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) October 31, 2011
Career Education Corporation
(Exact Name of Registrant as Specified in Charter)
Delaware | 0-23245 | 36-3932190 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
231 North Martingale Rd., Schaumburg, IL | 60173 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code (847) 781-3600
Not Applicable
(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):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | 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 of Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 31, 2011, Gary E. McCullough resigned from his positions as President and Chief Executive Officer and as a member of the Board of Directors (the Board) of Career Education Corporation (the Company).
In connection with Mr. McCulloughs resignation, the Company and Mr. McCullough entered into a letter agreement dated November 1, 2011 (the Letter Agreement). A copy of the Letter Agreement is attached as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein. Among the provisions, the Letter Agreement provides that Mr. McCullough is entitled to all rights and benefits under his Employment Agreement, as amended, with the Company (the Employment Agreement), as a termination without cause. The Employment Agreement provides for various compensation to be paid to Mr. McCullough in connection with his termination of employment. The Company intends to record an estimate of the expense associated with these payments in its fourth quarter 2011 results of operations. The material terms of any future arrangements with Mr. McCullough will be disclosed in a subsequent filing.
On October 31, 2011, the Board appointed Steven H. Lesnik as President and Chief Executive Officer of the Company. Mr. Lesnik has served as Chairman of the Company since 2008 and as a member of the Board since 2006. Mr. Lesnik continues to serve as Chairman and as a member of the Board. During his service as President and Chief Executive Officer, Mr. Lesnik will receive a salary of $83,333 per month, but will not continue to receive any additional compensation as Chairman or as a member of the Board.
Item 7.01. Regulation FD Disclosure.
On November 1, 2011, the Company issued a press release announcing the management and other changes described in Items 5.02 and 8.01 of this Form 8-K. A copy of the release is attached as Exhibit 99.2 to this Form 8-K and is incorporated by reference herein.
Item 8.01. Other Events.
On October 31, 2011, the Company appointed Leslie T. Thornton, a member of the Board, to serve as Lead Independent Director of the Board, effective immediately. As of the date of this report, no new compensatory arrangements have been entered into with Ms. Thornton in connection with her appointment as Lead Independent Director. Once determined, the material terms of such arrangements will be disclosed in a subsequent filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit |
Description of Exhibit | |
99.1 | Letter Agreement, dated November 1, 2011, by and between Gary E. McCullough and the Company | |
99.2 | Press release of the Company dated November 1, 2011 |
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 |
/s/ Jeffrey D. Ayers |
Jeffrey D. Ayers |
Senior Vice President, General Counsel and Corporate Secretary |
Dated: November 2, 2011 |
Exhibit Index
Exhibit |
Description of Exhibit | |
99.1 | Letter Agreement, dated November 1, 2011, by and between Gary E. McCullough and the Company. | |
99.2 | Press release of the Company dated November 1, 2011. |
Exhibit 99.1
November 1, 2011
Gary E. McCullough
[Address redacted]
Dear Mr. McCullough:
Pursuant to this letter agreement (this Agreement), you acknowledge and agree that, effective October 31, 2011, you have irrevocably resigned from (i) your employment with Career Education Corporation (the Company), CEC Employee Group, LLC (Employee Group), and, to the extent applicable, with their respective direct and indirect subsidiaries, affiliates, companies, divisions, units, schools, and affiliated schools (collectively, the Company Affiliates) and (ii) any officer and/or director positions held with the Company, Employee Group and/or any Company Affiliates. You also agree to execute such other documents and take such other actions as may be necessary or desirable to further effectuate the foregoing.
The Company acknowledges and agrees that notwithstanding these resignations, you are and remain entitled to all rights and benefits under the Employment Agreement by and among you, the Company, and Employee Group, dated March 5, 2007 and amended December 29, 2008 (the Employment Agreement), as if your employment had been terminated by the Company without Cause, as provided in Section 3.4 of the Employment Agreement, on October 31, 2011, subject to the requirements of Section 2.4(e) and all other applicable provisions of the Employment Agreement. This Agreement by the Company to treat your resignation as entitling you to all rights and benefits of the Employment Agreement as if the Company had terminated your employment without Cause is consistent with the resolutions approved by the Companys Board of Directors on October 31, 2011.
Both you and the Company agree to work expeditiously and in good faith to negotiate and conclude a separation agreement and general release. Such agreement shall include outplacement services to you, subject to a cap of $100,000.
This Agreement is subject to all provisions of the Employment Agreement, including, but not limited to, Section 6.5 (Arbitration). Any disputes as to the meaning of or compliance with this Agreement shall be resolved under the same procedures for arbitration as provided in Section 6.5 of the Employment Agreement and the provisions of Section 6.13 and 6.14 of the Employment Agreement shall be applicable to this Agreement.
The parties have reached this Agreement in mutual effort to address severe time pressures and it is their intent that this Agreement be interpreted in a such a way as to carry out the underlying purposes of this Agreement.
