consolidated earnings, including both continuing and discontinued operations, of the total Company (and its Affiliates) for the year ended December 31, 2017, determined before (a) interest, taxes, depreciation, amortization, asset impairments and non-operating miscellaneous income (expense), and (b) lease termination and unused space charges (as recorded in the Company’s accounting records under account number 604610) and legal settlements; and as adjusted (i.e., neutralized) for (c) the difference between actual legal fees and the estimated amounts used in determining Targeted AIP EBITDA.  The amount for each of the items in clause (a) shall be as reported on the consolidated statement of income (loss) and comprehensive income (loss) within the Company’s Form 10-K for the year ending on December 31, 2017 (which is prepared in accordance with the generally accepted accounting principles in the U.S. and filed with the U.S. Securities and Exchange Commission).  The amount for each of the actual items in clauses (b) and (c) shall be as reported within such Form 10-K; provided, however, that if the information reported in such Form 10-K is not sufficiently specific to provide data for a specific amount, then the data will be obtained from the Company’s Finance Department and will be based on the underlying accounting records upon which information in the Form 10-K is based.  In addition, AIP EBITDA shall be (i) determined assuming that the EBITDA Performance Factor and Individual Goals Performance Factor are both 100% for all Participants eligible to receive a payment pursuant to this Program (i.e., assuming target payments), and (ii) subject to such adjustment, if any, as may be made by the Committee. 

 

2.4“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).

 

2.5“EBITDA Performance Factor” means a percentage (expressed to the second decimal place) determined pursuant to the table set forth in the applicable memorandum from the Company setting forth the 

Program Effective January 1, 2017Page 2 of 6

 

criteria for a Participant’s Award.  The EBITDA Performance Factor may not be less than 0% nor more than 200%.

 

2.6“Eligible Earned Wages” means compensation for services performed in an incentive-eligible position (as determined pursuant to Article 3) that is eligible for inclusion when determining a Participant’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, short-term disability payments, long-term disability payments, etc.).  For the avoidance of doubt, Eligible Earned Wages for the Performance Period shall be determined consistent with Article 3 and any Participant who is not eligible for an award or payment pursuant to Article 3 shall have no Eligible Earned Wages for the Performance Period.

 

2.7“Individual Goals Performance Factor” means, with respect to each Participant, the Participant’s overall performance rating (expressed as a percentage and as determined by the Participant’s manager) based on the individual performance goals and competency rating, and weighting of such factors, established by the Participant’s manager or department head, as applicable, and recorded in the Company’s performance management system for the Performance Period.  The Individual Goals Performance Factor may not be less than 0% nor more than 200%.

 

2.8“Key Executive Program” means the Career Education Corporation 2017 Annual Incentive Award Program for Key Executives.

 

2.9“Misconduct” means any one of the following in which a Participant may engage prior to or during the Performance Period or any time thereafter, but prior to the date the 2017 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 Participant and the Company or an Affiliate; or (g) any conduct that causes the Participant to be ineligible for benefits pursuant to the applicable Company severance plan.

 

2.10“Performance Period” means the calendar year ending December 31, 2017.

 

2.11“Plan” means the Career Education Corporation 2016 Incentive Compensation Plan, as amended.

 

2.12“Program” means this 2017 Annual Incentive Award Program which is established under the Plan.

 

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

 

2.14“Targeted AIP EBITDA” means the targeted AIP EBITDA for the Performance Period as approved by the Committee, which shall be consistent with the Company’s 2017 operating plan approved by the Board of Directors of the Company on January 25, 2017.

 

 

ARTICLE 3

ELIGIBILITY

 

3.1General Eligibility Requirements.  The Participants for the Performance Period consist of employees who are (a) not in a Covered Management Position; (b) classified by the Company for purposes of this 

Program Effective January 1, 2017Page 3 of 6

 

Program as a Corporate or University Group employee; and (c) classified by the Company as (i) Grade E55 or higher or (ii) Grade T09, T10 or T12.  The Committee may designate additional Participants.  Participants are separately notified of their eligibility to participate in the Program.  Employees who participate in the Key Executive Program are not eligible Participants 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 not be eligible for an award or payment under this Program.  

