AMERICAN PUBLIC EDUCATION INC (Form: 10-Q, Received: 11/08/2021 16:04:20)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
						SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
						SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-33810

AMERICAN PUBLIC EDUCATION, INC.

(Exact name of registrant as specified in its charter)


Delaware			01-0724376
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

111 West Congress Street, Charles Town, West Virginia			25414
(Address of principal executive offices)			(Zip Code)

(304) 724-3700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

APEI

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The total number of shares of common stock outstanding as of November 5, 2021 was 18,709,171.

AMERICAN PUBLIC EDUCATION, INC.

FORM 10-Q

INDEX



			Page
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			42


PART II – OTHER INFORMATION


Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			46
Item 3. Defaults Upon Senior Securities			46
Item 4. Mine Safety Disclosures			46
Item 5. Other Information			46
Item 6. Exhibits			47

SIGNATURES			48

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Balance Sheets

(In thousands)


	As of September 30, 2021		As of December 31, 2020
ASSETS	(Unaudited)
Current assets:
Cash, cash equivalents, and restricted cash (Note 2)	$	141,487	$	227,686
Accounts receivable, net of allowance of $11,010 in 2021 and $5,983 in 2020	29,447		17,652
Prepaid expenses	13,152		6,472
Income tax receivable	5,822		—
Total current assets	189,908		251,810
Property and equipment, net	102,565		68,434
Operating lease assets, net	83,886		8,743
Investments	9,668		10,495
Intangible assets, net	88,936		3,721
Goodwill	243,766		26,563
Other assets, net	4,458		1,252
Total assets	$	723,187	$	371,018

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	9,066	$	3,757
Accrued compensation and benefits	17,724		15,660
Accrued liabilities	14,723		10,967
Deferred revenue and student deposits	25,990		22,104
Income tax payable	—		178
Operating lease liabilities, current	13,876		2,392
Long-term debt, current	8,750		—
Total current liabilities	90,129		55,058
Operating lease liabilities, long-term	73,420		6,455
Deferred income taxes	1,864		2,580
Long-term debt, net	153,336		—
Total liabilities	318,749		64,093
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $.01 par value; Authorized shares - 10,000; no shares issued or outstanding	—		—
Common stock, $.01 par value; Authorized shares - 100,000; 18,709 issued and outstanding in 2021; 14,809 issued and outstanding in 2020	187		148
Additional paid-in capital	284,700		195,597
Retained earnings	119,551		111,180
Total stockholders’ equity	404,438		306,925
Total liabilities and stockholders’ equity	$	723,187	$	371,018

The accompanying notes are an integral part of these Consolidated Financial Statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Income

(In thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)
Revenue	$	98,248	$	79,133	$	264,803	$	235,876
Costs and expenses:
Instructional costs and services	42,544		31,084		105,257		91,058
Selling and promotional	23,458		18,523		60,350		53,765
General and administrative	26,598		22,574		75,579		65,314
Loss on disposals of long-lived assets	—		418		182		742

Depreciation and amortization	4,386		3,226		9,561		9,955
Total costs and expenses	96,986		75,825		250,929		220,834
Income from operations before interest and income taxes	1,262		3,308		13,874		15,042
Interest (expense) income	(1,305)		121		(1,167)		1,002
(Loss) income before income taxes	(43)		3,429		12,707		16,044
Income tax expense	224		785		3,509		4,291
Equity investment loss	—		(2)		(827)		(2)
Net (loss) income	$	(267)	$	2,642	$	8,371	$	11,751

Net (loss) income per common share:
Basic	$	(0.01)	$	0.18	$	0.47	$	0.79
Diluted	$	(0.01)	$	0.18	$	0.46	$	0.78
Weighted average number of common shares:
Basic	18,700		14,797		17,874		14,870
Diluted	18,855		15,011		18,048		15,021

The accompanying notes are an integral part of these Consolidated Financial Statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)


				Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
	Common Stock
	Shares	Amount
Balance as of December 31, 2019	15,178	$	152	$	190,620	$	105,961	$	296,733
Issuance of common stock under employee benefit plans	258	2		(2)		—		—
Deemed repurchased shares of common and restricted stock for tax withholding	(79)	(1)		(2,096)		—		(2,097)
Stock-based compensation	—	—		5,265		—		5,265
Repurchased and retired shares of common stock	(548)	(5)		—		(13,603)		(13,608)
Net income	—	—		—		11,751		11,751
Balance as of September 30, 2020	14,809	$	148	$	193,787	$	104,109	$	298,044


				Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
	Common Stock
	Shares	Amount
Balance as of December 31, 2020	14,809	$	148	$	195,597	$	111,180	$	306,925
Issuance of common stock in public offering	3,680	37		86,168		—		86,205
Issuance of common stock under employee benefit plans	319	3		(3)		—		—
Deemed repurchased shares of common and restricted stock for tax withholding	(99)	(1)		(3,031)		—		(3,032)
Stock-based compensation	—	—		5,969		—		5,969

Net income	—	—		—		8,371		8,371
Balance as of September 30, 2021	18,709	$	187	$	284,700	$	119,551	$	404,438

The accompanying notes are an integral part of these Consolidated Financial Statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Cash Flows

(In thousands)


	Nine Months Ended September 30,
	2021		2020
	(Unaudited)
Operating activities
Net income	$	8,371	$	11,751
Adjustments to reconcile net income to net cash provided by operating activities, net of assets and liabilities acquired:
Depreciation and amortization, including debt issuance	9,561		9,955
Amortization of debt issuance costs	223		—
Stock-based compensation	5,969		5,265
Equity investment loss	827		2
Deferred income taxes	2,489		1,974
Loss on disposals of long-lived assets	182		742

Other	6		24
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for bad debt	(1,058)		1,765
Prepaid expenses	(2,076)		(807)
Income tax receivable/payable	(6,000)		(743)
Operating leases, net	766		(26)
Other assets	(1,594)		(427)
Accounts payable	3,595		943
Accrued compensation and benefits	(813)		3,031
Accrued liabilities	(1,022)		3,219
Deferred revenue and student deposits	(18,847)		8,065
Net cash provided by operating activities	579		44,733
Investing activities
Cash paid for acquisition, net of cash acquired	(325,509)		—
Capital expenditures	(5,813)		(4,171)
Proceeds from the sale of real property	—		412
Net cash used in investing activities	(331,322)		(3,759)
Financing activities
Cash paid for repurchase of common stock	(3,032)		(15,705)
Cash received from issuance of common stock	86,205		—

Cash received from borrowings	175,000		—
Cash paid for debt issuance costs	(13,629)		—
Net cash provided by (used in) financing activities	244,544		(15,705)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(86,199)		25,269
Cash, cash equivalents, and restricted cash at beginning of period	227,686		202,740
Cash, cash equivalents, and restricted cash at end of period	$	141,487	$	228,009

Supplemental disclosure of cash flow information
Interest paid	$	—	$	—
Income taxes paid	$	6,983	$	3,062

The accompanying notes are an integral part of these Consolidated Financial Statements.

AMERICAN PUBLIC EDUCATION, INC.

Notes to Consolidated Financial Statements

Note 1. Nature of the Business

American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education to students through subsidiary institutions that include:

•American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military, military-affiliated, public service and service-minded communities through American Military University, or AMU, and American Public University, or APU. APUS is institutionally accredited by the Higher Learning Commission, or HLC.

•Rasmussen College, LLC, which is referred to herein as Rasmussen University, or RU, a nursing- and health sciences-focused institution, provides postsecondary education to students at its 23 campuses across six states and online. The Company completed the acquisition of Rasmussen University, or the Rasmussen Acquisition, on September 1, 2021, or the Closing Date. See “Note 3. Acquisition Activity” for more information on this acquisition. The Consolidated Financial Statements do not include the operating results or financial position of Rasmussen University for any periods prior to the Closing Date. RU is institutionally accredited by HLC.

•National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides nursing education to students enrolled at six campuses in Ohio, including a campus in Akron that opened in April 2021, and one campus in Indianapolis, Indiana, to serve the needs of the nursing and healthcare communities. HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES.

The Company’s institutions are licensed or otherwise authorized, or are in the process of obtaining such licenses or authorizations, to offer postsecondary education programs by state authorities to the extent the institutions believe such licenses or authorizations are required, and are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs. During the third quarter of 2021, the Company revised its reportable segments, as discussed further in “Note 9. Segment Information” Prior period segment disclosures have been restated to conform to the current period presentation.

The Company’s operations are organized into three reportable segments:

•American Public University System, or APUS Segment. This segment reflects the operational activities of APUS.

•Rasmussen University Segment, or RU Segment. This segment reflects the operational activities of RU.

•Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Accounting

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

Principles of Consolidation

The accompanying unaudited interim Consolidated Financial Statements include the accounts of APEI and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Unaudited Interim Financial Information

The unaudited interim Consolidated Financial Statements do not include all of the information and notes required by GAAP for audited annual financial statement presentations. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s financial position, results of operations, and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2020, or the Annual Report.

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. Specifically, at September 30, 2021, Intangible assets, net are disclosed as a separate financial statement line item on the Consolidated Balance Sheet. Prior to September 30, 2021, Intangible assets, net, were presented in the Consolidated Balance Sheet in Other assets, net.

Use of Estimates

In preparing financial statements in conformity with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company evaluates these estimates and assumptions on an ongoing basis and bases its estimates on experience, current and expected future conditions, and various other assumptions that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the Company’s Consolidated Financial Statements.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash includes funds held for students for unbilled educational services that were received from Title IV programs and, as of September 30, 2021, amounts to secure letters of credit, including $24.2 million in a restricted certificate of deposit account to secure a letter of credit for the benefit of the ED on behalf of RU in connection with RU’s 2020 composite score, which is used by ED for determining compliance with financial responsibility standards, being below the minimum required, and a $0.6 million restricted certificate of deposit to secure a letter of credit in lieu of a security deposit for an RU leased campus. The Company is required to maintain funds from Title IV programs and restrict these funds pursuant to the terms of the applicable institution’s program participation agreement with ED. Restricted cash on the Company’s Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, excluding the restricted certificates of deposit, was $1.8 million and $1.2 million, respectively. Total restricted cash as of September 30, 2021 and December 31, 2020 is $26.6 million and $1.2 million, respectively.

Fair Value of Financial Instruments

The Company measures certain financial assets at fair value for disclosure purposes, as well as on a nonrecurring basis when they are deemed to be other-than-temporary impairments.

Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset. Assets recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:

Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly; or

Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s cash, cash equivalents, and restricted cash, accounts receivable, accounts payable and accrued liabilities are all short-term in nature. As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy. The carrying value of long-term debt approximates fair value as it is based on variable rate index.

Investments

The Company periodically evaluates its equity method investment for indicators of an other-than-temporary impairment. Factors the Company considers when evaluating for an other-than-temporary impairment include the duration and severity of the impairment, the reasons for the decline in value, and the potential recovery period. For an investee with impairment indicators, the Company measures fair value on the basis of discounted cash flows or other appropriate valuation methods. If it is probable that the Company will not recover the carrying amount of the investment, the impairment is considered other-than-temporary and recorded in equity investment loss, and the equity investment balance is reduced to its fair value.

For each reporting period, the Company evaluates its cost method investments for observable price changes. Factors the Company may consider when evaluating an observable price may include significant changes in the regulatory, economic or technological environment, changes in the general market condition, bona fide offers to purchase or sell similar investments, and other criteria.

Management must exercise significant judgment in evaluating the potential impairment of its equity and cost method investments.

During the three months ended June 30, 2021, the Company determined that impairment indicators existed and concluded the fair value of a cost method investment was less than its carrying amount, resulting in a pretax non-cash impairment charge of approximately $0.8 million. This impairment charge is included in equity investment loss in the Consolidated Statements of Income. There was no impairment charge during the three months ended September 30, 2021 and during the nine months ended September 30, 2020. As of September 30, 2021, the aggregate carrying amount of the Company’s investments accounted for under Financial Accounting Standards Board Accounting Standards Codification 321, Investments - Equity Securities, or FASB ASC 321, presented on its Consolidated Balance Sheets on a one-line basis as “Investments”, was approximately $8.5 million.

Self-Insured Liabilities

RU has a partially self-insured health plan (the Plan) for employee health benefits and records self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported. The Plan carries insurance with a yearly loss limit per person of $225,000 and a maximum claims expense of 125% of the average claim value. Self-insurance liabilities for employee health benefits claims are recorded in the accrued compensation and benefits line item of the Consolidated Balance Sheet and are $1.3 million as of September 30, 2021.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and intangible assets and liabilities assumed. Intangible assets are recorded at their estimated fair value as of the acquisition date, and are classified as either indefinite-lived or definite-lived. Indefinite-lived intangible assets are trade name and accreditation, licensing and Title IV. Definite-lived intangible assets are student roster, curricula, and lead conversions. Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment or more frequently if circumstances indicate potential impairment.

Definite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset.

Stock-based Compensation

Stock-based payments may include incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing. Stock-based compensation cost is recognized as an expense, generally over a three-year vesting period, using the straight-line method for employees and the graded-vesting method for members of the Board of Directors, and is measured using the Company’s closing stock price on the date of the grant. An accelerated one-year period is used to recognize stock-based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant. The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions, including assumptions with respect to expected stock price volatility and the risk-free interest rate.

Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, or PSUs, the level of performance that will be achieved and the number of shares that will be earned. The Company estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original estimates. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate. If actual results differ significantly from these estimates, stock-based compensation expense could be higher and have a material impact on the Company’s Consolidated Financial Statements. Estimates are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value.

Stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)
Instructional costs and services	$	274	$	343	$	1,129	$	1,223
Selling and promotional	142		252		706		729
General and administrative	1,388		1,347		4,134		3,313
Stock-based compensation expense in operating income	$	1,804	$	1,942	$	5,969	$	5,265

Incentive-based Compensation

The Company provides incentive-based compensation opportunities to certain employees through cash incentive and equity awards. The expense associated with these awards is reflected within the Company’s operating expenses. For the years ending December 31, 2021 and 2020, the Management Development and Compensation Committee of the Company’s Board of Directors approved an annual incentive arrangement for senior management employees. The aggregate amount of any awards payable is dependent upon the achievement of certain Company financial and operational goals, as well as individual performance goals. Given that the awards are generally contingent upon achieving annual objectives, final determination of the current year incentive awards cannot be made until after the results for the year are finalized. The Company recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant, and multiplying the corresponding number of shares earned based upon such achievement by the closing price of the Company’s stock on the date of grant. To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed. Amounts accrued are subject to change in future interim periods if actual future financial results or operational performance are better or worse than expected. The Company recognized an aggregate expense associated with the Company’s current year annual incentive-based compensation plans of approximately $0.1 million and $2.6 million during the three and nine month periods ended September 30, 2021, compared to an aggregate expense of $2.1 million and $5.1 million during the three and nine month periods ended September 30, 2020.

Common Stock

On March 1, 2021, the Company completed an underwritten public offering of 3,680,000 shares of its common stock at a price to the public of $25.00 per share for net proceeds of approximately $86.2 million, after deducting underwriting discounts and commissions and other offering expenses.

