8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):   December 19, 2006

Career Education Corporation

(Exact Name of Registrant as Specified in Charter)

Delaware	0-23245	36-3932190
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)
2895 Greenspoint Parkway, Suite 600, Hoffman Estates, IL		60169
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (847) 781-3600

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

On December 19, 2006, Career Education Corporation (the “Company”) issued a press release announcing the retirement of John M. Larson as the Chairman of the Board of Directors of the Company and from all positions with the Company and its affiliates.  The retirement was effective as of the close of business on December 19, 2006.  A copy of the Company’s press release announcing the retirement of Mr. Larson is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

On December 19, 2006, the Company’s Board of Directors appointed Robert E. Dowdell interim Chairman of the Board of Directors, effective immediately. Mr. Dowdell has been serving as the Company’s interim President and Chief Executive Officer since September 2006 and as a director of the Company since its inception in January 1994.  At the same time, and in connection with Mr. Larson’s retirement, the Company’s Board of Directors reduced the size of the board from nine to eight members.

Prior to Mr. Larson’s retirement, the Company and Mr. Larson entered into a Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation, and CEC Employee Group, LLC, as amended (the “Agreement”), dated as of December 19, 2006, by and among John M. Larson, the Company, and CEC Employee Group, LLC (the “Amendment”).  Except as modified by the Amendment, the Agreement, including Mr. Larson’s agreement to not compete with the Company for a period of two years following the date of termination or solicit any employee of the Company for a period of three years following the date of termination, remains in full force and effect.

The Amendment sets forth the amount of the Severance Benefits (as defined therein) and Accrued Obligations (as defined therein) to be paid to Mr. Larson upon his termination as an employee and director of the Company and its affiliates.  In accordance with the terms of the Agreement, the Company will pay Mr. Larson cash Severance Benefits and Accrued Obligations totaling approximately $4.1 million, which will be recorded by the Company as compensation expense during the fourth quarter of 2006.

The Amendment further provides that through December 31, 2007, at times that shall be mutually agreed upon by Mr. Larson and the Company, Mr. Larson will, as may be reasonably requested by the Company, (i) promptly assist and cooperate with the Company in the transition of his responsibilities and (ii) cooperate with the Company in connection with the management or resolution of any current or future litigation, potential litigation, proceeding, claim, charge, investigation, or other legal or regulatory matter.

The Amendment also provides that (i) the date of the vesting of certain specified outstanding, unvested options to a purchase a total of 100,000 shares of the Company’s common stock granted to Mr. Larson under the Company’s 1998 Employee Incentive Compensation Plan, as amended (the “Plan”), will be accelerated to December 19, 2006, and that (ii) the time allotted for Mr. Larson’s post-termination exercise of certain specified outstanding options to purchase a total of 700,000 shares of the Company’s common stock, with exercise prices ranging from $22.07 to $62.56, granted to Mr. Larson under the Plan will be extended from March 19, 2007 until December 31, 2007 (the “Adjusted Options”).  The Company will record non-cash share-based compensation expense of approximately $1.7 million during the fourth quarter of

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2006 as a result of the modifications made to the Adjusted Options.  All outstanding, vested stock options granted to Mr. Larson under the Plan other than the Adjusted Options will be cancelled on March 19, 2007, if not exercised by Mr. Larson prior to such date.

The description of the terms of the Amendment contained herein does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number	Description of Exhibits
10.1	Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation and CEC Employee Group, LLC, dated as of December 19, 2006.
99.1	Press Release issued by Career Education Corporation, dated December 19, 2006.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CAREER EDUCATION CORPORATION
	By:	/s/ Patrick K. Pesch
		Patrick K. Pesch
		Executive Vice President, Chief Financial Officer, and Assistant Secretary
Dated: December 19, 2006

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Exhibit Index

Exhibit
Number	Description of Exhibits
10.1	Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation and CEC Employee Group, LLC, dated as of December 19, 2006.
99.1	Press Release issued by Career Education Corporation, dated December 19, 2006.

