Form 8-K filing to the SEC

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): July 2, 2014

Corinthian Colleges, Inc.

(Exact name of registrant as specified in its charter)

Delaware

0-25283

33-0717312

(State or other jurisdiction

(Commission

(I.R.S. Employer

of incorporation)

File Number)

Identification No.)

6 Hutton Centre Drive, Suite 400, Santa

Ana, California

92707

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (714) 427-3000

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:

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 1.01 Entry into a Material Definitive Agreement.

Operating Agreement

On July 3, 2014, Corinthian Colleges, Inc. (the "Company," "Corinthian," "we," "us" or other similar terms) and its wholly- and partially- owned subsidiaries, on the one hand, and the U.S. Department of Education ("ED") on the other hand, entered into an Operating Agreement, implementing the Memorandum of Understanding previously agreed upon by the Company and ED on June 22, 2014 (the "Memorandum").

As set forth in the recitals to the Operating Agreement, the guiding principles followed by the Company and ED in preparing the Operating Agreement were to provide for a plan that would (i) provide the Company's students an opportunity to complete their education without material interruption, change or additional cost; (ii) treat the Company's faculty and staff in a manner that causes minimal personal and financial disruption; and (iii) consider the importance of the Company's responsibilities to students, employees, and taxpayers, and respect the interests of the government and the Company's federal and state law obligations (including fiduciary duties) and contractual obligations.

Section I of the Operating Agreement requires the Company to provide certain information to ED, some of which was provided prior to or contemporaneously with the signing of the Operating Agreement and others of which are to be provided prospectively. The required information includes cash flow forecasts for the Company, asset lists, information regarding the Company's schools and information regarding the Company's students.

Section II of the Operating Agreement provides, among other matters, that ED's current HCM-1 disbursement method for the Company and the attendant 21-day disbursement delay will remain in effect until ED provides further notice, but effective July 8, 2014 (the "Effective Date"), ED will, subject to compliance by the Company with the procedures set forth in the Operating Agreement, allow the Company to drawdown Title IV student aid funds on a weekly basis, as an advance against the 21-day disbursement delay. The procedures to be followed by the Company will include certain disbursement verifications by an independent student financial aid auditor to be selected by the Company and approved by ED, and by an individual appointed by ED who will serve as an independent monitor of the Company and report to ED (the "Monitor"). The Company is not permitted to enter into any contractual agreements with students between the date the Operating Agreement was signed and the Effective Date. In addition, ED may defer access to Title IV funds for any institution if it determines that the Company has not produced the placement rate and other materials requested that are related to that institution by a date specified.

Section III of the Operating Agreement provides, among other matters, for the engagement of the Monitor, including the scope of his or her responsibilities. The Company has agreed to provide the Monitor full and complete access to the Company's personnel and budgets, including financial projections, results of operations, cash receipts and disbursements, student records, databases and any and all documents the Company is providing to potential buyers, accreditors, lenders, state authorizing agencies and ED. The Monitor's responsibilities include: reviewing

supporting records prior to submission of such records by the Company for drawdown of Title IV funds; reviewing weekly lists of Company expenditures and reporting to ED on the permissibility of such expenditures from Title IV funds; confirming the implementation of each teach-out of a Company school is materially consistent with the approved teach-out plan for such school; prior to the Company's weekly drawdown of Title IV funds, confirming the Company is in material compliance with the agreed timetable for the production of documents by the Company to ED; monitoring the status of all school sales processes and providing monthly reports to ED; receiving access to and reviewing the existing multiple access points for internal and external complaints about the Company and reporting material relevant complaints to ED; and periodically reporting to ED and the Company the Monitor's findings with respect to any violations of the Operating Agreement, new or threatened litigation against the Company or any of its institutions, and any material developments in the Company's financial situation or in existing litigation.

Section IV of the Operating Agreement limits the Company's use of Title IV student aid funds to funding the normal daily operations and expenses of the Company, which categories are set forth in an exhibit to the Operating Agreement and include student refunds, payroll expenses, operating expenses, interest and related fees, and related professional fees. The Company has agreed that from and after the Effective Date, it will not use Title IV student aid funds to pay dividends, legal settlements of lawsuits or investigations, or debt repayments. Additionally, bonuses, severance payments, raises and retention agreements being considered must be discussed with the Monitor and reported to ED at least two weeks prior to the creation of contractual obligations and payment and are subject to ED approval. The Monitor is to be provided full access to review all disbursements by the Company to confirm compliance with the terms of the Operating Agreement.