Income Taxes

The Company determines its interim tax provision by applying the estimated income tax rate expected for the full calendar year to income before income taxes for the period adjusted for discrete items.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates, or ASUs, issued by FASB. All ASUs issued subsequent to the filing of the Annual Report on March 9, 2021 were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s consolidated financial position and/or results of operations.

Note 3. Acquisition Activity

On September 1, 2021, the Company completed the Rasmussen Acquisition. The Rasmussen Acquisition was completed pursuant to a Membership Interest Purchase Agreement, or the Purchase Agreement, dated October 28, 2020, by and among the Company, FAH Education, LLC, or Seller, Rasmussen, LLC, or Rasmussen, and Rasmussen College, LLC, a wholly owned subsidiary of Rasmussen, or Rasmussen College.

Pursuant to the Purchase Agreement, on the Closing Date, the Company purchased from Seller all membership interests in Rasmussen for an adjusted aggregate purchase price, subject to post-closing working capital adjustments, and net of cash acquired, of $325.5 million in cash. Upon completion of the Rasmussen Acquisition, Rasmussen merged into Rasmussen College and Rasmussen College became a wholly owned subsidiary of the Company.

The Company applied the acquisition method of accounting to the Rasmussen Acquisition, whereby the excess of the acquisition date fair value of consideration transferred over the fair value of identifiable net assets was allocated to goodwill. Goodwill reflects the fair value associated with the RU workforce and synergies expected from cost savings, operations, and revenue enhancements of the combined company that are expected to result from the acquisition. The goodwill recorded as part of the acquisition was allocated to the Rasmussen reportable segment in the amount of $217.2 million and is deductible for tax purposes.

For the three and nine months ended September 30, 2021, the Company incurred approximately $1.5 million and $5.0 million of acquisition-related expenses, respectively, which are included in general and administrative on the Consolidated Statements of Income.

The preliminary opening balance sheet is subject to adjustment based on a final assessment of the fair values of certain acquired assets and liabilities, primarily intangible assets and goodwill. The Company has up to one year from the Closing Date, or the measurement period, to complete the allocation of the purchase price. As the Company finalizes its assessment of the fair values of certain acquired assets and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur.

The following table summarizes the components of the estimated consideration along with the purchase price allocation (in thousands):


Purchase Price Allocation (Unaudited)	Amount
Cash and cash equivalents	$	329,000
Working capital adjustment and additional cash contributions	1,704
Total consideration	330,704

Assets acquired:
Cash and cash equivalents	5,200
Accounts receivable	10,700
Prepaid expenses	4,600
Property and equipment, net	36,996
Operating lease assets	75,800
Deferred tax asset	3,205
Intangible assets	86,500
Other assets	600
Total assets acquired	223,601

Liabilities assumed:
Accounts payable	1,200
Accrued expenses	6,700
Deferred revenue	22,700
Operating lease liabilities, current	11,200
Operating lease liabilities, long-term	67,000
Other liabilities	1,300
Total liabilities assumed	110,100
Net assets acquired	113,501
Goodwill	$	217,203

The fair value of the identified intangible assets including the trade name, student roster, and lead conversions were determined using the income-based approach. The fair value of curricula and accreditation, licensing, and Title IV identified intangible assets were determined using the cost approach. The table below presents a summary of intangible assets acquired and the useful lives of these assets (in thousands):


Intangible Assets (Unaudited)	Useful life	Amount
Trade name	Indefinite	26,500
Accreditation, licensing and Title IV	Indefinite	24,500
Student roster	2 years	20,000
Curricula	3 years	14,000
Lead conversions	2 years	1,500
		$	86,500

Pro Forma Financial Information

The following unaudited pro forma information is presented as if the Rasmussen Acquisition occurred on January 1, 2020. In preparing the pro forma results, the Company is required to make estimates and assumption including with respect to underlying financial performance, purchase accounting, appropriate depreciation and amortization methods, effective tax rate,

and future interest rates, among other estimates and assumptions. The Company believes that these estimates and assumptions are reasonable under the circumstances. The pro forma results do not represent what may occur in the future as actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the Company’s Consolidated Financial Statements. The table below presents the Company’s pro forma combined revenue and net income (in thousands):


	Nine Months Ended September 30,
	2021		2020
	(Unaudited)
Revenue	$	446,984	$	427,415
Net Income	15,781		16,499

Graduate School USA

On August 11, 2021, the Company announced that it had entered into an agreement to acquire substantially all of the assets of Graduate School USA, or Graduate School, one of the largest providers of training to the federal government workforce, for approximately $1.0 million. The purchase price is subject to working capital adjustments, and the acquisition is expected to close in the first quarter of 2022, subject to the satisfaction or waiver of closing conditions.

Note 4. Revenue

Disaggregation of Revenue

In the following table, revenue, shown net of grants and scholarships, is disaggregated by type of service provided. The table also includes a reconciliation of the disaggregated revenue with the reportable segments (in thousands):


	Three Months Ended September 30, 2021
	(Unaudited)
	APUS		RU		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	65,321	$	17,838	$	9,534	$	(30)	$	92,663
Graduation fees	397		—		—		—		397
Textbook and other course materials	—		3,282		1,556		—		4,838
Other fees	188		12		150		—		350
Total Revenue	$	65,906	$	21,132	$	11,240	$	(30)	$	98,248


	Three Months Ended September 30, 2020
	(Unaudited)
	APUS		RU		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	69,058	$	—	$	7,977	$	(67)	$	76,968
Graduation fees	401		—		—		—		401
Textbook and other course materials	—		—		1,411		—		1,411
Other fees	200		—		153		—		353
Total Revenue	$	69,659	$	—	$	9,541	$	(67)	$	79,133


	Nine Months Ended September 30, 2021
	(Unaudited)
	APUS		RU		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	208,727	$	17,838	$	28,290	$	(156)	$	254,699
Graduation fees	1,042		—		—		—		1,042
Textbook and other course materials	—		3,282		4,801		—		8,083
Other fees	552		12		415		—		979
Total Revenue	$	210,321	$	21,132	$	33,506	$	(156)	$	264,803


	Nine Months Ended September 30, 2020
	(Unaudited)
	APUS		RU		HCN		Intersegment		Consolidated
Instructional services, net of grants and scholarships	$	208,773	$	—	$	21,636	$	(182)	$	230,227
Graduation fees	1,001		—		—		—		1,001
Textbook and other course materials	—		—		3,634		—		3,634
Other fees	602		—		412		—		1,014
Total Revenue	$	210,376	$	—	$	25,682	$	(182)	$	235,876

The RU Segment reflects the operations of RU, which was acquired on the Closing Date, through September 30, 2021. The Company did not consolidate the financial results of the RU Segment prior to the Closing Date.

The APUS Segment charges the HCN Segment and corporate employees for the value of courses taken by HCN Segment employees at APUS. The intersegment elimination represents the elimination of this intersegment revenue in consolidation.

Contract Balances and Performance Obligations

The Company has no contract assets or deferred contract costs as of September 30, 2021 and December 31, 2020.

The Company recognizes a contract liability, or deferred revenue, when a student begins an online course or term, in the case of APUS, or starts a term, in the case of RU and HCN. Deferred revenue at September 30, 2021 was $26.0 million and includes $9.2 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $16.8 million in consideration received in advance for future courses or terms, or student deposits. Deferred revenue at December 31, 2020 was $22.1 million and includes $13.7 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $8.4 million in student deposits. Deferred revenue represents the Company’s performance obligation to transfer future instructional services to students. The Company’s remaining performance obligations represent the transaction price allocated to future reporting periods.

The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with students that have an expected duration of one year or less.

When the Company begins performing its obligations, a contract receivable is created, resulting in accounts receivable on the Company’s Consolidated Balance Sheets. The Company accounts for receivables in accordance with FASB ASC 310, Receivables. The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience. Contracts are subsequently reviewed for collectability if significant events or circumstances indicate a change.

The allowance for doubtful accounts is based on management’s evaluation of the status of existing accounts receivable. Among other factors, management considers the age of the receivable, the anticipated source of payment, and historical allowance considerations. Consideration is also given to any specific known risk areas among the existing accounts receivable balances. Recoveries of receivables previously written off are recorded when received. APUS and RU do not charge interest on past due accounts receivable. HCN charges interest on payment plans when a student graduates or otherwise exits the program. Interest charged by HCN on payment plans was immaterial for the periods presented.

Note 5. Leases

The Company has operating leases for office space and campus facilities. Some leases include options to terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company leases corporate office space in Maryland under an operating lease that expires in May 2022, and until May 2021, leased administrative office space in Virginia. The RU Segment leases administrative office space in suburban Chicago, Illinois, and Minneapolis, Minnesota, and leases 23 campuses located in six states under operating leases that expire through October 2033. The HCN Segment leases administrative office space in suburban Columbus, Ohio, and leases six campuses located in Ohio and one campus in Indianapolis, Indiana, under operating leases that expire through June 2029.

In November 2021, HCN entered into a lease agreement for a new campus location in suburban Detroit, Michigan for a lease term beginning in April 2022 and expiring in March 2032. The total value of the minimum rental payments for the initial term of this lease is $4.9 million.

Operating lease assets are right of use, or ROU, assets, which represent the right to use the underlying assets for the lease term. Operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term, on the Consolidated Balance Sheets. These lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When the lease does not provide an implicit interest rate, the Company estimates an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments. The ROU assets include all remaining lease payments and exclude lease incentives.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. There are no variable lease payments. Lease expense for the three and nine month periods ended September 30, 2021 was $1.8 million and $3.4 million, respectively, compared to $0.7 million and $2.2 million for the three and nine month periods ended September 30, 2020, respectively. These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material. Cash paid for amounts included in the present value of operating lease liabilities during the three and nine month periods ended September 30, 2021 was $1.9 million and $3.4 million, respectively, and is included in operating cash flows. Cash paid for amounts included in the present value of operating lease liabilities during the three and nine month periods ended September 30, 2020 was $0.7 million and $2.2 million, respectively, and is included in operating cash flows.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating leases as of September 30, 2021 (dollars in thousands):


Maturity of Lease Liabilities (Unaudited)	Lease Payments
2021 (remaining)	$	4,053
2022	16,036
2023	13,087
2024	11,377
2025	10,150
2026	9,916
2027 and beyond	33,572
Total future minimum lease payments	98,191
Less imputed interest	(10,895)
Present value of operating lease liabilities	$	87,296


Balance Sheet Classification (Unaudited)
Operating lease liabilities, current	$	13,876
Operating lease liabilities, long-term	73,420
Total operating lease liabilities	$	87,296


Other Information (Unaudited)
Weighted average remaining lease term (in years)	7.76
Weighted average discount rate	3.1	%

Note 6. Goodwill and Intangible Assets

In connection with the Rasmussen Acquisition, the Company applied FASB ASC 805, Business Combinations, using the acquisition method of accounting, and recorded $217.2 million of goodwill, representing the excess of the purchase price over the fair value of assets acquired and liabilities assumed, including identifiable intangible assets. The Company previously recorded goodwill in the amount of $38.6 million in connection with its acquisition of HCN, and later recorded charges reducing the carrying value of our goodwill to $26.6 million.

Changes in the carrying amount of goodwill by reportable segment during the years ended September 30, 2021 and 2020 are as follows (in thousands):


	APUS Segment		RU Segment		HCN Segment		Total Goodwill
	(Unaudited)
Goodwill as of December 31, 2020	$	—	$	—	$	26,563	$	26,563
Goodwill acquired	—		217,203		—		217,203
Impairment	—		—		—		—
Goodwill as of September 30, 2021	$	—	$	217,203	$	26,563	$	243,766

In addition to goodwill, in connection with the acquisitions of RU and HCN, the Company recorded identified intangible assets with an indefinite useful life in the aggregate amount of $51.0 million and $3.7 million, respectively, which includes trade name, accreditation, licensing and Title IV, and affiliate agreements, and recorded $35.5 million and $4.4 million, respectively, of identified intangible assets with a definite useful life. At the acquisition date, the useful life assigned to each type of intangible asset with a definite useful life was as follows for the RU Segment:


			Useful Life
Curricula			3 years
Lead conversions			2 years
Student Roster			2 years

As of September 30, 2021 and December 31, 2020, all HCN Segment recorded identified intangible assets with a definite useful life were fully amortized. HCN Segment indefinite-lived Intangible assets, consist of the following as of September 30, 2021 and December 31, 2020 (in thousands):


	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
	(Unaudited)
Indefinite-lived intangible assets
Trade name	1,998	—	1,998
Accreditation, licensing and Title IV	1,686	—	1,686
Affiliation agreements	37	—	37
Total indefinite-lived intangible assets	3,721	—	3,721

RU Segment Intangible assets consist of the following as of September 30, 2021 (in thousands):


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(Unaudited)
Finite-lived intangible assets
Student roster	$	20,000	833		19,167
Curricula	14,000		389		13,611
Lead conversions	1,500		63		1,437
Total finite-lived intangible assets	$	35,500	$	1,285	$	34,215
Indefinite-lived intangible assets
Trade name	26,500		—		26,500
Accreditation, licensing and Title IV	24,500		—		24,500
Total indefinite-lived intangible assets	51,000		—		51,000
Total intangible assets	$	86,500	$	1,285	$	85,215

The Company evaluated events and circumstances related to the valuation of goodwill and intangibles, recorded within our HCN Segment, through September 30, 2021 and 2020, respectively, to determine if there were indicators of impairment. This evaluation included consideration of enrollment trends and financial performance, as well as industry and market conditions, and the impact of the COVID-19 pandemic. These evaluations concluded there were no indicators of impairment during the three and nine months ended September 30, 2021 and 2020, and consequently, there were no impairment of goodwill or intangible assets during those periods.

Determining the fair value of HCN goodwill and intangible assets requires judgment and the use of significant estimates and assumptions, including fluctuations in enrollments, revenue growth rates, operating margins, discount rates and future economic market conditions, among others. Given the current competitive and regulatory environment, and the uncertainties regarding the related impact on HCN’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future. If the Company’s assumptions are not realized, the Company may record additional goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or whether such charge would be material.

For additional information on goodwill and intangible assets, see the Company’s Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Annual Report.

Note 7. Net Income Per Common Share

Basic net income per common share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share increases the shares used in the per share calculation by the dilutive effects of restricted stock and option awards. The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted net income per common share (in thousands).


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(Unaudited)		(Unaudited)
Basic weighted average shares outstanding	18,700	14,797	17,874	14,870
Effect of dilutive restricted stock and options	155	214	174	151
Diluted weighted average shares outstanding	18,855	15,011	18,048	15,021

The table below reflects a summary of securities that could potentially dilute basic net income per common share in future periods that were not included in the computation of diluted earnings per share because the effect would have been antidilutive (in thousands).