 

3.2Employment Changes.  To the extent an individual is newly hired by the Company or any of its Affiliates or first moves into an incentive-eligible position on or after October 1, 2017, such individual shall not be eligible to receive an Annual Incentive Award pursuant to this Program.  Subject to Section 1.3 hereof and unless otherwise determined by the Committee, a Participant 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 Participant’s employment with the Company is terminated by the Company without Cause as part of a reduction in force on or after October 1, 2017, then such Participant shall remain eligible to receive an Annual Incentive Award payment pursuant to this Program and such Participant’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; provided that, unless otherwise determined by the Committee, such Participant shall not be eligible for a payment hereunder to the extent such Participant received a severance package in connection with such termination and such severance package contained a payment related to or otherwise based on annual bonus.  In all cases, to the extent a Participant is no longer employed by the Company or an Affiliate on the last day of the Performance Period (a “Separated Participant”), then any Annual Incentive Award amount shall only be paid to such Separated Participant to the extent the Separated Participant 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 Participant 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.

 

ARTICLE 4

AWARD AMOUNT 

 

4.1Annual Incentive Award Weightings.  The following table identifies the Annual Incentive Award element weightings based on the performance components and Participant classification. Participant classification will be determined by the Administrator and communicated to the Participant. 

 

				
	
Participant Classification
	
EBITDA
	
Individual Goals
	
Total

	
E61 and Above
	
80%
	
20%
	
100%

	
E58 - E60, T12
	
70%
	
30%
	
100%

	
E55 – E57, T09, T10
	
60%
	
40%
	
100%

 

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

 

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

 

Program Effective January 1, 2017Page 4 of 6

 

A x B x C x D:

 

Where:

 

“A” equals such Participant’s Eligible Earned Wages;

“B” equals such Participant’s Target Incentive Percentage;

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

“D” equals the applicable EBITDA Performance Factor.

 

4.3Individual Goals Performance Component.  In respect of the individual goals performance component, each Participant will be eligible to receive a payment equal to the result of applying the following formula to such Participant: 

 

A x B x Y x D x Z:

 

Where:

 

“A” equals such Participant’s Eligible Earned Wages;

“B” equals such Participant’s Target Incentive Percentage;

“D” equals the applicable EBITDA Performance Factor;

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

“Z” equals the applicable Individual Goals Performance Factor.

 

Notwithstanding the foregoing, the product of D x Z may not be greater than 200%, and any payment pursuant to this Section 4.3 shall be adjusted accordingly to implement a 200% payout cap with respect to the individual goals performance component.

 

4.4Adjustment.  The individual goals performance component of each Participant’s Annual Incentive Award (determined without application of this Section 4.4) is subject to the aggregate funded amount for the individual goals performance component of all Participants (determined based on the EBITDA Performance Factor) and to adjustment by managers.  Such adjustment may be negative for those Participants who do not achieve the applicable goals, and positive for those Participants who demonstrate outstanding accomplishments.  For purposes of applying this Section 4.4, any positive adjustment made to the individual goals performance component of the Annual Incentive Award of one Participant must result in a dollar-for-dollar negative adjustment to the individual goals performance component of the Annual Incentive Award of one or more other Participants so that, in the aggregate, the application of the manager adjustment described in this Section 4.4 to all the Participants shall not result in any additional cost to the Company and its Affiliates for the group of Participants over which a particular manager retains authority.

 

ARTICLE 5

MISCELLANEOUS

 

5.1Miscellaneous.  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 Participants or stockholders of the Company.  Without limiting the foregoing, the Committee reserves the right to adjust AIP EBITDA, the EBITDA Performance Factor, Targeted AIP EBITDA, the Target Incentive Percentage and the applicable individual goals, and to adjust, make or interpret any other determination or classification, for any or all Participants 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, terminations, adjustments, determinations and interpretations relating to this Program shall be binding on all Participants.

Program Effective January 1, 2017Page 5 of 6

 

 

5.2Proration.  If a Participant’s move between two or more incentive-eligible positions during the Performance Period impacts Participant classification for purposes of Section 4.1, then a proration may be applied to determine the amount due to such Participant 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 Participant working at each level, and (b) the extent to which corporate or an education group was charged for the services of such Participant.  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.

 

5.3Compliance 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 Participants.  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 Participants. 

 

 

 

Program Effective January 1, 2017Page 6 of 6ceco-ex104_150.htm

Exhibit 10.4

SETTLEMENT AGREEMENT

 

This Settlement Agreement (“Agreement”) is entered into between Defendants Career Education Corporation and American InterContinental University, Inc. (“Defendants”) and Relators Melissa Simms Powell, Angela Hitchens, Joseph P. Plumley, Jr., and Glenn W. Dobson (“Relators”) (Defendants and Relators hereafter collectively referred to as “the Parties”), through their authorized representatives.