CAREER EDUCATION CORPORATION | ||
/x/ Jeffrey D. Ayers | ||
Name: | Jeffrey D. Ayers | |
Title: | Senior Vice President, General Counsel & Corporate Secretary | |
/x/ Gary E. McCullough | ||
Gary E. McCullough | ||
DATED: November 1, 2011 |
Cc: [Names and addresses redacted]
Exhibit 99.2
CONTACT: | ||
Mark Spencer | ||
847.585.3802 mdspencer@careered.com |
Career Education Corporation Board of Directors Accepts Resignation of
Chief Executive Officer Gary E. McCullough as Company Moves Forward to
Position Toward Growth in Long-Term Value
Board Appoints Chairman Steve Lesnik to Post of Chief Executive Officer and Board Member Leslie Thornton to
Newly Created Position of Lead Independent Director, Ensuring Stability in Transition to New Leadership
Schaumburg, Ill., Nov. 1, 2011 Career Education Corporation (CEC) (NASDAQ: CECO) today announced that its Board of Directors has accepted the resignation of Gary E. McCullough as President, Chief Executive Officer and Board member. The Board has appointed Steven H. Lesnik, who is Chairman, as President and Chief Executive Officer and Board member Leslie T. Thornton to the newly created position of Lead Independent Director to ensure stability in transition to new leadership of the company.
Mr. Lesnik has served as Chairman since 2008 and as a Board member since 2006. He is the former Chairman of the Illinois Board of Higher Education, a visiting lecturer at Northwestern University, and a director of the Illinois Math and Science Academy Foundation. Ms. Thornton has served on Career Educations board since 2005, and has chaired the Compliance Committee since 2006. Ms. Thornton is a partner at the law firm Dickstein Shapiro LLP and served in the Clinton Administration, including as chief of staff for U.S. Secretary of Education Richard W. Riley.
The Company will commence a comprehensive search for a new Chief Executive Officer. To ensure leadership stability and continuity for the Company, Mr. Lesnik will remain as Chairman, President and Chief Executive Officer until the completion of the search process and a new Chief Executive successor is in place. Ms. Thornton will serve as Lead Independent Director during Mr. Lesniks tenure as Chief Executive.
In my capacity as Chief Executive Officer, I will be focused on ensuring that the Company accelerates its efforts at every level to support its 100,000 students and further positions itself to grow the potential value of the enterprise for stockholders, Mr. Lesnik said. This is a critical time for Career Education, and we will aggressively implement initiatives to improve our business and drive improvements in our quality and compliance.
The Board and Career Education thank Gary McCullough for all of his efforts, particularly with respect to representing the Company during a time of substantial regulatory changes, advancing our companys industry-leading IT capabilities, and streamlining our operations. Under his leadership, the management and operations of this company have been both professionalized and improved, Mr. Lesnik emphasized.
Given the complexities of the regulatory environment and other issues that have arisen over the last year, CEC is moving towards a new phase and the Board views it as the appropriate time to start the process of putting in place fresh leadership at the CEO level. At the same time, the Board and the Companys experienced management core will move forward to address the issues before Career Education, Mr. Lesnik said.
These initiatives include completing the Companys review of placement rate determination practices of its domestic schools and continuing to cooperate with the New York Attorney Generals office with a view toward satisfying its inquiries as promptly as possible; strengthening the governance foundation that the Board has established over the last several years; ensuring there is strong leadership at the top of all its operating entities, including filling open leadership positions within our operating units; focusing on students and outcomes; and further positioning the Company to achieve a record of performance consistent with the priority of growing the value of Career Education to the benefit of students and stockholders, he said.
Furthermore, the creation by the Board of the Lead Independent Director position reflects its and the Companys commitments to continue to operate under the best corporate governance practices. Leslie Thornton is the ideal director to serve in this role, Mr. Lesnik noted.
Mr. Lesnik stated: The Board will be deliberate and thorough in its search for a new Chief Executive. Accordingly, the Board intentionally has not set a deadline or strict timetable in order to assure that the search process is one that solely focuses finding the best possible professional to lead the Company. To this end, we will look to bring in as chief executive officer an individual who has the demonstrated ability to address industry and company issues, as the company operates in a highly complex and regulated environment and, based on that persons management experience and fresh perspective, provide the leadership to drive Career Education to ably serve adult learners and achieve growth in its value over the long term, Mr. Lesnik concluded.
About Career Education Corporation
The colleges, schools and universities that are part of the Career Education Corporation family offer high-quality education to a diverse student population of more than 100,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States and in France, Italy, the United Kingdom and Monaco, and offer doctoral, masters, bachelors and associate degrees and diploma and certificate programs.
CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Group Schools; International University of Monaco; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.
For more information, see CECs website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CECs colleges, schools and universities.
Conference Call Information
Career Education Corporation will host a conference call on Wednesday November 2, 2011 at 8:30 a.m. Eastern time. Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 31100876. Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website. A replay of the call will also be available for seven days by calling 888-843-7419 (domestic) or 630-652-3042 (international) and citing code 31100876.
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