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	(Unaudited)		(Unaudited)
Antidilutive securities:
Stock Options	112	61	112	61
Restricted Shares	11	16	3	48
Total antidilutive securities	123	77	115	109

Note 8. Long-Term Debt

On the Closing Date, APEI, as borrower, entered into a Credit Agreement (the “Credit Agreement”) with Macquarie Capital Funding LLC, as administrative agent and collateral agent (the “Agent”), Macquarie Capital USA Inc. and Truist Securities, Inc., as lead arrangers and joint bookrunners, and certain lenders party thereto (the “Lenders”). The Credit Agreement provides for (i) a senior secured term loan facility in an aggregate original principal amount of $175 million (the “Term Loan”) with a scheduled maturity date of September 1, 2027 and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $20 million (the “Revolving Credit Facility” and, together with the Term Loan, the “Facilities”) with a scheduled maturity date of September 1, 2026, the full capacity of which may be utilized for the issuance of letters of credit. The Revolving Credit Facility also includes a $5 million sub-facility for swing line loans. The Term Loan, the proceeds of which were used as part of the cash consideration for the Rasmussen Acquisition, was fully funded on the Closing Date and is presented net of the debt issuance costs of $12.9 million in the Consolidated Balance Sheet. The debt issuance costs are being amortized using the effective interest method over the term of the Term Loan. Debt issuance costs of $0.5 million related to the Revolving Credit Facility were recorded as an asset and are being amortized to interest expense over the term of the Revolving Credit Facility. There were no borrowings outstanding on the Revolving Credit Facility at September 30, 2021.

The Credit Agreement provides APEI with the option, subject to certain conditions, including obtaining commitments from one or more lenders, to increase the total commitments under the Revolving Credit Facility, increase the amount of the Term Loan and/or incur incremental term loan facilities in an aggregate amount not to exceed the sum of (A) the greater of (1) $91.0 million and (2) an amount equal to consolidated EBITDA on a pro forma basis for the most recently ended four-quarter period (less the aggregate amount of certain other incremental indebtedness permitted to be incurred by APEI, and plus the aggregate amount of voluntary prepayments of certain other incremental indebtedness permitted to be incurred by APEI) and (B) an amount (1) in the case of secured incremental facilities that rank pari passu with the Facilities, such that the First Lien Net Leverage Ratio would not be greater than 1.50 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, (2) in the case of secured incremental facilities that rank junior to the Facilities, such that the Secured Net Leverage Ratio would not be greater than 1.75 to 1.00 and the Total Net Leverage Ratio would not be greater than 2.00 to 1.00, and (3) in the case of unsecured incremental facilities, such that the Total Net Leverage Ratio would not be greater than 2.00 to 1.00 or the

Interest Coverage Ratio would not be less than 2.00 to 1.00. The First Lien Net Leverage Ratio, the Secured Net Leverage Ratio and the Total Net Leverage Ratio are each defined in the Credit Agreement and reflect a ratio of (x) in the case of the First Lien Net Leverage Ratio, consolidated first lien indebtedness (net of unrestricted cash and cash equivalents in excess of $50.0 million) to consolidated EBITDA, (y) in the case of the Secured Net Leverage Ratio, consolidated secured indebtedness (net of unrestricted cash and cash equivalents in excess of $50.0 million) to consolidated EBITDA, and (z) in the case of the Total Net Leverage Ratio, consolidated total indebtedness to consolidated EBITDA. The Interest Coverage Ratio is also defined in the Credit Agreement and reflects a ratio of consolidated EBITDA to consolidated interest expense.

Outstanding borrowings under the Facilities bear interest at a per annum rate equal to LIBOR (subject to a 0.75% floor) plus 5.50%, which shall increase by an additional 2.00% on all past due obligations if APEI fails to pay any amount when due. An unused commitment fee in the amount of 0.50% is payable quarterly in arrears based on the average daily unused amount of the commitments under the Revolving Credit Facility. APEI is also required to make principal payments of the Term Loan on the last day of each quarter, commencing with the quarter ending December 31, 2021, in an amount equal to $2.2 million per quarter.

Subject to certain exceptions, APEI is required to make mandatory prepayments of the Term Loan, with the proceeds of asset sales, casualty and condemnation events, and unpermitted debt issuances.

The Facilities are and will be guaranteed by APEI’s subsidiaries and certain of APEI’s future subsidiaries that are required to become a party thereto as guarantors (collectively, the “Guarantors”). The obligations of APEI and the Guarantors are secured by a pledge of substantially all of their respective assets pursuant to the terms of the Collateral Agreement dated as of the Closing Date by and among APEI, the Agent and the Guarantors from time to time party thereto (the “Collateral Agreement”).

The Credit Agreement contains customary affirmative and negative covenants, including limitations on APEI’s and its subsidiaries’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions, as well as customary representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Facilities. In addition, the Credit Agreement contains a financial covenant that requires APEI to maintain a Total Net Leverage Ratio of no greater than 2.0 to 1.0.

Long-term debt consists of the following as of September 30, 2021 (in thousands):


Long-Term debt (Unaudited)
Credit agreement	$	175,000
Deferred financing fees	(12,914)
Total debt	162,086

Less: Current portion	(8,750)
Long-term Debt	$	153,336

Scheduled maturities of long-term debt at September 30, 2021 are as follows (in thousands):


Maturities of Long-Term Debt (Unaudited)	Loan Payments
2021 (remaining)	$	2,188
2022	8,750
2023	8,750
2024	8,750
2025	8,750
2026	8,750
Thereafter	129,062
Total	$	175,000

Derivatives and Hedging

The Company is subject to interest rate risk as all outstanding borrowings under the Credit Agreement are subject to a variable rate of interest. On September 30, 2021, the Company entered into an interest rate cap agreement to manage its exposure to the variable rate of interest with a total notional value of $87.5 million. This interest rate cap agreement, designated as a cash flow hedge, provides the Company with interest rate protection in the event the LIBOR rate exceeds 2.0%. The interest rate cap is effective October 1, 2021 and will expire on January 1, 2025.

Note 9. Segment Information

In the third quarter of 2021, in connection with the Rasmussen Acquisition (as further described in Note 3, “Acquisition Activity”), the Company revised its reportable segments to reflect the manner in which the chief operating decision-maker evaluates performance and allocates resources, and to include RU as a separately reportable segment. Prior to the third quarter of 2021, the Company had two reportable segments: the American Public Education, Inc. Segment, or APEI Segment, and the HCN Segment. Post-acquisition, the Company has three reportable segments: the APUS Segment, which was previously included within the former APEI Segment; the Rasmussen Segment; and the HCN Segment. The APEI Segment previously reported the results of both APUS and remaining unallocated Company expenses. Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”, which primarily includes unallocated corporate activity and eliminations, which generally were previously reported within the APEI Segment. Prior periods have been updated to conform to the revised presentation.

In accordance with FASB ASC 280, Segment Reporting, the chief operating decision-maker has been identified as the Company’s Chief Executive Officer. The Company’s Chief Executive Officer reviews operating results to make decisions about allocating resources and assessing performance for the APUS, RU, and HCN Segments.

A summary of financial information by reportable segment is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)
Revenue:
APUS Segment	$	65,906	$	69,659	$	210,321	$	210,376
RU Segment	21,132		—		21,132		—
HCN Segment	11,240		9,541		33,506		25,682
Corporate and Other	(30)		(67)		(156)		(182)
Total Revenue	$	98,248	$	79,133	$	264,803	$	235,876
Depreciation and amortization:
APUS Segment	$	2,246	$	3,057	$	7,071	$	9,451
RU Segment	1,935		—		1,935		—
HCN Segment	195		159		524		473
Corporate and Other	10		10		31		31
Total Depreciation and amortization	$	4,386	$	3,226	$	9,561	$	9,955
Income (loss) from operations before interest and income taxes:
APUS Segment	$	7,825	$	7,392	$	30,969	$	29,785
RU Segment	(999)		—		(999)		—
HCN Segment	448		466		1,348		(455)
Corporate and Other	(6,012)		(4,550)		(17,444)		(14,288)
Total income from operations before interest and income taxes	$	1,262	$	3,308	$	13,874	$	15,042
Interest (expense) income:
APUS Segment	$	41	$	78	$	171	$	251
RU Segment	—		—		—		—
HCN Segment	2		2		6		16
Corporate and Other	(1,348)		41		(1,344)		735
Total Interest (expense) income	$	(1,305)	$	121	$	(1,167)	$	1,002
Income tax expense (benefit):
APUS Segment	$	2,606	$	1,769	$	9,673	$	7,944
RU Segment	(371)		—		(371)		—
HCN Segment	250		130		494		(116)
Corporate and Other	(2,261)		(1,114)		(6,287)		(3,537)
Total Income tax expense	$	224	$	785	$	3,509	$	4,291
Capital expenditures:
APUS Segment	$	1,159	$	1,271	$	2,973	$	4,015
RU Segment	1,259		—		1,259		—
HCN Segment	367		7		1,581		156

Total Capital expenditures	$	2,785	$	1,278	$	5,813	$	4,171

A summary of the Company’s consolidated assets by reportable segment is as follows (in thousands):


	As of September 30, 2021		As of December 31, 2020
	(Unaudited)
Assets:
APUS Segment	$	128,331	$	112,461
RU Segment	432,767		—
HCN Segment	52,827		48,474
Corporate and Other	109,262		210,083
Total Assets	$	723,187	$	371,018

Note 10. Commitments and Contingencies

The Company accrues for costs associated with contingencies including, but not limited to, regulatory compliance and legal matters when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate costs and expenses, associated with any such contingency.

From time to time, the Company is involved in legal matters in the normal course of its business.

Note 11. Concentration

APUS students utilize various payment sources and programs to finance their educational expenses, including funds from: Department of Defense, or DoD, tuition assistance programs, or TA, education benefit programs administered by the U.S. Department of Veterans Affairs, or VA; and federal student aid from Title IV programs, as well as cash and other sources. Reductions in or changes to TA, VA education benefits, Title IV programs, and other payment sources could have a significant impact on the Company’s operations. As of September 30, 2021, approximately 63% of APUS students self-reported that they served in the military on active duty at the time of initial enrollment. Active duty military students generally take fewer courses per year on average than non-military students.

A summary of APUS Segment revenue derived from students by primary funding source for the three and nine month periods ended September 30, 2021 and 2020 is included in the table below (unaudited):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
DoD tuition assistance programs	43%	41%	44%	42%
VA education benefits	22%	22%	22%	22%
Title IV programs	21%	22%	20%	22%
Cash and other sources	14%	15%	14%	14%

A summary of HCN Segment revenue derived from students by primary funding source for the three and nine month periods ended September 30, 2021 and 2020 is included in the table below (unaudited):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Title IV programs	81%	83%	81%	82%
Cash and other sources	18%	14%	18%	16%
VA education benefits	1%	3%	1%	2%

RU participates in Title IV programs and also receives funds from education benefit programs administered by the VA. During the nine months ended September 30, 2021, approximately 76% of RU Segment revenue was derived from students using Title IV programs, 2% from VA education benefits, and the remaining 22% was derived from students using cash and other sources.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Quarterly Report on Form 10-Q, or Quarterly Report, “we,” “our,” “us,” “the Company” and similar terms refer to American Public Education, Inc., or “APEI,” and its subsidiary institutions collectively unless the context indicates otherwise. The following discussion of our historical results of operations and our liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements and related notes that appear elsewhere in this Quarterly Report and the audited financial information and related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, or our Annual Report.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements intended to be covered by the safe harbor provisions for forward-looking statements in Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may use words such as “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words that convey uncertainty of future events, conditions, circumstances, or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report include, without limitation, statements regarding:

•actions by the Department of Defense, or DoD, or branches of the United States Armed Forces, including actions related to the disruption and suspension of DoD tuition assistance programs and ArmyIgnitED, and their and our expectations regarding the effects of those actions;

•our expectations regarding the effects of and our response to the COVID-19 pandemic, including the demand environment for online education or nursing education as the pandemic abates, impacts on business operations and our financial results, and our ability to comply with regulations related to emergency relief;

•changes to and expectations regarding our student enrollment, net course registrations, and the composition of our student body, including the pace of such changes;

•our ability to maintain, develop, and grow our technology infrastructure to support our student body;

•our conversion of prospective students to enrolled students and our retention of active students;

•our ability to update and expand the content of existing programs and develop new programs to meet emerging student needs and marketplace demands, and our ability to do so in a cost-effective manner or on a timely basis;

•our plans for, marketing of, and initiatives at, our institutions;

•our maintenance and expansion of our relationships and partnerships and the development of new relationships and partnerships;

•federal appropriations and other budgetary matters, including government shutdowns;

•our ability to comply with the extensive regulatory framework applicable to our industry, as well as state law and regulations and accrediting agency requirements;

•our ability to undertake initiatives to improve the learning experience and attract students who are likely to persist;

•changes in enrollment in postsecondary degree-granting institutions and workforce needs;

•the competitive environment in which we operate;

•our cash needs and expectations regarding cash flow from operations;

•our ability to manage and influence our bad debt expense;

•the expected effects of our workforce reduction;

•our ability to manage, grow, and diversify our business and execute our business initiatives and strategy; and

•our financial performance generally.

Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account information currently available to us and are not guarantees of future results. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. Risks and uncertainties involved in forward-looking statements include, among others:

•the loss of our ability to receive funds under DoD tuition assistance programs or the reduction, elimination, or suspension of tuition assistance;

•the effects, duration and severity of the ongoing COVID-19 pandemic and the adverse effects on demand for online education or nursing education as impacts of the pandemic abate, and the actions we have taken or may take in response, particularly at Hondros College of Nursing, or HCN, and Rasmussen University, or RU, and as a result of working remotely;

•risks related to the acquisition of Rasmussen University, including regulatory approvals, limitations on growth and expansion at Rasmussen, effective integration of Rasmussen University’s business, and our ability to realize the expected benefits of the acquisition;

•our dependence on the effectiveness of our ability to attract students who persist in our institutions’ programs;

•our inability to effectively market our programs;

•adverse effects of changes our institutions make to improve the student experience and enhance their ability to identify and enroll students who are likely to succeed;

•our inability to maintain strong relationships with the military and maintain enrollments from military students;

•our failure to comply with regulatory and accrediting agency requirements or to maintain institutional accreditation;

•our loss of eligibility to participate in Title IV programs or ability to process Title IV financial aid;

•our need to successfully adjust to future market demands by updating existing programs and developing new programs;

•our dependence on and need to continue to invest in our technology infrastructure; and

•risks related to incurring substantial debt under the debt facilities that we have entered into in connection with financing the acquisition of Rasmussen University, the cost of servicing that debt, and our ability in the future to service that debt.

Forward-looking statements should be considered in light of these factors and the factors described elsewhere in this Quarterly Report, including in the “Risk Factors” section, in the “Risk Factors” section of our Annual Report, and in our various filings with the Securities and Exchange Commission, or the SEC. It is important that you read these factors and the other cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. If any of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. You should also read the more detailed description of our business in our Annual Report when considering forward-looking statements. We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements except as required by law.

Overview

Background

We are a provider of online and on-campus postsecondary education to approximately 107,800 students through three subsidiary institutions. Our subsidiary institutions offer programs designed to prepare individuals for productive contributions to their professions and society, and to offer opportunities that may advance students in their current professions or help them prepare for their next career. Our subsidiary institutions are licensed or otherwise authorized by state authorities, or are in the process of obtaining such licenses or authorizations, to offer postsecondary education programs to the extent the institutions believe such licenses or authorizations are required, and are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.