 

RECITALS

 

A.Defendant Career Education Corporation (“CEC”) is a corporation organized under the laws of the State of Delaware with its principal place of business located at 231 N. Martingale Rd., Schaumburg, Illinois.  CEC is an educational services company which operates certain postsecondary education schools that offer bachelor’s degree, associate’s degree, doctorate degree, master’s degree, and non-degree programs in career-oriented disciplines.  Defendant American InterContinental University, Inc. (“AIU”) is a Georgia corporation that owns and operates American InterContinental University, a university accredited previously by the Southern Association of Colleges and Schools and presently by the Higher Learning Commission, providing associate’s, bachelor’s and graduate degree programs to students on campus and online.  AIU’s principal place of business is located at 231 N. Martingale Rd., Schaumburg, Illinois.

B.On July 14, 2008, Relators filed an action in the United States District Court for the Northern District of Georgia, Atlanta Division captioned United States of America ex rel. Melissa Simms Powell, Angela Hitchens, Joseph P. Plumley, Jr. ED.D., and Glenn W. Dobson v. American InterContinental University Inc., Career Education Corporation, and John Doe Nos. 1-100 (N.D. Ga. 1:08-CV-2277), pursuant 

to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the “Complaint”).

C.Defendants filed an Answer to the Complaint on December 6, 2010 in which Defendants denied any liability relating to the claims in the Complaint.

D.Defendants by entering into this Agreement are not admitting to any violations of law or any liability with respect to the matters contained in the Complaint and, in connection therewith, maintain they acted at all times in compliance with all laws and regulations.

E. Relators contend that they have certain claims under the False Claims Act, 31 U.S.C. §§ 3729-3733 (the “FCA”) in their capacity as Relators and on behalf of the United States as alleged in the Complaint.  

F.The United States declined to intervene in any of the claims alleged in the Complaint.

G.Relators claim entitlement under 31 U.S.C. § 3730(d)(2) to a share of the proceeds of this Agreement.

In consideration of the mutual promises and obligations of this Agreement, the Parties agree and covenant as follows:

 

TERMS AND CONDITIONS

 

1.Relators, for each of themselves and for their respective heirs, assigns, grantees, agents, representatives, employees, successors, attorneys, and insurers, do hereby release and forever discharge Defendants and John Doe Nos. 1-100 together with each of their current and former parent corporations, if any; direct and indirect subsidiaries or divisions; brother and sister corporations; current and former owners; and current and former officers, directors, employees, agents, attorneys, consultants, 

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affiliates, and insurers; and the successors and assigns of any of them, from any claims that Relators may have under the False Claims Act, 31 U.S.C. §§ 3729-3733.

2.Upon execution of this Agreement, Relators shall sign and file a joint motion to dismiss the Complaint with prejudice, conditional upon the United States filing a Notice of Consent to Dismissal.  As consideration for the dismissal and releases described herein, within two (2) business days of the dismissal of the Complaint, Defendants shall pay or cause to be paid to the United States the sum of Ten Million Dollars ($10,000,000) (the “Settlement Amount”) by electronic funds transferred pursuant to written instructions to be provided to Defendants by the Office of the United States Attorney for the Northern District of Georgia.  

3.Defendants and Relators have resolved all claims for expenses, attorneys’ fees, and costs under 31 U.S.C. 3730(d) and Fed. R. Civ. P. 68 in a separate agreement.

4.Relators for themselves and for their respective heirs, assigns, grantees, agents, representatives, employees, successors, attorneys, and insurers agree and confirm that this Agreement is fair, adequate, and reasonable under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B).  Notwithstanding the foregoing, because the issue of the percentage share to be paid to Relators from the amount referenced in paragraph 2, above, remains unresolved, Relators reserve their right to seek the maximum share of this settlement pursuant to 31 U.S.C. § 3730(d)(2).

5.Notwithstanding the release given in paragraph 1 of this Agreement, or any other term of this Agreement, the following claims of the United States are specifically reserved and are not released:

	
 
	
a.
	
Any liability arising under Title 26, U.S. Code (Internal Revenue Code);

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b.
	
Any criminal liability;

	
 
	
c.
	