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EX-10.1

Exhibit 10.1

SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT
BY AND AMONG
JOHN M. LARSON, CAREER EDUCATION CORPORATION
AND
CEC EMPLOYEE GROUP, LLC

WHEREAS, JOHN M. LARSON (the “Executive”), CAREER EDUCATION CORPORATION, a Delaware corporation (the “Company”) and CEC EMPLOYEE GROUP, LLC (“Employee Group”) (collectively, the Executive, Company and Employee Group as referred to herein as the “Parties”) entered into that certain Employment Agreement as of the 1st day of August, 2000, which was subsequently amended as of September 24, 2006 (the “Agreement”); and

WHEREAS, the Executive desires to resign from all positions of the Company and its affiliates effective as of December 19, 2006; and

WHEREAS, the Parties agree that such resignation constitutes a termination by Executive for Good Reason under Section 3.3 of the Agreement; and

WHEREAS, the Parties desire to amend the Agreement (1) to extend the exercise period of certain of Executive’s outstanding stock options under the Career Education Corporation 1998 Employee Incentive Compensation Plan and to accelerate the vesting of certain of Executive’s outstanding stock options, (2) to avoid unintended negative tax consequences under Section 409A of the Internal Revenue Code of 1986, as amended, and any applicable guidance thereunder, and (3) to provide for certain other provisions requested by the Executive and Company;

NOW, THEREFORE, in consideration of the mutual undertakings of the Parties, the Parties agree:

I.

The final clause of Section 2.4(d)(i)(A)(2) is hereby amended to read as follows:

that total amount being payable in equal monthly installments during each of the twenty-four (24) months following the month in which the Date of Termination occurs, provided, however that in accordance with Section 6.18, Larson, the Company and Employee Group (the “Parties”) agree that no amount shall be paid to Larson hereunder until the date that is six (6) months after the Date of Termination, on which date the first six (6) monthly payments shall be paid to Larson in a single lump sum, with no adjustment for interest.  The total amount payable over twenty-four (24) months under this subsection shall be paid on a date that is no later than thirty (30) days after the Date of Termination in a single lump sum payment amount of $4,066,800 (such amount the Parties agree satisfies the Company and Employee Group’s obligation to Larson under this Section 2.4(d)(i)(A)(2) as of the Date of Termination) to an escrow account at a financial institution designated by the Company pursuant to an escrow

agreement that shall be on such terms as are mutually agreed to in advance by the Parties, and thereafter shall be paid to Larson in accordance with the preceding sentence with any interest earned on amounts in escrow to be returned to the Company after satisfaction of this obligation to Larson; and

II.

Section 2.4(d)(i)(A)(3) is hereby amended to add the following sentence to the end thereof:

Notwithstanding the foregoing, in lieu of any continued life insurance and disability coverage following the Date of Termination, Larson shall receive a single lump sum cash payment equal to $44,820 on the date that is six (6) months after the Date of Termination.

III.

Section 2.4(e) of the Agreement is hereby deleted in its entirety and replaced with a new Section 2.4(e) to read as follows:

(e)           If, following a termination of employment that gives Larson a right to the payment of Severance Benefits under Section 2.4(d), Larson engages in any activities that violate any of the covenants in Sections 4 and 5, Larson shall have no further right or claim to any Severance Benefits (other than any Accrued Obligations) to which Larson may otherwise be entitled under Section 2.4(d) from and after the date on which Larson engages in such activities and the Company shall have no further obligations with respect to the payment of Severance Benefits.

IV.

A new Section 2.5 is hereby added to the Agreement to read as follows:

2.5.         Treatment of Options.  All stock options granted to Larson under the Career Education Corporation 1998 Employee Incentive Compensation Plan (the “Plan”) and outstanding as of the Date of Termination are included within the list attached hereto as Exhibit A to this Second Amendment (“Options”).  For Options with respect to which the exercise price is more than $20, included in a list attached hereto as Exhibit B to this Second Amendment (“Extended Options”), an extended period in which they may be exercised is hereby provided notwithstanding anything in the Plan or any award agreement to the contrary.  Such extended exercise period for the Extended Options shall terminate on the earlier of (x) December 31, 2007 and (y) the end of the “Option Period” specified in the applicable Option award agreement (i.e., the end of the Option’s 10-year term) (the period from the Date of Termination until and including the end of the extended exercise period described in this sentence, the “Extension Period”).  Further, all Options that would have otherwise vested in accordance with their terms during the Extension Period had Larson remained employed throughout the Extension Period, included as accelerated options in a list attached hereto as Exhibit C to this Second Amendment (“Accelerated Options”), shall, notwithstanding anything in the Plan or any award agreement to the contrary, be fully vested and freely exercisable on the Date of Termination.  Upon each such

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unexercised Extended Option’s termination date as described in this Section, the Extended Option will be cancelled and forfeited to the Company.  For the avoidance of doubt, all Options that are not Extended Options shall terminate on the date that is ninety (90) days after the Date of Termination, which is the date on which all such Options would have terminated absent the extension described in this Section 2.5.

V.

The last sentence of Section 3.1 of the Agreement is hereby amended to read as follows:

“Date of Termination” shall mean December 19, 2006.

VI.

