15. SHARE-BASED COMPENSATION

Overview of Share-Based Compensation Plans

The Career Education Corporation 2008 Incentive Compensation Plan (the "2008 Plan") authorizes awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, annual incentive awards, and substitute awards. Any shares of our common stock that are subject to awards of stock options or stock appreciation rights payable in shares will be counted as 1.0 share for each share granted for purposes of the aggregate share limit and any shares of our common stock that are subject to any other form of award will be counted as 1.67 shares for each share granted for purposes of the aggregate share limit. As of December 31, 2011 there were approximately 5.9 million shares of common stock available for future share-based awards under the 2008 Plan.

As of December 31, 2011, we estimate that compensation expense of approximately $15.2 million will be recognized over the next four years for all unvested share-based awards that have been granted to participants, including both stock options and shares of restricted stock. We expect to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock or by using treasury shares.

Stock Options. The exercise price of stock options granted under each of the plans is equal to the fair market value of our common stock on the date of grant. Employee stock options generally become exercisable 25% per year over a four-year service period beginning on the date of grant and expire ten years from the date of grant, unless an earlier expiration date is set at the time of the grant. Non-employee directors' stock options expire ten years from the date of grant and generally become exercisable as follows: one-third on the grant date, one-third on the first anniversary of the grant date, and one-third on the second anniversary of the grant date, or, one-fourth on the grant date and one-fourth for each of the first through third anniversaries of the grant date. Both employee stock options and non-employee director stock options are subject to possible earlier vesting and termination in certain circumstances. Generally, if a plan participant terminates his or her employment for any reason other than by death or disability during the vesting period, he or she forfeits the right to unvested stock option awards. Since the inception of the plans, grants of stock options have only been subject to the service conditions discussed previously. No stock option grants have included performance or market conditions or other factors that affect stock option vesting.

Stock option activity during the years ended December 31, 2011, 2010 and 2009, under all of our plans was as follows:


	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2008		2,915,634		$	29.29

Granted		569,231			24.76
Exercised		(57,360	)		12.05			$	695
Forfeited		(53,521	)		26.32
Cancelled		(160,882	)		40.24

Outstanding as of December 31, 2009		3,213,102		$	28.30

Granted		626,664			29.53
Exercised		(51,528	)		14.87			$	651
Forfeited		(84,779	)		27.07
Cancelled		(128,845	)		40.70

Outstanding as of December 31, 2010		3,574,614		$	28.29

Granted		565,720			21.87
Exercised		(141,625	)		14.60			$	1,112
Forfeited		(456,459	)		24.69
Cancelled		(188,788	)		36.94

Outstanding as of December 31, 2011		3,353,462		$	27.79		4.3 years	$	—

Exercisable as of December 31, 2011		2,764,948		$	28.50		3.4 years	$	—

The following table summarizes information with respect to all outstanding and exercisable stock options under all of our plans as of December 31, 2011:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Number Exercisable		Weighted Average Exercise Price
$13.32 $13.32		442,200	$	13.32		2.46		412,325	$	13.32
$13.67 $21.80		474,938	$	19.65		7.01		261,619	$	18.00
$22.04 $22.13		393,950	$	22.07		6.02		309,950	$	22.06
$23.32 $29.02		500,147	$	27.46		5.16		294,827	$	26.95
$29.35 $29.73		471,300	$	29.56		1.14		471,300	$	29.56
$30.67 $32.91		350,500	$	30.88		6.18		294,500	$	30.92
$33.04 $34.70		438,502	$	34.42		3.95		438,502	$	34.42
$34.86 $62.56		273,800	$	55.35		2.56		273,800	$	55.35
$64.12 $64.12		5,000	$	64.12		2.30		5,000	$	64.12
$68.24 $68.24		3,125	$	68.24		2.43		3,125	$	68.24

		3,353,462	$	27.79		4.33		2,764,948	$	28.50

Restricted Stock. Shares of restricted stock generally become fully vested either three years after the date of grant or 25% per year over a four-year service period beginning on the date of grant. Generally, if a plan participant terminates his or her employment for any reason other than by death or disability during the vesting period, he or she forfeits the right to the unvested shares of restricted stock. The vesting of shares of restricted stock is subject to possible acceleration in certain circumstances. Certain of the shares of restricted stock that we have granted to plan participants are subject to performance conditions that, even if the requisite service period is met, may reduce the number of shares of restricted stock that vest at the end of the requisite service period or result in all shares being forfeited. These awards are referred to as "performance-based restricted stock."

The following table summarizes information with respect to all outstanding shares of restricted stock under our plans during the years ended December 31, 2011, 2010 and 2009:


	Number of Shares			Weighted Average Grant-Date Fair Value Per Share
Outstanding as of December 31, 2008		1,404,428		$	18.79
Granted		726,247			25.77
Vested		(207,665	)		26.96
Forfeited		(214,658	)		21.20

Outstanding as of December 31, 2009		1,708,352		$	20.46

Granted		1,037,218			28.96
Vested		(283,932	)		27.58
Forfeited		(273,002	)		23.68

Outstanding as of December 31, 2010		2,188,636		$	23.17

Granted		1,266,170			21.83
Vested		(816,017	)		15.55
Forfeited		(842,042	)		25.19

Outstanding as of December 31, 2011		1,796,747		$	24.74

Share-Based Awards Assumptions

In accordance with FASB ASC Topic 718, the fair value of each stock option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. We recognize the value of share-based compensation as expense in our consolidated statements of operations during the vesting periods of the underlying share-based awards using the straight-line method. FASB ASC Topic 718 requires companies to estimate forfeitures of share-based awards at the time of grant and revise such estimates in subsequent periods if actual forfeitures differ from original projections.

The fair value of each stock option award granted during the years ended December 31, 2011, 2010 and 2009 was estimated on the date of grant using the Black-Scholes-Merton option pricing model. Our determination of the fair value of each stock option is affected by our stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. The weighted average fair value per share of stock option awards granted during the years ended December 31, 2011, 2010 and 2009, and assumptions used to value stock options are as follows:


	For the Year Ended December 31,
	2011			2010			2009
Dividend yield		—			—			—
Risk-free interest rate		2.2	%		2.5	%		2.2	%
Weighted average volatility		53.3	%		52.4	%		55.0	%
Expected life (in years)		5.5			5.8			6.5
Weighted average grant date fair value per share of options granted	$	10.89		$	14.95		$	13.48

Volatility is calculated based on the actual historical daily prices of our common stock over the expected term of the stock option award. During the year ended December 31, 2011, we utilized a range of expected volatility assumptions for purposes of estimating the fair value of stock options awarded during the period. Such volatility assumptions ranged from 52.9% to 53.8%.

The expected life of each stock option award is estimated based primarily on our actual historical director and employee exercise behavior.

The fair value of each share of restricted stock is equal to the fair market value of our common stock as of the date of grant, which is the closing price per share of our common stock on NASDAQ.

Outstanding performance-based restricted stock awards generally have three-year vesting provided that performance conditions are met based on total company performance. Share-based compensation expense associated with performance-based restricted stock awards is recognized only to the extent that we believe performance conditions attributable to such awards will ultimately be satisfied.