Except as explicitly stated in the Agreement, any administrative liability, including the suspension and debarment rights of any federal agency;

	
 
	
d.
	
Any liability to the United States (or its agencies) except as specified in the Notice of Consent to Dismissal attached hereto; and

	
 
	
e.
	
Any liability based upon obligations created by this Agreement.

6.Defendants waive and shall not assert any defenses Defendants may have to any criminal prosecution or administrative action relating to the Complaint that may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in such criminal prosecution or administrative action. Nothing in this paragraph or any other provision of this Agreement constitutes an agreement by the United States concerning the characterization of the Settlement Amount for purposes of the Internal Revenue laws, Title 26 of the United States Code.

7.This Agreement is intended to be for the benefit of the Parties and the United States only.

8.Except as may be provided in a separate agreement, each Party shall bear its own legal and other costs incurred in connection with this matter, including the preparation and performance of this Agreement.

9.Each party and signatory to this Agreement represents that it freely and voluntarily enters into this Agreement without any degree of duress or compulsion.

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10.This Agreement is governed by the laws of the United States. The exclusive jurisdiction and venue for any dispute relating to this Agreement is the United States District Court for the Northern District of Georgia. For purposes of construing this Agreement, this Agreement shall be deemed to have been drafted by all Parties to this Agreement and shall not, therefore, be construed against any Party for that reason in any subsequent dispute.

11.This Agreement constitutes the complete agreement between the Parties, except as to the separate agreement contemplated above and the United States’ Notice of Consent to Dismissal. This Agreement may not be amended except by written consent of the Parties.

12.The undersigned counsel represent and warrant that they are fully authorized to execute this Agreement on behalf of the persons and entities indicated below.

13.This Agreement may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same Agreement.

14.This Agreement is binding on Defendants’ successors, transferees, heirs, and assigns.

15.This Agreement is binding on Relators’ successors, transferees, heirs, and assigns.

16.This Agreement is effective on the date of signature of the last signatory to the Agreement (Effective Date of this Agreement). Facsimiles of signatures shall constitute acceptable, binding signatures for purposes of this Agreement.

17.All parties consent to the United States’ and Defendants’ disclosure of this Agreement, and information about this Agreement, to the public.

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Dated: _2/15___, 2017__/s/ Melissa Simms Powell______________

MELISSA SIMMS POWELL

 

 

 

Signed, sealed and delivered this _15th_ day

of _February___, 2017 in the presence of:

 

 

_/s/ Angela Johnson______________________

Notary Public

My Commission Expires:__9/16/2019________

 

 

6

 

 

Dated: _Feb 15__, 2017__/s/ Angela Hitchens____________________

ANGELA HITCHENS

 

 

Signed, sealed and delivered this _15__ day

of _February__, 2017 in the presence of:

 

 

_/s/ Christina MacMullen__________________

Notary Public

My Commission Expires:_Sept 27, 2019_____

 

 

[Notary Stamp]

 

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Dated: _2-15___, 2017_/s/ Joseph P. Plumley, Jr._________________

JOSEPH P. PLUMLEY, JR.

 

 

 

Signed, sealed and delivered this _15th_ day

of _February__, 2017 in the presence of:

 

 

_/s/ Karen A. Diehl_______________________

Notary Public

My Commission Expires:__________________

 

                       [Notary Stamp]

8

 

 

Dated: __2/15___, 2017___/s/ Glenn W. Dobson___________________

GLENN W. DOBSON

 

 

Signed, sealed and delivered this _15th__ day

of _February__, 2017 in the presence of:

 

 

__/s/ Angela Johnson_____________________

Notary Public

My Commission Expires:__9/16/2019________

 

 

[Notary Stamp]

 

9

 

 

 

Dated: _2-15__, 2017_/s/ Joseph D. Wargo_____________________

JOSEPH D. WARGO

Wargo French LLP

Counsel for Relators

 

10

 

 

 

Dated: _Feb. 15___, 2017__/s/ Jeffrey D. Ayers_____________________

JEFFREY D. AYERS

 

Vice President of American InterContinental University, Inc.

 

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Dated: _Feb. 15__, 2017__/s/ Jeffrey D. Ayers______________________

JEFFREY D. AYERS

 

Senior Vice President & General Counsel of Career Education Corporation

 

 

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Dated: _2/15__, 2017__/s/ John L. Latham______________________

JOHN L. LATHAM

 

Alston & Bird LLP

Counsel for Defendants

 

 

 

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