Section 3.3 of the Agreement is hereby amended by adding the following sentence to the end thereof:

Larson, the Company and Employee Group acknowledge and agree that Larson’s resignation and termination on December 19, 2006 satisfies the requirements of this Section 3.3 as a termination of his employment for Good Reason on such date.

VII.

A new Section 3.10 is hereby added to the Agreement to read as follows:

3.10.       Indemnification.  The Company and Employee Group hereby covenant and agree to be bound by all of the terms in that certain indemnification agreement executed by the Company and Larson in January, 1998, the terms of which shall survive termination of employment and which the Parties agree are binding and enforceable and remain in full force and effect.

VIII.

A new Section 6.16 is hereby added to the Agreement to read as follows:

6.16.       Consultation and Cooperation.  From the Date of Termination through and until December 31, 2007, Larson agrees to (i) promptly assist and cooperate with Company in the transition of his responsibilities as may be reasonably requested by Company and as mutually agreed by the Parties; and (ii) cooperate as mutually agreed with Company in any current or future litigation, potential litigation, proceeding, claim, charge, investigation or other legal matters in any reasonable manner as Company may request, including but not limited to meeting with and fully answering the questions of Company or its attorneys, representatives or agents, and testifying and preparing to testify at any deposition, trial, or other proceeding. The Company shall provide Larson with reasonable advance written notice of when and how it requires such assistance and cooperation, and will schedule such matters consistent with Larson’s business and personal affairs at such times and places as may be mutually agreed by the Parties.  The

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Company agrees to compensate Larson for any reasonable out-of-pocket expenses incurred by Larson in providing such assistance and cooperation, including travel expenses.

IX.

A new Section 6.17 is hereby added to the Agreement to read as follows:

6.17.       Mutual Non-Disparagement.

(a)           Larson agrees that he shall not, and shall not permit his agents or representatives, to criticize, ridicule or make any comment or statement which disparages or is derogatory of the Company or the Employee Group or any of their affiliates or directors, officers, employees or trustees or goods or services in any communication with the press or other media, any customer or client of the Company, Employee Group or their affiliates, or any employee or director or potential employee or director of the Company, Employee Group or their affiliates; provided, however that nothing herein shall prevent Executive from giving truthful testimony if properly subpoenaed to testify under oath.

(b)           The Company and Employee Group agree that its executive officers and directors shall not criticize, ridicule or make any comment or statement which disparages or is derogatory of Larson in any communication with the press or other media, any person with whom Larson has a business relationship, or any other person which would adversely affect in any manner the conduct of any business of Larson or the business or personal reputation of Larson; provided, however that nothing herein shall prevent the Company’s officers and directors from giving truthful testimony if properly subpoenaed to testify under oath.

X.

A new Section 6.18 is hereby added to the Agreement to read as follows:

6.18.       Section 409A.  The Parties acknowledge that Section 409A of the Code (“Section 409A”) imposes an additional tax (“409A Tax”) on deferred compensation (as defined under Section 409A) that does not meet certain requirements, and that as of the date this Agreement is executed (and each amendment hereto is executed), final regulations implementing Section 409A have not been implemented.  The Parties agree that it is not intended that the 409A Tax apply to any payment or the provision of any benefit hereunder, and accordingly, the provisions of this Section 6.18 shall apply to any payment or benefit to which the 409A Tax would apply, regardless of whether such payment or benefit is explicitly made subject to this Section 6.18.  If any of the Parties reasonably determine that any payment or benefit permitted or required under this Agreement would result in 409A Tax, and if such 409A Tax could be avoided by delaying the payment or postponing the provision of the benefit, the Parties agree to work in good faith to delay or postpone such payment or provision of the benefit until such time as it may be made or provided without the 409A Tax being imposed.  If delay or postponement of a payment or the provision of a benefit would not avoid the imposition of the 409A Tax, then the Parties shall promptly agree in good faith on appropriate provisions to avoid such risk without materially changing the economic value of this Agreement to any Party.  Each Party hereto agrees that (a) none of the Parties has any obligation to bring any potential 409A Tax or any other reporting or

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withholding obligation to the attention of any other Party and (b) none of the Parties has any liability for 409A Tax or any other reporting or withholding obligation to any other Party.

XI.

Except as provided herein, the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the Parties have executed this Amendment on and effective as of December 19, 2006.