The COVID-19 pandemic did not materially impact our results of operations during the nine month period ended September 30, 2021. However, any future impact on our operations remains uncertain. We believe that the pandemic at times did lead to increased registrations and enrollments across our subsidiary institutions. As the COVID-19 pandemic abates, we believe near-term demand for our programs is moderating. For more information on the potential risks related to COVID-19, please refer to our Annual Report and to the sections entitled “Results of Operations” and “Risk Factors” in this Quarterly Report.

Our wholly owned operating subsidiary institutions include the following:

•American Public University System, Inc., or APUS, provides online postsecondary education to approximately 88,600 adult learners. APUS is an accredited university system with a history of serving the academic needs of the military, military-affiliated, public service and service-minded communities through two brands: American Military University, or AMU, and American Public University, or APU.

APUS offers 130 degree programs and 112 certificate programs in diverse fields of study, with a particular focus on those relevant to today’s job market and emerging fields. Fields of study include traditional academics, such as business administration, health science, technology, criminal justice, education and liberal arts, as well as public service-focused fields of study such as national security, military studies, intelligence, and homeland security. APUS has institutional accreditation from the Higher Learning Commission, or HLC, and several of its academic programs have specialized accreditation granted by industry governing organizations. In August 2021, HLC granted APUS re-accreditation, with the next evaluation of accreditation due in 2030-2031. As part of the process, APUS moved to the Open Pathway designation, which affords institutions greater opportunity to pursue institutional improvement projects than the previous Standard Pathway designation.

APUS relies on the ability of the Armed Forces to process service members’ participation in TA programs, and from time to time changes to processes have impacted the ability of service members to participate in the TA programs. The Army previously announced that it would transition from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, which soldiers will use to request TA. On February 12, 2021, after February enrollments for APUS were principally determined, the Army deactivated GoArmyEd and announced that access to online TA requests would be suspended until the launch of ArmyIgnitED on March 8, 2021. During the suspension, soldiers, Army education counselors, and education institutions such as APUS did not have access to the portal and soldiers could not apply for TA. On March 8, 2021, the Army launched and then, due to technical difficulties, suspended ArmyIgnitED. The Army announced on March 18, 2021 that TA-eligible soldiers could register for courses beginning on or after March 8, 2021 and then retroactively apply for TA for those courses once the TA system came online in ArmyIgnitED. Soldiers could continue to directly register for courses with the expectation that TA can be retroactively applied for, and the Army has created a process for soldiers to seek reimbursement. On July 19, 2021, the ArmyIgnitED system went live for soldiers seeking to use TA for courses at APUS. We continue to experience challenges related to system performance, process changes and software defects, and there is no assurance that the new portal will ever work correctly or efficiently or will not have continuing impacts on soldiers’ ability to participate in the TA programs or receive funds under those programs. The disruption to Army TA and resulting decreases in Army registrations had an adverse impact on registrations and revenue for the quarters ended June 30, 2021 and September 30, 2021, and while system performance is improving, we expect some impact will continue for the remainder of 2021.

For information on potential risks associated with APUS, please refer to the section entitled “Risk Factors” in our Annual Report and this Quarterly Report.

•Rasmussen College, LLC, referred to herein as Rasmussen University, or RU, provides nursing- and health sciences-focused postsecondary education to over 16,900 students at its 23 campuses in six states and online. RU offers a comprehensive “ladder” of nursing degrees including a pre-licensure Diploma in Practical Nursing, or PN, an Associate Degree in Nursing, or ADN, and a Bachelor of Science in Nursing, or BSN, as well as the post-licensure RN to BSN, Master of Science in Nursing and Doctorate of Nurse Practice. As of September 30, 2021, approximately 8,500 students are pursuing nursing degrees at Rasmussen University, approximately 90% of whom are enrolled in Rasmussen University’s pre-licensure degree programs. RU is institutionally accredited by HLC with an Open Pathway designation. The Company completed the acquisition of Rasmussen University, or the Rasmussen Acquisition, on September 1, 2021, or the Closing Date. See “Acquisition of Rasmussen University” below for more information.

•National Education Seminars, Inc., which we refer to as Hondros College of Nursing, provides nursing education to approximately 2,300 students at six campuses in Ohio, including a campus in Akron that opened in April 2021, and one campus in Indianapolis, Indiana, to serve the needs of local nursing and healthcare communities, addressing the persistent supply-demand gap of nurses that is evident nation-wide. In addition to Akron, HCN’s Ohio campuses are located in the suburban areas of Cincinnati, Cleveland, Columbus, Dayton, and Toledo.

HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES, and HCN’s Ohio locations and programs are approved by the Ohio State Board of Career Colleges and Schools. In February 2021, ABHES granted HCN continued accreditation through February 2027 for all programs at all campuses. HCN’s Ohio Diploma in Practical Nursing, or PN, and Associate Degree in Nursing, or ADN, Programs are approved by the Ohio Board of Nursing, or OBN, and the PN Program is accredited by the National League for Nursing Commission for Nursing Education Accreditation, or NLN CNEA. HCN is authorized to offer instruction in Indiana by the Indiana Board for Proprietary Education/Indiana Commission for Higher Education. The Indiana State Board of Nursing granted initial accreditation and authorized the admission of the first cohort of students. NLN CNEA granted HCN accreditation at its Indianapolis campus effective January 13, 2021. In July 2021, the Indiana

Board of Nursing authorized the admission of an additional 30 students per year, increasing the maximum enrollment to 60 students for the 2022 calendar year. HCN can petition for an additional class size increase in February 2022.

ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate. Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% pass rate on mandatory licensing and credentialing examinations or fails to meet the state-mandated results for credentialing or licensure. Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or other good cause. For the reporting year ended June 30, 2021, several HCN programs did not satisfy ABHES’s threshold requirements for retention rates. Each such program had a retention rate of between 55% and 69% for the reporting year. HCN submitted its annual report to ABHES on November 2, 2021, including an action plan regarding areas where benchmarks were not met. We cannot predict how ABHES will respond to the report.

For information on potential risks associated with HCN, please refer to the section entitled “Risk Factors” in our Annual Report and this Quarterly Report.

Acquisition of Rasmussen University

On the Closing Date, we completed the acquisition of Rasmussen University, or the Rasmussen Acquisition, for an adjusted aggregate purchase price, subject to post-closing working capital adjustments of $325.5 million in cash and without issuing any shares of non-voting preferred stock. Upon completion of the Rasmussen Acquisition, Rasmussen University became a wholly owned subsidiary of APEI. On September 9, 2021, Rasmussen University timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. Rasmussen University is also pursuing other post-closing notices and consents related to the change in ownership. For the three and nine months ended September 30, 2021, we incurred approximately $1.5 million and $5.0 million of acquisition-related expenses, respectively, which are included in general and administrative expenses in the Consolidated Statements of Income.

We relied on debt financing pursuant to a credit agreement to fund a portion of the consideration for the Rasmussen Acquisition. For more information on this financing, see “– Liquidity and Capital Resources – Liquidity – Acquisition of Rasmussen University” below and “Note 8. Long-Term Debt” included in the Consolidated Financial Statements in this Quarterly Report.

For more information on the Rasmussen Acquisition, please refer to our Annual Report, “Note 3. Acquisition Activity” included in the Consolidated Financial Statements in this Quarterly Report, and the sections entitled “– Regulatory and Legislative Activity – Rasmussen Acquisition Regulatory Review” below.

Cost and Expense Reductions

On August 5, 2021, in connection with an evaluation and review of our costs and expenses, we initiated a plan to reduce costs. The plan includes a reduction in force that resulted in the termination of 11 full-time faculty members at APUS, and 28 non-faculty employees across a variety of roles and departments at APEI and APUS, representing approximately 3.2% of the APUS full-time faculty workforce, and 3.1% of the APEI and APUS non-faculty workforce. We completed this workforce reduction by August 9, 2021. We recorded expenses for termination benefits related to the workforce reduction in the third quarter of 2021 in accordance with FASB ASC 420, Exit or Disposal Cost Obligations. We incurred an aggregate of approximately $1.0 million of pre-tax cash expenses associated with employee severance benefits. The reduction in force is expected to result in pre-tax labor and benefit savings in 2021 of approximately $1.4 million, and in the range of approximately $2.6 million to $3.6 million on an annualized basis. These cost savings do not include expenses associated with employee severance benefits. The actual costs and benefits of the plan are preliminary and may vary based on various factors, including the timing of implementation and changes in underlying assumptions and projections. There is no certainty that the program, or any other expense reduction initiative, will have the intended benefits of reducing costs and expenses over the long-term, or whether there will be adverse impacts, including as a result of the loss of valuable employees.

Regulatory and Legislative Activity

On April 7, 2020, the Department of Veterans Affairs, or VA, announced that, effective April 1, 2021, it would no longer count the use of Veteran Readiness & Employment, or VR&E, benefits against the 48-month cap on veterans education benefits programs imposed when veterans use more than one benefit program. As a result, veterans who use VR&E benefits prior to using another veterans education benefits program, such as the Montgomery GI Bill, or the GI Bill, and the Post-9/11 GI Bill, can still use up to 48 total months of the other veterans education benefits programs.

In March 2021, ED announced a revised approach for determining relief for borrowers who successfully assert borrower relief claims. Under this new approach, a borrower will receive full loan relief when evidence shows that the institution engaged in certain misconduct. This policy rescinds the prior administration’s formula that generally granted only partial loan relief for borrower defense claims. ED also announced changes to the process for borrowers to seek loan relief due to total or permanent disability. Specifically, ED has eliminated requirements that borrowers with total or permanent disability prove that they continue to have sufficiently low-incomes for three years following their loan discharge.

In June 2021, ED held virtual public hearings to receive feedback on potential issues for future rulemaking sessions, including borrower defenses to repayment, change in ownership processes, student outcomes transparency, public service loan forgiveness programs, and gainful employment requirements. Following these hearings, ED solicited nominations for non-federal negotiators who can serve on the negotiated rulemaking committees, which ED indicated that it planned to convene during the third quarter of 2021. On August 6, 2021, ED announced that it was establishing a negotiated rulemaking committee to address borrower defenses to repayment, public service student loan forgiveness programs, mandatory pre-dispute arbitration and prohibition of class-action lawsuits, among other issues. The negotiated rulemaking committee held its first session in October 2021 and plans to meet two more times in November and December. ED is expected to submit at least one notice of proposed rulemaking on these matters prior to November 1, 2022. If it does so, any new rules are expected to be effective July 1, 2023.

Effective May 31, 2021, APUS terminated its lease for administrative offices in Manassas, Virginia. As a result of this lease termination, APUS is no longer required to be certified by the State Council of Higher Education for Virginia, or SCHEV, and therefore did not renew its certification before it expired on June 30, 2021. This change will not impact our operations in Virginia, and we will continue to serve our Virginia students as an NC-SARA approved institution. As a result of this change, APUS will no longer need to seek SCHEV approval prior to adding any new academic programs.

As part of the Consolidated Appropriations Act, 2021, Congress included legislative provisions that alter the application process for federal student aid, including streamlining the Free Application for Federal Student Aid, or FAFSA. These changes were set to become effective for the 2023-2024 academic year. On June 11, 2021, ED announced that the agency is delaying implementation, noting that many of these provisions will not be effective until the 2024-2025 academic year.

On June 8, 2021, the President signed into law the Training in High-Demand Roles to Improve Veteran Employment Act, or the THRIVE Act, which amended provisions related to veterans education programs found in the American Rescue Plan Act and the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020. The legislation requires the VA to work with the Department of Labor to determine the list of high-demand occupations for the rapid retraining assistance program, excludes programs pursued solely through distance learning on a half-time basis or less from the housing stipend available to those in the retraining program, and requires the Government Accountability Office to

report on the outcomes and effectiveness of retraining programs. The legislation also requires the VA to take disciplinary action if a person with whom an institution has an agreement to provide educational or recruiting services violates the VA’s incentive compensation prohibitions.

Section 1018 of the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020, became effective June 15, 2021, and applied to institutions of higher learning beginning August 1, 2021. This provision mandates that schools that receive veterans education benefits: (i) provide VA students with information on total cost of an education program and certain other disclosures; (ii) inform VA students of the availability and potential eligibility of federal financial aid before packaging or arranging private student loans or alternative financing programs; (iii) avoid fraudulent and unduly aggressive recruiting or automatic renewal techniques; (iv) avoid misrepresentations or payment of incentive compensation; (v) fully disclose conditions or additional requirements required to obtain any license, certification, or approval for which the course of education is designed to provide preparation; (vi) provide VA students with graduation requirements; (vii) obtain approval of the institutions’ accrediting agency for new courses or programs; (viii) maintain a policy to accommodate service members and reservists to be readmitted if they are temporarily unable to attend due to service requirements; and (ix) appoint a point of contact to provide academic and financial aid advising. In September 2021, APUS and HCN received waivers for the requirements of Section 1018 for the period August 1, 2021 through July 31, 2022. At the conclusion of the waiver period, it is expected that APUS and HCN will be in compliance with all of the provisions of Section 1018.

In September 2021, the Navy increased their TA benefits, allowing qualified sailors to use up to 18 semester credit hours annually, previously limited to 12 semester credit hours. Along with the expanded annual credit limit comes new eligibility requirements, including new requirements as to who can use TA and when. Eligible sailors can only use TA to fund two courses each quarter of the fiscal year. The minimum time in service increased from two to three years and active duty enlisted sailors under 16 years of service and reservists on active duty orders must have 12 months or more remaining on their current enlistment or extension as of the course state date to be eligible. Reservists on one-year orders will no longer be eligible for TA, and sailors who have begun utilizing TA benefits after only two years of service must pause their TA benefits. These changes were effective October 1, 2021.

On October 6, 2021, ED announced several changes to the Public Service Loan Forgiveness program, or PSLF. ED is implementing a time-limited waiver that would allow borrowers to count all prior payments toward PSLF, regardless of the loan program. The waiver will apply to borrowers with Direct Loans, those with other types of loans that submit a consolidation application into the Direct Loan Program while the waiver is in effect. The waiver will run through October 31, 2022. Additionally, ED will allow months spent on active duty to count toward PSLF, even if the service member’s loans were on deferment or forbearance. This change will allow more service members to pursue loan forgiveness. ED also plans to implement automatic PSLF crediting for federal employees and military service members. To further support these efforts, ED plans to simplify the PSLF application process and improve communication to PSLF-eligible borrowers.

In October 2021, in what it termed a broad-based initiative to deter for-profit college fraud, the Federal Trade Commission, or FTC, issued informational notices to 70 for-profit higher education institutions, including APUS and RU, informing them of certain marketing practices the FTC had previously determined to be deceptive or unfair and therefore unlawful under the FTC Act. The FTC indicated that an institution’s receipt of the notice was not an indication that the institution has engaged in deceptive or unfair conduct. The informational notices were sent in furtherance of an FTC Act provision permitting penalties against those engaging in unfair or deceptive acts or practices with actual knowledge of their unfair or deceptive nature. The informational notices informed the institutions that engaging in such practices could subject a company to civil penalties under that provision. By providing the informational notices, the FTC is able to document that the institutions have knowledge that the FTC has found these marketing practices to be unfair or deceptive. The FTC also announced that it would be enhancing its enforcement cooperation with other agencies with oversight of educational institutions, including ED’s Office of Student Aid and the Department of Veterans Affairs. In addition, on October 6, 2021, ED announced that it had restored an Office of Enforcement within ED’s Office of Federal Student Aid to strengthen oversight of and enforcement actions against postsecondary institutions that participate in federal student loan, grant, and work-study programs.