Section V of the Operating Agreement requires the Company to provide notices to current and prospective students as to the status of the schools and the options and protections afforded to students. The Company must provide the notices to ED for review and approval prior to use and is also required to obtain certain written acknowledgements from students with respect to those schools and programs that are being taught out or sold.

Section VI of the Operating Agreement provides, among other matters, for the Company to discontinue enrolling new students at those schools designated in the Operating Agreement to be taught out and closed thereafter (the "Teach-out Schools"). With respect to new students who enrolled in a Teach-out School between June 22, 2014 (the date of the Memorandum) and the Effective Date, those students would have the option to either: (i) obtain a Full Refund (as defined below) and discontinue their education at the Teach-out School, and the Company would forgive entirely all tuition and other fees charged the student for the program; or (ii) continue their education in the ordinary course. If the student does not affirmatively make a choice, the Company must withdraw the student from the program and issue the student a Full Refund. With respect to students enrolled at a Teach-out School prior to June 22, 2014, the Company must provide each such student one of the following two plans at the time of the announcement of the teach-out: (a) the Company may provide for the student to continue his or her program of study as he or she normally would (which may mean transferring to a comparable program of study at a comparable school at no additional cost above the amount such student would have

been charged to continue attending the Company's school); or (b) the Company may provide for the student to withdraw from school and receive a Full Refund. The Company would be required to provide an internal appeals process whereby the student could appeal the decision by the Company to continue the stud

U.S. Department of Education Accepts Operating Plan from Corinthian Colleges Inc.

Students Will Have Option to Complete Programs without Disruption

JULY 3, 2014

Contact: Press Office, (202) 401-1576, press@ed.gov

The U.S. Department of Education and Corinthian Colleges Inc. have agreed to an operating plan that provides students at the company’s career colleges a chance to complete their education and protects taxpayers’ investment while Corinthian works to either sell or close its campuses across the country in the next six months.

The plan calls for an independent monitor that will oversee this process for all programs owned by Corinthian, including Everest, Heald and Wyotech campuses.

“We have accepted an operating plan for Corinthian Colleges Inc. that will protect students’ futures and fulfill the Department’s responsibilities to taxpayers moving forward,” U.S. Education Under Secretary Ted Mitchell said.

“Ensuring that Corinthian students are served well remains our first and most important priority, and we will continue to work with Corinthian officials and the independent monitor on behalf of the best interests of students and taxpayers.”

On June 12, the Department’s Federal Student Aid (FSA) office placed Corinthian on an increased level of financial oversight after the company failed to provide records concerning enrollment and job placement data required by federal law, and failed to fully address concerns about its practices, including faulty job placement data used in marketing claims to prospective students and allegations of altered grades and attendance.

In order to ensure that Corinthian can still provide classes for its current students, the Department has agreed to release $35 million in student aid to be used solely for education activities - all of which must be approved by the Department. Under the operating agreement, which is effective July 8, 2014, Corinthian has also agreed to the following:

Corinthian’s campuses will inform students of their options, and every campus will institute a plan so students can complete their programs without disruption, if they choose to do so. The operating plan will also immediately halt enrollment at schools that are operating under this teach-out provision and require additional notification and disclosures for campuses that are being sold.

Corinthian will only use federal student aid funds for normal daily operations, including student refunds, payroll expenses (including retention arrangements), accounts payable, interest and related fees, and related professional fees. Corinthian will not use federal funding to pay dividends, legal settlements of lawsuits or investigations, or debt repayments. Additionally, bonuses, severance payments, raises and retention agreements must be reported to the monitor and the Department at least two weeks prior to the creation of contractual obligations and are subject to the approval of the Department.

Corinthian will hire an independent monitor - approved by the Department - that will have full and complete access to Corinthian personnel and budgets to ensure prudent financial management and see that taxpayer-funded federal student aid dollars are spent well. The monitor will also review teach-out plans and sales of schools, and ensure students have multiple ways to submit feedback and any complaints about the process.

Corinthian will also make refunds available to students in a number of circumstances. Corinthian and the Department will work together with the assistance of the monitor to establish a reserve fund of at least $30 million for Corinthian to pay those refunds.

Corinthian will turn over all enrollment and job placement data required by federal law – and overdue to the Department since January - by July 15, 2014.

Corinthian enrolls 72,000 students nationwide, who receive $1.4 billion in federal financial aid annually to support their educations and prepare them for careers.

http://www.ed.gov/news/press-releases/us-department-education-accepts-operating-plan-corinthian-colleges-inc

Thread regarding Corinthian Colleges Inc. layoffs

5 replies (most recent on top)

Post a reply