CAREER EDUCATION CORPORATION
By:	/s/ Robert E. Dowdell
	Robert E. Dowdell
Its: President and Chief Executive Officer
CEC EMPLOYEE GROUP, LLC
By:	/s/ Patrick K. Pesch
	Patrick K. Pesch
Its: Authorized Signatory
EXECUTIVE
By:	/s/ John M. Larson
	John M. Larson

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EXHIBIT A

Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation and CEC Employee Group, LLC

DECEMBER 19, 2006

OPTIONS

Grant Date	Exercise Price per Share		Number of Shares Underlying the Options	Vested and Outstanding Option Shares as of December 19, 2006*
May 20, 1999	$	4.6563	600,000	120,000
June 28, 2000	$	6.00	1,000,000	932,000
May 11, 2001	$	12.625	600,000	600,000
May 17, 2002	$	22.065	300,000	300,000
May 19, 2003	$	29.35	150,000	150,000
May 21, 2004	$	62.56	150,000	150,000
May 20, 2005	$	34.70	150,000	75,000
May 18, 2006	$	30.80	100,000	25,000
Total Shares			3,050,000	2,352,000

*Includes the Accelerated Options per this Second Amendment to the Agreement

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EXHIBIT B

Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation and CEC Employee Group, LLC

DECEMBER 19, 2006

EXTENDED OPTIONS

Grant Date	Exercise Price per Share		Number of Shares Underlying the Options	Vested and Outstanding Option Shares as of December 19, 2006*
May 17, 2002	$	22.065	300,000	300,000
May 19, 2003	$	29.35	150,000	150,000
May 21, 2004	$	62.56	150,000	150,000
May 20, 2005	$	34.70	150,000	75,000
May 18, 2006	$	30.80	100,000	25,000
Total Shares			850,000	700,000

*Includes the Accelerated Options per this Second Amendment to the Agreement

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EXHIBIT C

Second Amendment to the Employment Agreement by and among John M. Larson, Career Education Corporation and CEC Employee Group, LLC

DECEMBER 19, 2006

ACCELERATED OPTIONS

Grant Date	Exercise Price per Share		Total Number of Shares Underlying the Options on Grant Date	Number of Accelerated Options
May 19, 2003	$	29.35	150,000	37,500
May 20, 2005	$	34.70	150,000	37,500
May 18, 2006	$	30.80	100,000	25,000
Total Shares			400,000	100,000

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Career Education Corporation Announces Retirement of Chairman John Larson

Confers Title of Chairman Emeritus

HOFFMAN ESTATES, IL (December 19, 2006) — Career Education Corporation (NASDAQ: CECO) today announced the retirement of John Larson as chairman of the board and as a director.  Robert E. Dowdell, who currently serves as CEC’s interim chief executive officer, has assumed the role of interim chairman of the board. In recognition of his significant contributions as a founder and a director of the company, the board of directors has named Larson to the honorary position of chairman emeritus.

Larson served as president and CEO and a member of the board of directors since the company’s founding in 1994, and as chairman of the board since January, 2000. Larson’s guidance drove the acquisition of gold standard brands such as Brooks Institute of Photography and Le Cordon Bleu Schools North America and the expansion of on-site and online educational offerings throughout the U.S. and Canada, France, and the United Kingdom.

“I take great pride in what this company and its employees and educators have accomplished since the company’s founding—becoming a $2 billion dollar company that now educates almost 100,000 students a year.  I feel privileged to have been a part of the development of Career Education Corporation,” said Larson.  “Since the search for a new CEO is progressing, I believe now is the right time for me to retire to spend more time with my family and to accommodate new leadership at CEC.  I leave with high regard for our CEC team and what we have accomplished together, particularly for our students and graduates.”

“Jack Larson has dedicated an incredible amount of his talent and his life to this company,” said Dowdell, who has been a director of CEC since its inception.  “Following a year of concrete progress, Jack leaves this company in a strong position with a bright future. He will always be revered and respected and long remembered for his innovation and entrepreneurship.”

About Career Education Corporation

The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high quality education to approximately 100,000 students across the world in a variety of career-oriented disciplines.  The 80-plus campuses that serve these students are located throughout the U. S. and Canada, France, and the United Kingdom, and offer doctoral, master’s, bachelor’s, and associate degrees and diploma and certificate programs. Many students attend the fully online educational platforms offered by American InterContinental University Online and Colorado Technical University Online.

Career Education is an industry leader whose gold-standard brands are recognized globally.  Those brands include, among others, Le Cordon Bleu Schools North America; Harrington College of Design; Brooks Institute of Photography; the Katharine Gibbs Schools; American InterContinental University; Colorado Technical University and Sanford-Brown Institutes and Colleges.  The mission of CEC, through its schools, its educators, and its employees is education—their primary goal, to enable students to graduate successfully and pursue rewarding careers.

For more information see www.careered.com.   The company’s website also has a detailed listing of individual campus locations and web links for its colleges, schools and universities.

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Media:	Pattie Overstreet-Miller
	847/851-7351
	Lynne Baker
	847/851-7006
Investors:	Karen M. King
	847/585-3899
	www.careered.com