Cohort Default Rate

To remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain levels. Pursuant to requirements of the Higher Education Act, as amended, if the cohort default rate for any year exceeds 40%, an institution loses eligibility to participate in Title IV programs, and if the institution’s cohort default rate exceeds 30% for three consecutive years, the institution loses eligibility to participate in Title IV programs. If an institution’s cohort default rate is equal to or greater than 30% in any year, it must establish a default prevention task force. In

September 2021, ED released final official cohort default rates for institutions for federal fiscal year 2018, with ED reporting a 9.4% cohort default rate for APUS, a 7.8% cohort default rate for RU, and a 8.1% cohort default rate for HCN. Additional information regarding student loan default rates, prior year default rates, and potential risks associated with them is available in our Annual Report.

Higher Education Emergency Relief Funds

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, in response to COVID-19 and its related effects. Due to the COVID-19 pandemic, many higher education institutions shifted to distance learning as campuses shut down as a result of the public health emergency. The CARES Act included provisions designed to provide relief to higher education institutions in connection with the pandemic, including by creating the Higher Education Emergency Relief Fund, or HEERF, which included $12.6 billion in funding for higher education institutions. The CARES Act authorized ED to allocate HEERF funding based on a statutory formula that accounted for the relative share of full-time students who are Pell Grant recipients and that excluded students who were enrolled exclusively in distance education courses prior to the COVID-19 emergency from the calculation. Wholly online institutions such as APUS were therefore not eligible to receive an allocation of funding under the CARES Act HEERF. The CARES Act required recipient institutions to use at least 50% of their HEERF funds to provide emergency grants to students for expenses related to the disruption of campus operations due to COVID-19. The CARES Act also permitted institutions to use up to 50% of their HEERF funds to cover any costs associated with significant changes to the delivery of instruction due to COVID-19, with certain exceptions. By June 30, 2020, HCN distributed its entire allocation of $3.1 million in CARES Act HEERF funds to eligible students.

In addition, as a result of the CARES Act and subsequent administrative actions, ED implemented a temporary freeze on payments and interest accruals for federal student loans. This administrative forbearance period began on March 20, 2020 and will run until at least January 31, 2022.

In December 2020, Congress passed a law that includes the Coronavirus Response and Relief Supplemental Appropriations Act, or the CRRSAA, which contained several education-related provisions. The CRRSAA appropriated an additional $22.7 billion for the HEERF, or CRRSAA HEERF, to be distributed to higher education institutions. The CRRSAA HEERF allocation formula differs from the CARES Act HEERF formula in several ways, including new allocations for institutions based on the number of students enrolled exclusively in distance education and included certain restrictions regarding allowable uses of CRRSAA HEERF funds. Under this formula, ED allocated approximately $600,000 for APUS and $2.0 million for HCN. Both APUS and HCN have distributed the entirety of their allocated CRRSAA HEERF funds to eligible students.

In March 2021, Congress passed the American Rescue Plan Act of 2021, or ARPA, which includes an additional $40 billion for HEERF, or HEERF III. ARPA incorporates CRRSAA’s restrictions regarding allowable uses of HEERF funds. ARPA’s HEERF III allocation formula decreases the amount of funds allocated to for-profit institutions. Under this formula, ED allocated approximately $330,000 for APUS and $1.2 million for HCN. APUS distributed the entirety of the allocated HEERF III funds to eligible students during the third quarter. HCN declined its HEERF III allocation.

ARPA also includes a provision that amends the provision of the Higher Education Act of 1964, as amended, or the HEA, that, as a condition of participation in the Title IV programs, prohibits a for-profit institution from deriving more than 90% of its revenue (as computed by ED) on a cash accounting basis (except for certain institutional loans) from Title IV programs for any fiscal year. For more information on the so-called 90/10 Rule, please refer to our Annual Report. ARPA modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”. ARPA provides that the amendment applies to institutional fiscal years beginning on or after January 1, 2023. In addition, ARPA provides that the amendment is subject to the HEA’s master calendar requirements and negotiated rulemaking and that such negotiated rulemaking shall commence no earlier than October 1, 2021. An ED final rule to implement the ARPA provision is not expected to go into effect until July 1, 2023 at the earliest. ARPA does not define “federal education assistance funds.” We expect such definition to be developed as part of the required negotiated rulemaking and anticipate that ED would seek to include TA and VA education benefits in the scope of the definition. At this time, we cannot predict the impact of the ARPA 90/10 Rule on our business, including because we cannot predict how ED will implement the ARPA 90/10 Rule provision. We also cannot predict the likelihood that Congress will pass additional legislation to modify the 90/10 Rule further with respect to relevant sources of funds or other aspects of the calculation. For example, other recent congressional proposals have focused on decreasing the limit on Title IV funds from 90% to 85%. Such proposals, or other similar legislation, should they become law, could have a material adverse impact on our financial condition and results of operation.

On March 27, 2020, Ohio enacted a COVID-19 emergency relief law that allows individuals who have successfully completed a nursing education program approved by OBN to receive a temporary license to practice as an RN or LPN before taking the National Council Licensure Examination, or NCLEX. Graduates of OBN-approved nursing education programs, such as HCN’s programs, were permitted to apply for a temporary license that was valid until March 1, 2021 and effective May 14, 2021 was reinstated and extended to July 1, 2021. This law specified that the individual must have completed the nursing education program no more than two years before the date of submitting the Licensure by Examination application, the individual cannot receive a temporary license if they have a prior NCLEX failure in any state, if they have been convicted of or pleaded guilty to any felony, or have failed a drug test as determined by the Board. The emergency relief law expired on July 1, 2021.

The postsecondary education regulatory landscape is complex and continues to evolve, and the foregoing discussion does not address all of the laws and regulations that may materially affect our business, financial condition, and results of operations. Additional information on the regulation of our business, including certain regulatory developments in 2021 that occurred prior to the filing of our Annual Report, is available in “Business – Regulatory Environment” in Item 1 of Part I of our Annual Report. We cannot predict the extent to which the aforementioned regulatory activity or any other potential regulatory or legislative activity may impact us or our institutions, nor can we predict the possible associated burdens and costs. Additional information regarding the potential risks associated with the regulation of postsecondary education and our business is available in the sections entitled “Risk Factors” in our Annual Report and this Quarterly Report.

Rasmussen Acquisition Regulatory Review

The Rasmussen Acquisition was required to be reported to, and in some cases approved by, various education regulatory bodies. An institution must obtain ED approval for a change in ownership and control in order to continue to participate in Title IV programs under the new ownership. ED does not provide pre-closing approval.

In July 2021, ED notified Rasmussen University that in connection with Rasmussen University’s March 2019 change in ownership, ED was imposing certain temporary growth restrictions on the institution, which included maintaining limitations on new programs and locations that were already in place and imposing a cap on the number of students that participate in Title IV programs that can be enrolled. Additionally, ED continued to require Rasmussen University to submit periodic financial and enrollment reports, a requirement that it had imposed on RU in connection with the financial responsibility letter of credit described below. On September 9, 2021, Rasmussen University timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. ED and Rasmussen University entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective as of October 14, 2021, that allows Rasmussen University to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application. The TPPPA continues the growth restrictions that ED imposed as a result of the March 2019 change in ownership, including the same enrollment cap. The TPPPA specifies that after ED reviews and accepts financial statements and compliance audits that cover one complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU may seek to have the enrollment cap removed and may seek approval for new programs that replace current programs. The TPPPA also specifies that at least until after ED reviews and accepts financial statements and compliance audits that cover the second complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU must seek pre-approval for new locations, new programs that are not replacing current programs, and other changes. The growth restrictions under the TPPPA could limit or adversely affect Rasmussen University’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or changed programs. Rasmussen University is also pursuing other post-closing notices and consents related to the change in ownership.

State agencies, accreditors, boards of nursing, and other relevant regulators also require action with respect to the Rasmussen Acquisition. In some instances, these bodies required prior approval before the change in ownership could be completed. For example, HLC requires approval before the closing of a transaction in order for an institution to maintain accredited status after closing. The parties submitted an application to HLC for pre-closing approval of the change in ownership, and HLC conducted focused site visits related to the application in February and March 2021. Effective in June 2021, HLC approved the application regarding the change in control. An additional site visit is required within six months of the Closing Date. Additionally, some regulators will require approval after a change in ownership in order to continue proper licensure, accreditation, approval, or authorization.

ED evaluates institutions on an annual basis for compliance with specified financial responsibility standards, including a complex formula based on line items from the institution’s audited financial statements. The formula focuses on three financial ratios: (1) equity ratio (which measures the institution’s capital resources, financial viability, and ability to borrow); (2) primary reserve ratio (which measures the institution’s viability and liquidity); and (3) net income ratio (which measures the

institution’s profitability or ability to operate within its means). Generally, an institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible. An institution which does not meet ED’s minimum composite score of 1.5 can demonstrate financial responsibility by meeting the “zone alternative” or posting a letter of credit in favor of ED. The “zone alternative” includes a delayed method of cash funding for Title IV aid, and the

providing of additional information to ED, upon request. As of September 30, 2020, RU had a composite score equal to 1.4, compared to the minimum required of 1.5. RU elected to post a letter of credit with ED totaling $23.1 million, which represents 10% of the Title IV program funds received by RU during its most recently completed fiscal year. Upon the closing of the RU Acquisition, APEI was required to fund this letter of credit using a restricted deposit account that required a deposit of 105%, or $24.2 million, to secure the RU letter of credit. Under the TPPPA for RU described above, a letter of credit will continue to be required at least until ED reviews and accepts financial statements and compliance audits that cover one complete fiscal year of RU’s Title IV participation under APEI’s ownership. Additionally, RU is required to make Title IV disbursements to eligible students and parents under the heightened cash monitoring payment method, or HCM1. Under HCM1, Rasmussen University must first make Title IV disbursements to eligible students and parents and pay any credit balances before the institution requests or receives funds for the amount of those disbursements from ED.

APUS, RU and HCN Compliance Reviews

In July 2017, ED began a program review of RU’s administration of Title IV program during the 2015-2016 and 2016-2017 award years. The program review remains open and ongoing. At this time, we cannot predict the outcome of the program review, when it will be completed, or whether ED will place any liability or other limitations on RU as a result of the review.

On July 9, 2021, HCN received a letter from ED announcing an off-site program review. The review, which was completed in August 2021, assessed HCN’s administration of Title IV programs, with a focus on award years 2019-2020 and 2020-2021. The program review is pending while ED is reviewing the data collected.

Reportable Segments

During the third quarter of 2021, we revised our reportable segments and updated the results for the prior period to conform to the current period presentation. As of September 30, 2021, APEI had the following reportable segments:

•American Public University System Segment, or APUS Segment. This segment reflects the operational activities of APUS and was previously included within the former APEI Segment;

•Rasmussen University Segment, or RU Segment. This segment reflects the operational activities of Rasmussen University; and

•Hondros College of Nursing Segment, or HCN Segment. This segment reflects the operational activities of HCN.

Prior to the third quarter of 2021, the Company had two reportable segments: the American Public Education, Inc. Segment, or APEI Segment, and the HCN Segment. Post-acquisition, the Company has three reportable segments: the APUS Segment, which was previously included within the APEI Segment; the Rasmussen Segment; and the HCN Segment. The APEI Segment previously reported the results of both APUS and remaining unallocated Company expenses. Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”, which primarily includes unallocated corporate activity and eliminations, which generally were previously reported within the APEI Segment. Prior periods have been updated to conform to the revised presentation.

Summary of Results

As discussed above, we completed the Rasmussen Acquisition on September 1, 2021. Our results of operations for the three and nine months ended September 30, 2021 include the results of RU from the Closing Date through September 30, 2021. We did not consolidate the financial results of the RU Segment prior to the Closing Date. Accordingly, the financial results of each period presented are not directly comparable. This discussion highlights changes in the APUS and HCN segments, as those results are fully included in each period.

For the three months ended September 30, 2021, our consolidated revenue increased to $98.2 million from $79.1 million, or by 24.2%, compared to the prior year period. Our operating margins decreased to 1.2% from 4.2% for the three months ended September 30, 2021, compared to the prior year period. For the three months ended September 30, 2021, the net loss for the period was $0.3 million, compared to net income of $2.6 million for the three months ended September 30, 2020, a

decrease of $2.9 million. For the nine months ended September 30, 2021, our consolidated revenue increased to $264.8 million from $235.9 million, or 12.3%, compared to the prior period. Our operating margins decreased to 5.3% from 6.4% for the nine month periods ended September 30, 2021, compared to the prior year period. Net income decreased to $8.4 million from $11.8 million, a decrease of $3.4 million, or 28.8%, compared to the prior year period.

For the three months ended September 30, 2021, APUS Segment revenue decreased to $65.9 million from $69.7 million, or by 5.4%, compared to the prior year period. Net course registrations at APUS for the three months ended September 30, 2021 decreased to approximately 83,100 from approximately 90,300, or approximately 8.0%, compared to the prior year period. APUS Segment operating margins increased to 11.9% from 10.6% for the three months ended September 30, 2021, compared to the prior year period.

For the nine months ended September 30, 2021, APUS Segment revenue decreased to $210.3 million from $210.4 million, or by less than 1%, compared to the prior year period. Net course registrations at APUS for the nine months ended September 30, 2021 decreased to approximately 258,700 from approximately 264,700, or approximately 2.3%, compared to the prior year period. APUS Segment operating margins increased to 14.7% from 14.2% for the nine months ended September 30, 2021, compared to the prior year period.

The decreases in APUS Segment revenue were due to the decreases in net course registrations which we believe were due to a moderation in near-term demand for online education due to the abatement of the COVID-19 pandemic, and also in part to the temporary suspension and disruption of the Army’s TA program.

From the Closing Date through September 30, 2021, RU Segment revenue was $21.1 million. RU Segment operating margin was negative 4.7% for the three months ended September 30, 2021.

For the three months ended September 30, 2021, HCN Segment revenue increased to $11.2 million from $9.5 million, or by 17.8%, compared to the prior year period. Total enrollment at HCN for the three months ended September 30, 2021 increased to approximately 2,300 from approximately 2,000, or approximately 18.9%, as compared to the prior year period. HCN Segment operating margins decreased to 4.0% from 4.9% for the three months ended September 30, 2021, compared to the prior year period.

For the nine months ended September 30, 2021, HCN Segment revenue increased to $33.5 million from $25.7 million, or by 30.5%, compared to the prior year period. HCN Segment operating margins increased to 4.0% from negative 1.8% for the nine months ended September 30, 2021, compared to the prior year period.

For more information on Army TA program suspension and delays, their related impacts on the Company, and related risks, please refer to “Overview—Background” above and the section entitled “Risk Factors” in this Quarterly Report.

Critical Accounting Policies and Use of Estimates

For information regarding our Critical Accounting Policies and Use of Estimates, see the “Critical Accounting Policies and Use of Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Results of Operations

Below we have included a discussion of our operating results and material changes in our operating results during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020. Our revenue and operating results normally fluctuate as a result of seasonal or other variations in our enrollments and the level of expenses in our reportable segments. Our student population varies as a result of new enrollments, graduations, student attrition, the success of our marketing programs, and other reasons that we cannot always anticipate. We expect quarterly fluctuations in operating results to continue as a result of various enrollment patterns and changes in revenue and expenses, including due to the Rasmussen Acquisition.

We believe the decrease in net course registrations at APUS for the three and nine months ended September 30, 2021 was due, in part, to the temporary suspension and disruption of the Army’s TA program on March 8, 2021, resulting from delays in the transition from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, and a moderation in near-term demand for online education due to the abatement of the COVID-19 pandemic. For more information on the impacts of the Army TA program delays on the Company and the potential risks related to this, please refer to “Overview” in this Management’s Discussion and Analysis of Financial Condition and Results of Operation and the section entitled “Risk Factors” in this Quarterly Report.

We believe that the increase in enrollment at HCN for the three and nine months ended September 30, 2021 as compared to the prior year period is due in part to an increase in demand for nursing education, a change in the competitive environment due to COVID-19, an increase in marketing expenditures, and the continued impact of initiatives implemented in 2019 and 2020, such as the direct entry ADN Program and the institutional affordability grant. We cannot predict whether our initiatives and efforts will continue to be successful over the long term and cannot guarantee continued enrollment and revenue growth in our HCN Segment. The success of these efforts could also be adversely affected by future impacts of the COVID-19 pandemic or a further moderation of or decrease in the demand for nursing education as the pandemic abates. For more information on the impacts of COVID-19 on the Company and the potential risks related to COVID-19, please refer to “Overview—Background” in this Management’s Discussion and Analysis of Financial Condition and Results of Operation and the section entitled “Risk Factors” in our Annual Report and this Quarterly Report.

Our consolidated results for the three and nine months ended September 30, 2021 and 2020 reflect the operations of our APUS and HCN Segments only and include the results of our RU Segment from the Closing Date. We did not consolidate the RU Segment prior to the Closing Date. Rasmussen enrollment was approximately 16,900 during the three months ended September 30, 2021, which compares to 17,200 during the three months ended September 30, 2020. We believe this decline in enrollment may have been caused, in part, due to a moderation in near-term demand for Rasmussen’s programs due to the abatement of the COVID-19 pandemic. However, because we have only recently acquired Rasmussen University, we cannot provide a full assessment of the factors that could have led to the decline in enrollments at Rasmussen University.

For a more detailed discussion of our results by reportable segment, refer to “Analysis of Operating Results by Reportable Segment” below.

Analysis of Consolidated Statements of Income

For the Consolidated Statements of Income, refer to our Financial Statements: Consolidated Statements of Income. The following table sets forth statements of income data as a percentage of revenue for each of the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)

Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:
Instructional costs and services	43.3		39.3		39.7		38.6
Selling and promotional	23.9		23.4		22.8		22.8
General and administrative	27.1		28.5		28.5		27.7
Loss on disposals of long-lived assets	—		0.5		0.1		0.3

Depreciation and amortization	4.5		4.1		3.6		4.2
Total costs and expenses	98.8		95.8		94.7		93.6

Income from operations before interest income and income taxes	1.2		4.2		5.3		6.4
Interest (expense) income	(1.3)		0.2		(0.4)		0.4

(Loss) Income from operations before income taxes	(0.1)		4.4		4.9		6.8
Income tax expense	0.2		1.0		1.3		1.8
Equity investment loss	—		—		(0.3)		—
Net (loss) income	(0.3)	%	3.4	%	3.3	%	5.0	%

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Revenue. Our consolidated revenue for the three months ended September 30, 2021 was $98.2 million, an increase of $19.1 million, or 24.2%, compared to $79.1 million for the three months ended September 30, 2020. The increase in revenue was primarily due to the inclusion of RU Segment revenue from the Closing Date through September 30, 2021 of $21.1 million, as well as a $1.7 million, or 17.8%, increase in revenue in our HCN Segment, partially offset by a $3.8 million, or 5.4%, decrease in revenue in our APUS Segment. The APUS Segment revenue decrease was primarily due to decreases in APUS total student net course registrations of 8.0% during the three months ended September 30, 2021 as compared to the prior year period. The HCN Segment revenue increased primarily due to an 18.9% increase in total enrollment as compared to the prior year period.

Costs and expenses. Costs and expenses for the three months ended September 30, 2021 were $97.0 million, an increase of $21.2 million, or 27.9%, compared to $75.8 million for the three months ended September 30, 2020. The increase in costs and expenses for the three months ended September 30, 2021 as compared to the prior year period was primarily due to the inclusion of our RU Segment costs and expenses from the Closing Date through September 30, 2021 of $22.0 million, as well as increases in professional fees in our APUS Segment, increases in employee compensation costs, advertising costs, bad debt expense, and instructional materials costs in our HCN Segment, increases in employee compensation costs, professional fees primarily related to the integration planning of the Rasmussen Acquisition, and increases in other unallocated costs in Corporate and Other, partially offset by decreases in employee compensation costs, advertising expenses, and course materials costs in our APUS Segment. The three months ended September 30, 2021 includes the following costs on a pre-tax basis: $1.7 million in information technology costs related to our multi-year technology transformation program in our APUS Segment, and $1.6 million in professional fees primarily related to the Rasmussen Acquisition in our Corporate and Other unallocated costs. The three months ended September 30, 2020 included the following costs on a pre-tax basis: a $2.1 million increase in advertising in our APUS and HCN Segments, $1.5 million in information technology costs related to our multi-year technology transformation program in our APUS Segment, and $1.9 million in professional fees associated with strategic growth opportunities including the Rasmussen Acquisition in our Corporate and Other unallocated costs. Costs and expenses as a percentage of revenue increased to 98.8% for the three months ended September 30, 2021, from 95.8% for the three months ended September 30, 2020.

Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended September 30, 2021 were $42.5 million, an increase of $11.5 million, or 36.9%, compared to $31.1 million for the three months ended September 30, 2020. The increase in instructional costs and services expenses was primarily due to the inclusion of our RU Segment instructional costs and services expenses from the Closing Date through September 30, 2021 of $12.3 million, as

well as increases in employee compensation costs in our HCN Segment, partially offset by decreases in employee compensation costs and course materials costs in our APUS Segment. Instructional costs and services expenses as a percentage of revenue increased to 43.3% for the three months ended September 30, 2021, from 39.3% for the three months ended September 30, 2020.

Selling and promotional expenses. Our selling and promotional expenses for the three months ended September 30, 2021 were $23.5 million, an increase of $4.9 million, or 26.6%, compared to $18.5 million for the three months ended September 30, 2020. The increase in selling and promotional expenses was primarily due to the inclusion of our RU Segment selling and promotional expenses from the Closing Date through September 30, 2021 of $5.8 million, as well as increases in advertising costs and employee compensation costs in our HCN Segment, partially offset by decreases in advertising costs in our APUS Segment. Selling and promotional expenses as a percentage of revenue increased to 23.9% for the three months ended September 30, 2021, from 23.4% for the three months ended September 30, 2020.

General and administrative expenses. Our general and administrative expenses for the three months ended September 30, 2021 were $26.6 million, an increase of $4.0 million, or 17.8%, compared to $22.6 million for the three months ended September 30, 2020. The increase in general and administrative expenses was primarily due to the inclusion of our RU Segment general and administrative expenses from the Closing Date through September 30, 2021 of $2.1 million, as well as increases in employee compensation costs and professional fees primarily related to the integration planning of the Rasmussen acquisition in our Corporate and Other unallocated costs, an increase in professional fees in our APUS Segment, and increases in bad debt expense and employee compensation costs in our HCN Segment, partially offset by decreases in employee compensation costs in our APUS Segment. For the three months ended September 30, 2021, general and administrative expenses include the following on a pre-tax basis: approximately $1.7 million of information technology costs related to our multi-year technology transformation program in our APUS Segment, and $1.6 million in professional fees primarily related to the Rasmussen Acquisition in our Corporate and Other unallocated costs. Consolidated bad debt expense for the three months ended September 30, 2021 was $1.6 million, or 1.6% of revenue, compared to $0.9 million, or 1.1% of revenue in the prior year period. General and administrative expenses as a percentage of revenue decreased to 27.1% for the three months ended September 30, 2021, from 28.5% for the three months ended September 30, 2020. As we continue to integrate RU and evaluate and execute on strategic growth opportunities and enhancements to our business capabilities, we expect to incur additional costs and that our general and administrative expenses related to professional fees will vary from time to time.

Loss on disposals of long-lived assets. There was no loss on disposals of long-lived assets for the three months ended September 30, 2021. The loss on disposals of long-lived assets was $0.4 million for the three months ended and September 30, 2020.

Depreciation and amortization expenses. Depreciation and amortization expenses were $4.4 million and $3.2 million for the three months ended September 30, 2021 and 2020, respectively. The increase of depreciation and amortization expenses was primarily the result of the inclusion of RU Segment depreciation and amortization expenses from the Closing Date through September 30, 2021 of $1.9 million. Depreciation and amortization expenses as a percentage of revenue increased to 4.5% for the three months ended September 30, 2021, from 4.1% for the three months ended September 30, 2020.

Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $1.8 million and $1.9 million for the three months ended September 30, 2021 and 2020, respectively. Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Interest (expense) income. Interest expense was $1.3 million for the three months ended September 30, 2021, compared to interest income of $0.1 million for the three months ended September 30, 2020. The increase in interest expense was due to the $175.0 million Term Loan issued in connection with the Rasmussen Acquisition.

Income tax expense. We recognized income tax expense of $0.2 million and $0.8 million for the three months ended September 30, 2021 and 2020, respectively, or a negative effective tax rate for the three months ended September 30, 2021, as compared to an effective tax rate of 22.9% in the prior year period. The negative effective tax rate for the three months ended September 30, 2021 is due to non-deductible expenses in a period with a pre-tax loss compared to pre-tax income in the prior period. There was no material impact to our effective tax rate for the three months ended September 30, 2021 and 2020 as a result of the effects of the COVID-19 pandemic.

Equity investment income (loss). There was no equity investment loss for the three months ended September 30, 2021 and 2020.

Net (loss) income. Our net loss was $0.3 million for the three months ended September 30, 2021, compared to net income of $2.6 million for the three months ended September 30, 2020, a decrease of $2.9 million. This decrease was related to the factors discussed above.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Revenue. Our consolidated revenue for the nine months ended September 30, 2021 was $264.8 million, an increase of $28.9 million, or 12.3%, compared to $235.9 million for the nine months ended September 30, 2020. The increase in revenue was primarily due to the inclusion of RU Segment revenue from the Closing Date through September 30, 2021 of $21.1 million, as well as a $7.8 million, or 30.5%, increase in revenue in our HCN Segment, partially offset by a $0.1 million or less than a 1% decrease in our APUS Segment revenue. The HCN Segment revenue increase was primarily due to a 32.3% increase in total enrollment as compared to the prior year period. The APUS Segment revenue decrease was primarily as a result of total student net course registrations decreasing 2.3% during the nine months ended September 30, 2021, as compared to the prior year period.

Costs and expenses. Costs and expenses for the nine months ended September 30, 2021 were $250.9 million, an increase of $30.1 million, or 13.6%, compared to $220.8 million for the nine months ended September 30, 2020. The increase in costs and expenses for the nine months ended September 30, 2021 as compared to the prior year period was primarily due to the inclusion of our RU Segment costs and expenses from the Closing Date through September 30, 2021 of $22.0 million, as well as increases in professional fees, employee compensation costs, and information technology costs in our APUS Segment, increases in employee compensation costs, bad debt expense, and instructional materials costs in our HCN Segment, increases in professional fees primarily related to the integration planning of the Rasmussen Acquisition, and increases in employee compensation costs and other unallocated costs in Corporate and Other. Results for the nine months ended September 30, 2021 include the following costs on a pre-tax basis: $5.6 million in professional fees primarily related to the Rasmussen Acquisition in our Corporate and Other unallocated costs, $5.0 million in information technology costs related to our multi-year technology transformation program in our APUS Segment. Results for the nine months ended September 30, 2020 included the following costs on a pre-tax basis: $3.8 million in professional fees primarily related to the Rasmussen Acquisition in our corporate and other unallocated costs, and $3.4 million in information technology costs related to our multi-year technology transformation programs in our APUS Segment. Costs and expenses as a percentage of revenue increased to 94.7% for the nine months ended September 30, 2021, from 93.6% and for the nine months ended September 30, 2020.

Instructional costs and services expenses. Our instructional costs and services expenses for the nine months ended September 30, 2021 were $105.3 million, an increase of $14.2 million, or 15.6%, compared to $91.1 million for the nine months ended September 30, 2020. The increase in instructional costs and services expenses was primarily due to the inclusion of RU Segment instructional costs and services expenses from the Closing Date through September 30, 2021 of $12.3 million, as well as increases in employee compensation costs, and instructional materials costs in our HCN Segment, partially offset by decreases in employee compensation costs and instructional materials costs in our APUS Segment. Instructional costs and services expenses as a percentage of revenue increased to 39.7% for the nine months ended September 30, 2021, from 38.6% for the nine months ended September 30, 2020.

Selling and promotional expenses. Our selling and promotional expenses for the nine months ended September 30, 2021 were $60.4 million, an increase of $6.6 million, or 12.2%, compared to $53.8 million for the nine months ended September 30, 2020. The increase in selling and promotional expenses was primarily due to the inclusion of RU Segment selling and promotional expenses from the Closing Date through September 30, 2021 of $5.8 million, as well as increases in employee compensation costs in our APUS Segment, and increases in advertising costs in our HCN Segment. Selling and promotional expenses as a percentage of revenue was 22.8% for both the nine months ended September 30, 2021 and 2020.

General and administrative expenses. Our general and administrative expenses for the nine months ended September 30, 2021 were $75.6 million, an increase of $10.3 million, or 15.7%, compared to $65.3 million for the nine months ended September 30, 2020. The increase in general and administrative expenses was primarily due to the inclusion of RU Segment general and administrative expenses from the Closing Date through September 30, 2021 of $2.1 million as well as increases in professional fees and information technology costs in our APUS Segment, increases in professional fees primarily related to the Rasmussen Acquisition and employee compensation costs in our Corporate and Other unallocated costs, and increases in bad debt expense and employee compensation costs in our HCN Segment, partially offset by decreases in rent expense in our APUS Segment. For the nine months ended September 30, 2021, general and administrative expenses include the following on a pre-tax basis: $5.6 million in professional fees primarily related to the Rasmussen Acquisition in our Corporate and Other unallocated costs, and $5.0 million in information technology costs related to our multi-year technology transformation program in our APUS Segment. Consolidated bad debt expense for the nine months ended September 30, 2021 was $4.4 million, or 1.7% of revenue, compared to $2.8 million, or 1.2% of revenue in the prior year period. General and administrative

expenses as a percentage of revenue increased to 28.5% for the nine months ended September 30, 2021, from 27.7% for the nine months ended September 30, 2020. As we continue to integrate RU and evaluate and execute on strategic growth opportunities and enhancements to our business capabilities, we expect to incur additional costs and that our general and administrative expenses related to professional fees will vary from time to time.

Loss on disposals of long-lived assets. The loss on disposals of long-lived assets was $0.2 million and $0.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Depreciation and amortization expenses. Depreciation and amortization expenses were $9.6 million and $10.0 million for the nine months ended September 30, 2021 and 2020, respectively. The decrease in depreciation and amortization expenses was primarily the result of a decrease in our APUS Segment, partially offset by the inclusion of the RU Segment depreciation and amortization expenses from the Closing Date through September 30, 2021 of $1.9 million. Depreciation and amortization expenses as a percentage of revenue decreased to 3.6% for the nine months ended September 30, 2021, from 4.2% for the nine months ended September 30, 2020.

Stock-based compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expenses were $6.0 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. Stock-based compensation costs include accelerated expense for retirement-eligible employees and performance stock unit incentive costs.

Interest (expense) income. Interest expense was $1.2 million for the nine months ended September 30, 2021, compared to interest income of $1.0 million for the nine months ended September 30, 2020. The increase in interest expense was due to the $175.0 million Term Loan issued in connection with the Rasmussen Acquisition.

Income tax expense. We recognized income tax expense of $3.5 million and $4.3 million for the nine months ended September 30, 2021 and 2020, respectively, or effective tax rates of 29.5% and 26.7%, respectively. The increase in the effective tax rate for the nine months ended September 30, 2021 is due to higher non-deductible expenses in the current year period as compared to the prior year period, and a higher overall effective state tax rate. There was no material impact to our effective tax rate for the nine months ended September 30, 2021 and 2020 as a result of the effects of the COVID-19 pandemic.

Equity investment loss. Equity investment loss was $0.8 million for the nine months ended September 30, 2021. There was no equity investment income or loss for the nine months ended September 30, 2020. The equity investment loss for the nine months ended September 30, 2021 includes an impairment loss of $0.8 million on one of our cost method investments. For additional information on our investments please refer to “Note 2. Significant Accounting Policies” in our Consolidated Financial Statements.

Net income. Our net income was $8.4 million for the nine months ended September 30, 2021, compared to net income of $11.8 million for the nine months ended September 30, 2020, a decrease of $3.4 million, or 28.8%. This decrease was related to the factors discussed above.

Analysis of Operating Results by Reportable Segment

The following table provides details on our operating results by reportable segment for the respective periods (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Unaudited)				(Unaudited)
Revenue:
APUS Segment	$	65,906	$	69,659	$	210,321	$	210,376
RU Segment	21,132		—		21,132		—
HCN Segment	11,240		9,541		33,506		25,682
Corporate and Other	(30)		(67)		(156)		(182)
Total Revenue	$	98,248	$	79,133	$	264,803	$	235,876
Income (loss) from operations before interest and income taxes:
APUS Segment	$	7,825	$	7,392	$	30,969	$	29,785
RU Segment	(999)		—		(999)		—
HCN Segment	448		466		1,348		(455)
Corporate and Other	(6,012)		(4,550)		(17,444)		(14,288)
Total income from operations before interest and income taxes	$	1,262	$	3,308	$	13,874	$	15,042

Adjustments to reconcile segment results to the Consolidated Financial Statements are included in “Corporate and Other”, which primarily includes unallocated corporate activity and eliminations, including charges for the value of courses taken by non-APUS employees of the Company at APUS.

APUS Segment

For the three months ended September 30, 2021, the $3.8 million, or 5.4%, decrease to approximately $65.9 million in revenue in our APUS Segment was attributable to lower net course registrations. Net course registrations at APUS decreased 8.0% to approximately 83,100 for the three months ended September 30, 2021 from approximately 90,300 during the same period in 2020. Income from operations before interest and income taxes increased to $7.8 million during the three months ended September 30, 2021, from $7.4 million, an increase of $0.4 million, or 5.9%, compared to the prior year as a result of a decrease in revenue due to decreases in net course registrations as discussed above. For the three months ended September 30, 2021, enrollment and revenue were adversely impacted by the moderation in near-term demand for online education due to the abatement of the COVID-19 pandemic. We anticipate that enrollment and revenue for the quarter ending December 31, 2021 will continue to be impacted by these events.

For the nine months ended September 30, 2021, the $0.1 million decrease to approximately $210.3 million in revenue in our APUS Segment was primarily attributable to lower net course registrations. Net course registrations at APUS decreased 2.3% to approximately 258,700 for the nine months ended September 30, 2021 from approximately 264,700 during the same period in 2020. Income from operations before interest and income taxes in our APUS Segment was $31.0 million during the nine months ended September 30, 2021, an increase of $1.2 million, or 4.0%, compared to the same period in 2020.

RU Segment

For the three and nine months ended September 30, 2021, RU Segment revenue was $21.1 million from the Closing Date through September 30, 2021 . The RU Segment loss from operations before interest and income taxes was $1.0 million for the period from the Closing Date through September 30, 2021. Rasmussen enrollment was approximately 16,900 during the

three months ended September 30, 2021, which compares to 17,200 during the three months ended September 30, 2020. We believe this decline in enrollment may have been caused, in part, due to a moderation in near-term demand for Rasmussen’s programs due to the abatement of the COVID-19 pandemic.

HCN Segment

For the three months ended September 30, 2021, the $1.7 million, or 17.8%, increase to approximately $11.2 million in revenue in our HCN Segment was attributable to an increase in total student enrollment. HCN total student enrollment increased 18.9% to approximately 2,300 from approximately 2,000 students during the three months ended September 30, 2021, compared to the same period in 2020. Income from operations before interest and income taxes in our HCN Segment was $0.4 million during the three months ended September 30, 2021, compared to $0.5 million in the same period in 2020, a decrease of $0.1 million, primarily as a result of increases in expenses as discussed above.

For the nine months ended September 30, 2021, the $7.8 million, or 30.5%, increase to approximately $33.5 million in revenue in our HCN Segment was primarily attributable to an increase in student enrollment. HCN total student enrollment increased 32.3% during the nine months ended September 30, 2021 compared to the same period in 2020. The income from operations before interest and income taxes in our HCN Segment was $1.3 million during the nine months ended September 30, 2021, compared to a loss of $0.5 million in the same period in 2020, primarily as a result of the increase in revenue due to higher enrollment discussed above.

Liquidity and Capital Resources

Liquidity

Cash and cash equivalents were $141.5 million and $227.7 million at September 30, 2021 and December 31, 2020, respectively, representing a decrease of $86.2 million, or 37.9%. Cash and cash equivalents at September 30, 2021 decreased by $86.5 million from $228.0 million, or 37.9%, as compared to September 30, 2020. The decrease in cash was due to the acquisition of Rasmussen University on the Closing Date, partially offset by net proceeds of approximately $86.2 million from the underwritten public offering of 3,680,000 shares of our common stock completed on March 1, 2021. The acquisition was funded by $170.5 million of cash and cash equivalents and the net proceeds from the $175 million Term Loan. We have historically financed operating activities and capital expenditures with cash provided by operating activities. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments, and debt interest and principal obligations, through at least the next 12 months primarily with cash generated by operations and existing cash balances.

We derive a significant portion of our revenue from TA from the DoD and programs from the VA. Generally, these funds are received within 60 days of the start of the courses to which they relate. Disruptions related to the Army’s transition to a new system for soldiers to use to request TA have adversely impacted APUS’s ability to invoice the Army for Army registrations and have adversely impacted accounts receivable balances and cash flow from operations. As of September 30, 2021, approximately $18.7 million in accounts receivable, of which $11.6 million is older than 60 days from the course start date, was due from the Army due to the disruption associated with the transition to ArmyIgnitED. We cannot predict when this disruption will be completely resolved with the Army’s systems fully operational or the timing of expected cash receipts from the Army.

Another significant source of revenue is derived from our participation in ED’s Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable course or term.

We expect to continue to fund our costs and expenses through cash generated from operations. Based on our current level of operations, we believe that our cash flow from operations and our existing cash and cash equivalents will provide adequate funds for ongoing operations, debt and interest obligations, and planned capital expenditures for the foreseeable future. Our operating expenditures may increase in future periods as we continue to invest in the modernization of our information technology systems, advertising, and other expenditures. For the year ended December 31, 2020, we incurred approximately $5.6 million on our multi-year technology transformation program, and we anticipate spending between approximately $6.0 million and $8.0 million in 2021. For the nine months ended September 30, 2021, we incurred approximately $5.0 million on our information technology transformation program, focusing on specific information technology projects, including the replacement of our customer relationship management system. We will continue to evaluate our Partnership At a Distance™, or PAD, customized student information and services system for possible changes and upgrades and anticipate that we will eventually make significant changes to that system, as well.

Capital expenditures could be higher in the future as a result of, among other things, additional expenditures for technology or other business capabilities, the opening of new campuses at RU and HCN, the acquisition or lease of existing structures or potential new construction projects, and necessary tenant improvements that arise as a result of our ongoing evaluation of our space needs and opportunities for physical growth. Professional fees may increase as we continue the integration of Rasmussen University, and continue to evaluate and execute on strategic growth opportunities and enhancements to our business capabilities. We expect to continue to explore opportunities to invest in the education industry, which could include purchasing or investing in other education-related companies or companies developing new technologies. For the three and nine months ended September 30, 2021, we incurred approximately $1.6 million and $5.6 million of acquisition-related expenses, respectively, which are included in general and administrative expenses on the Consolidated Statements of Income.

We raised additional capital to finance the Rasmussen Acquisition, as discussed below, and we may also need additional capital in the future, including to finance other business acquisitions and investments in technology or to achieve growth or fund other business initiatives. In February 2021, we filed a shelf registration statement in order to help facilitate potential public offerings of up to $300 million of our securities. On March 1, 2021, we completed an underwritten public offering of 3,680,000 shares of our common stock at a price to the public of $25.00 per share for net proceeds of approximately $86.2 million, after deducting underwriting discounts and commissions and offering expenses, and we have approximately $214 million of room available under our shelf registration statement for future offerings.

Acquisition of Rasmussen University

In connection with entering into the Rasmussen Agreement, on October 28, 2020, we entered into a senior secured credit facilities commitment letter with Macquarie Capital (USA) Inc., or Macquarie Lender, and Macquarie Capital Funding LLC, or Macquarie Capital, and together, Macquarie, pursuant to which Macquarie Capital committed to provide (i) a senior secured term loan facility in the aggregate principal amount of $175.0 million, or the Term Loan, and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $20.0 million, or together with the Term Loan, the Facilities. On January 26, 2021, we entered into a joinder agreement pursuant to which Macquarie assigned a portion of the commitments to Truist Bank and Truist Securities, Inc.

In connection with the completion of the Rasmussen Acquisition, on the Closing Date, we entered into a Credit Agreement with Macquarie Capital, as administrative agent and collateral agent, Macquarie Lender and Truist Securities as joint lead arrangers and bookrunners, and a syndicate of lenders, or the Lenders and, pursuant to the Credit Agreement, the Lenders provided us with the Facilities. We paid a portion of the consideration for the Rasmussen Acquisition with proceeds from the Term Loan. For more information on the Facilities and their terms, see “Note 8. Long-Term Debt” included in the Consolidated Financial Statements in this Quarterly Report.

Our future capital requirements will depend on a number of factors. There can be no guarantee that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness. There can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Acquisition of Graduate School USA

On August 11, 2021, we announced that we had entered into an agreement to acquire substantially all of the assets of Graduate School USA, or Graduate School, one of the largest providers of training to the federal government workforce, for approximately $1.0 million. The purchase price is subject to working capital adjustments, and the acquisition is expected to close in the first quarter of 2022, subject to the satisfaction or waiver of closing conditions.

Share Repurchase Program

On May 2, 2019, our Board of Directors authorized the repurchase of up to $35.0 million of shares of our common stock, and on December 5, 2019, the Board approved an additional authorization of up to $25.0 million of shares. We may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price and general business and market conditions. We have no obligation to repurchase shares and may modify, suspend or discontinue the repurchase program at any time. The authorization under this program is in addition to our repurchase program under which we may annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plans.

During the three and nine months ended September 30, 2021, we did not repurchase shares of common stock. As of September 30, 2021, there remained $8.4 million available under our share repurchase authorization.

For additional information on our repurchases of our common stock, please refer to “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of Part II of our Annual Report and “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - Repurchases” of Part II of this Quarterly Report.

Operating Activities

Net cash provided by operating activities was $0.6 million and $44.7 million for the nine months ended September 30, 2021 and 2020, respectively. The decrease in cash from operating activities is primarily due to the timing of the Rasmussen Acquisition. Rasmussen University receives the majority of its cash receipts during the first month of each fiscal quarter while disbursements occur throughout the quarter. Pursuant to the terms of the Rasmussen Acquisition, the Seller in the transaction retained substantially all of the cash held by Rasmussen University on the Closing Date. Accordingly, from the Closing Date through September 30, 2021, and continuing through mid-October when Rasmussen University received its TPPPA, the majority of Rasmussen’s operations were funded by APEI. Cash flow from operating activities also decreased due to changes in working capital due to the timing of receipts and payments, and higher estimated tax payments in 2021 compared to the prior year. Tax payments for income taxes were $7.0 million for the nine months ended September 30, 2021, compared to $3.1 million for the nine months ended September 30, 2020, an increase of $3.9 million. The following changes in working capital accounts had a negative impact on operating cash flow for the nine months ended September 30, 2021, as compared to the prior year period: deferred revenue of $26.9 million due to the acquisition of Rasmussen occurring during the quarterly and academic third quarter term; accounts payable, accrued compensation and benefits, and accrued liabilities of $5.4 million due in part to higher incentive-based compensation payments in the current year period; and changes in accounts receivable of $2.8 million primarily due to the disruption caused by the Army’s transition to the ArmyIgnitED system. Disruptions related to the Army’s transition to a new system for soldiers to use to request TA have adversely impacted APUS’s ability to invoice the Army for Army registrations and may impact future accounts receivable balances and cash flow from operations. As of September 30, 2021, approximately $18.7 million in accounts receivable, of which $11.6 million is older than 60 days from the course start date, was due from the Army due to the disruption caused by the transition to ArmyIgnitED.

Investing Activities

Net cash used in investing activities was $331.3 million and $3.8 million for the nine months ended September 30, 2021 and 2020, respectively. This increase was primarily related to the Rasmussen Acquisition, as well as increases in capital expenditures.

Financing Activities

Net cash provided by financing activities was $244.5 million for the nine months ended September 30, 2021, compared to $15.7 million of net cash used in financing activities for the nine months ended September 30, 2020, respectively. The increase in cash provided by financing activities for the nine months ended September 30, 2021 was due to our underwritten public offering of common stock for aggregate net proceeds of approximately $86.2 million and the long-term debt net proceeds of $162.7 million received on the Closing Date. For the nine months ended September 30, 2020, we used $13.6 million to repurchase shares of our common stock in accordance with our share repurchase program.

Contractual Obligations

We have various contractual obligations consisting of operating leases and purchase obligations. Purchase obligations include agreements with consultants, contracts with third-party service providers, and other future contracts or agreements.

Prior to the Closing Date, RU entered into service agreements with a third party, Collegis LLC, to provide marketing and IT services that expire September 30, 2024. The total minimum value of the service contracts over the remaining three year period is approximately $57.2 million.

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements, including any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

We had no material derivative financial instruments or derivative commodity instruments as of September 30, 2021. We maintain our cash and cash equivalents in bank deposit accounts, money market funds and short-term U.S. treasury bills. The bank deposits exceed federally insured limits. We have historically not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash and cash equivalents. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, a 10% increase or decrease in interest rates would not have a material impact on the fair market value of our portfolio.

Interest Rate Risk

We are subject to risk from changes in interest rates primarily relating to our investment of funds in short-term U.S. treasury bills issued at a discount to their par value. Our future investment income will vary due to changes in interest rates. For example, during the period ended September 30, 2020 and thereafter, we have experienced a significant decrease in interest rates, including in connection with the COVID-19 pandemic, and we expect to continue to reduce interest income earned on our invested funds. However, the decrease in interest income did not have a material impact on our earnings. At September 30, 2021, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows.

In the normal course of business, we employ established policies and procedures to manage our exposure to changes in interest rates. To reduce our exposure to market risks from increases in interest rates on our variable rate indebtedness we entered into a hedging arrangement in the form of an interest rate cap agreement. The interest rate cap agreement provides us with interest rate protection in the event the LIBOR rate increases above 2% and has a January 2025 termination date. As of September 30, 2021, the interest rate cap agreement hedged $87.5 million of principal under our term loan. For every 100 basis points increase in LIBOR, we would incur an incremental $1.8 million in interest expense per year, excluding any impact offset from the interest rate cap agreement.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of September 30, 2021. Based upon the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2021.

In accordance with SEC guidance of an acquired business, Rasmussen University, acquired on September 1, 2021, was excluded from the evaluation of the effectiveness of our disclosure controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Beginning in March 2020, in response to the COVID-19 pandemic, we implemented our business continuity plan and transitioned to a remote workforce. Although the impacts of the COVID-19 pandemic have not resulted in any changes in our internal control that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, we are continually monitoring and assessing the COVID-19 pandemic and the impact it may have on our operations, including our internal control.

In accordance with SEC guidance, management may omit an assessment of an acquired business’ internal control over financial reporting from management’s assessment of internal control over financial reporting for a period not to exceed one year. Based on this guidance, management did not assess the effectiveness of internal control over financial reporting of RU, due to the timing of the acquisition.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we have been and may be involved in various legal proceedings. We currently have no material legal proceedings pending.

Item 1A. Risk Factors

An investment in our stock involves a high degree of risk. You should carefully consider the risks set forth in the Risk Factors section of our Annual Report and the other information set forth in this Quarterly Report on Form 10-Q, our Annual Report, and the additional information in the other reports we file with the SEC. If any of the risks contained in those reports actually occur, our business, results of operation, financial condition, and liquidity could be harmed, the value of our securities could decline and you could lose all or part of your investment. With the exception of the following, there have been no material changes in the risk factors set forth in the Risk Factors section of our Annual Report.

Our student registrations and revenue have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition from GoArmyEd to ArmyIgnitED.

Army service members participating in TA programs constituted approximately 22.9% of APUS’s adjusted net course registrations for 2020. APUS relies on the ability of the Army, and the other branches of the Armed Forces, to process service members’ participation in TA programs, and from time to time, changes to processes have impacted the ability of service members to participate in those programs. For example, the Army previously announced that it would transition from its legacy system, GoArmyEd, to a new system, ArmyIgnitED, that soldiers could use to apply for TA. As described more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview,” this transition has been beset by delays and resulted in temporary suspension and disruption of the Army’s TA programs. While soldiers could continue to directly register for courses with the expectation TA can be retroactively applied for, Army officials have indicated that soldiers will be reimbursed for out-of-pocket costs incurred while ArmyIgnitED is unavailable and the Army has created a process for soldiers to seek reimbursement. On July 16, 2021, the Army released a list of educational institutions that are permitted to begin to enroll students with TA after the ArmyIgnitED system goes live. The Army included AMU and APU on the list of institutions that had taken the steps necessarily to support enrollment of students through the new system, and on July 19, 2021, the ArmyIgnitED system went live for soldiers seeking to use TA for courses at APUS. We continue to experience challenges related to system performance, process changes and software defects, and there is no assurance that the new portal will ever work correctly or efficiently or will not have continuing impacts on soldiers’ ability to participate in the TA programs or receive funds under those programs. There was an adverse impact on registrations and revenue for the quarters ended June 30, 2021 and September 30, 2021, and we expect some impact to continue for the remainder of 2021. The inability of soldiers to participate in TA programs, or continued or additional limitations on their ability to apply and participate, would have an adverse effect on our results of operations and financial condition, particularly because soldiers make up the largest group of TA participants at APUS. In addition, TA will have to be retroactively sought and obtained for soldiers who registered for courses during the period beginning March 8, 2021. As a result, it is possible that we could incur bad debt expenses if soldiers who expect to receive TA do not receive it and do not otherwise pay the tuition for their courses. The disruption to the Army’s systems has also adversely impacted APUS’s ability to invoice the Army for Army registrations and has adversely impacted accounts receivable, and may continue to impact future registrations, revenue and accounts receivable balances and cash flow from operations.

Moderating demand for our programs as a result of the abatement of the COVID-19 pandemic could adversely affect our business, financial condition, and results of operations.

In 2020, we experienced an increase in net course registrations at APUS and an increase in student enrollment at HCN, and Rasmussen University similarly experienced an increase in its enrollments. We believe the increase in net course registrations at APUS was in part due to the impact of the COVID-19 pandemic, and that the increase in student enrollment at Rasmussen University and HCN was due in part to an increase in demand for nursing education and a change in the competitive environment due to COVID-19. There is no assurance that the increases will be sustained, and recent trends at APUS and Rasmussen University show a moderation in registration and enrollments. As the COVID-19 pandemic abates, we believe near-term demand for our programs could moderate further.

Rasmussen University is currently on provisional certification with the Department of Education, including because of the recent Rasmussen Acquisition, and the terms of that provisional certification could limit its potential for growth.

In July 2021, ED notified Rasmussen University that in connection with Rasmussen University’s March 2019 change in ownership, ED was imposing certain temporary growth restrictions on the institution, which include maintaining limitations on new programs and locations that were already in place and imposing a cap on the number of students that participate in Title IV programs that can be enrolled. Additionally, ED continued to require Rasmussen University to submit periodic financial and enrollment reports, a requirement that it had imposed on RU in connection with the financial responsibility letter of credit previously imposed on Rasmussen University. On September 9, 2021, Rasmussen University timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership. ED and Rasmussen University entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective as of October 14, 2021, that allows Rasmussen University to continue disbursing Title IV funds during the period of ED’s review of the change in ownership application. The TPPPA continues the growth restrictions that ED imposed as a result of the March 2019 change in ownership, including the same enrollment cap. The TPPPA specifies that after ED reviews and accepts financial statements and compliance audits that cover one complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU may seek to have the enrollment cap removed and may seek approval for new programs that replace current programs. The TPPPA also specifies that at least until after ED reviews and accepts financial statements and compliance audits that cover the second complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU must seek pre-approval for new locations, new programs that are not replacing current programs, and other changes. These growth restrictions could limit or adversely affect Rasmussen University’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or changed programs. The growth restrictions could also have an adverse effect on our ability to grow revenues or meet investors’ and financial analysts’ expectations for financial performance.

In addition, if ED were to determine that an institution is unable to meet its responsibilities while it is provisionally-certified, as Rasmussen and APUS currently are, ED can seek to revoke an institutions’ certification to participate in Title IV programs with fewer due process protections than if they were fully-certified. Limitations on our institutions’ operations could, and the loss of our institutions’ certification to participate in Title IV programs would adversely affect our institutions’ enrollments, and our revenue and results of operations.

Congressional and administrative examination of for-profit institutions has resulted in and could result in further legislative and regulatory changes that may materially and adversely affect our business.

ARPA modifies the 90/10 Rule to require that a for-profit institution derive not less than 10% of its revenue from sources other than “federal education assistance funds.” Prior to going into effect, the provisions of ARPA related to the 90/10 Rule are required to go through a negotiated rulemaking process. An ED final rule to implement the ARPA provision is not expected to go into effect until July 1, 2023 for the full year ending December 31, 2023 at the earliest, and we cannot predict to what extent ARPA and the final rule will affect us and our institutions. ARPA does not define “federal education assistance funds”. However, we expect such definition to be developed as part of the required negotiated rulemaking and anticipate that ED would seek to include TA and VA education benefits in the scope of the definition. If the rulemaking process results in TA and VA being included in the “90%” side of the ratio, our institutions’ 90/10 Rule percentage will increase. This change, and any resulting actions we take to adjust the operations of our institutions to comply with the rule, could have a material adverse impact on the financial condition and operations of our institutions.

We cannot predict the likelihood that Congress or the President will continue to modify the 90/10 Rule with respect to relevant sources of funds or other aspects of the calculation. For example, in recent years Congress has considered various other proposals that would modify the 90/10 Rule, including proposals to decrease the limit on Title IV funds from 90% to 85%. Such proposals, or other similar legislation, should they become law, could have a material adverse impact on the operations of our institutions. In addition, one state has passed and other states may in the future pass their own versions of the 90/10 Rule that include TA and VA education benefits or other sources of funds in the “90%” side of the ratio. To the extent that any additional laws or regulations, including regulations under ARPA, are adopted that limit or condition the participation of for-profit schools or distance education programs in TA or in Title IV programs, or that limit or condition the amount of TA for which for-profit schools or distance education programs are eligible to receive, our financial condition and results of operations could be materially and adversely affected.

We also cannot predict whether ED’s negotiated rulemaking process to address borrower defenses to repayment, public service student loan forgiveness programs, mandatory pre-dispute arbitration and prohibition of class-action lawsuits, among other issues, will result in regulatory changes that would harm our business. These regulatory changes have the potential to materially and adversely affect our financial conditions and results of operations.

Finally, in October 2021, in what it termed a broad-based initiative to deter for-profit college fraud, the Federal Trade Commission, or FTC, issued informational notices to 70 for-profit higher education institutions, including APUS and Rasmussen University, informing them of certain marketing practices the FTC had previously determined to be deceptive or unfair and therefore unlawful under the FTC Act. The informational notices were sent in furtherance of an FTC Act provision permitting penalties against those engaging in unfair or deceptive acts or practices with actual knowledge of their unfair or deceptive nature. The informational notices informed the institutions that engaging in such practices could subject a company to civil penalties under that provision. By providing the informational notices, the FTC is able to document that the institutions have knowledge that the FTC has found these marketing practices to be unfair or deceptive. The FTC also announced that it would be enhancing its enforcement cooperation with other agencies with oversight of educational institutions, including ED’s Office of Student Aid and the Department of Veterans Affairs. In addition, on October 6, 2021, ED announced that it had restored an Office of Enforcement within ED’s Office of Federal Student Aid to strengthen oversight of and enforcement actions against postsecondary institutions that participate in federal student loan, grant, and work-study programs. Any civil penalties or enforcement actions could have a material and adverse effect on our financial condition and results of operations

A failure of HCN to satisfy ABHES accreditation standards, including specific student achievement indicators, could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, cash flows, and results of operations.

ABHES annually reviews student achievement indicators, including retention rate, placement rate, and licensing and credentialing examination pass rate. Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% pass rate on mandatory licensing and credentialing examinations, or fails to meet state-mandated results for credentialing or licensure. Alternatively, ABHES may in its discretion provide an opportunity for a program to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or other good cause. For the reporting year ended June 30, 2021, several HCN programs did not satisfy ABHES’s threshold requirements for retention rates.

If any HCN campus or program fails to satisfy ABHES achievement measures, enrollment in such HCN campus or program could decline, or we could be forced to cease enrollments at that campus or in that program, which could have a material adverse impact on HCN’s student enrollment and our and HCN’s revenue, cash flows, and results of operations. The actions HCN takes to comply with ABHES requirements may not be successful in resolving existing issues and, if those actions are targeted at specific campuses or programs, may fail to prevent additional issues arising with respect to those or other campuses or programs. Similarly, even if HCN is successful in the long term in complying with these standards, the actions HCN takes to comply could result in increased costs or decreased enrollments, and impairment of goodwill.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases

During the three months ended September 30, 2021, we did not repurchase any shares of our common stock. The table and footnotes below provide details regarding our repurchase programs (unaudited):


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3)
July 1, 2021	—	$	—	—	350,424	$	8,396,734
July 1, 2021 - July 31, 2021	—	—		—	350,424	8,396,734
August 1, 2021 - August 31, 2021	—	—		—	350,424	8,396,734
September 1, 2021 - September 30, 2021	—	—		—	383,064	8,396,734
Total	—	$	—	—	383,064	$	8,396,734

(1)On December 9, 2011, our Board of Directors approved a stock repurchase program for our common stock, under which we could annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plans. Repurchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions based on business and market conditions. The stock repurchase program does not obligate us to repurchase any shares, may be suspended or discontinued at any time, and is funded using our available cash.

(2)On May 2, 2019, our Board of Directors authorized the repurchase of up to $35.0 million of our common stock, and on December 5, 2019, our Board approved an additional authorization of up to $25.0 million of shares. We may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price and general business and market conditions. We have no obligation to repurchase shares and may modify, suspend or discontinue the repurchase program at any time. The authorization under this program is in addition to our repurchase program under which we may annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plans.

(1)During the three month period ended September 30, 2021, we were deemed to have repurchased 8,343 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants. These repurchases were not part of the stock repurchase program authorized by our Board of Directors as described in footnotes 1 and 2 of this table.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.			Exhibit Description
10.1			Credit Agreement, dated September 1, 2021, by and among American Public Education, Inc., the Lenders and Issuing Banks from time to time party thereto, Macquarie Capital Funding LLC, Macquarie Capital (USA) Inc., and Truist Securities, Inc. (1)
10.2			Collateral Agreement, dated September 1, 2021, by and among American Public Education, Inc., Macquarie Capital Funding LLC, as administrative agent and collateral agent and the Guarantors from time to time party thereto. (1)
10.3*			Third Amended and Restated Information Technology Services Agreement, dated October 1, 2016, by and between Rasmussen College Inc. and Collegis LLC. (filed herewith)
10.4*			Statement of Work #4, dated March 15, 2019, by and between Collegis, LLC, and Rasmussen College, LLC, subject to the terms of the Third Amended and Restated Information Technology Services Agreement, dated October 1, 2016. (filed herewith)
31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
EX-101.SCH			Inline XBRL Taxonomy Extension Schema Document
EX-101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
EX-101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Portions of this exhibit have been redacted in compliance with Regulation S-K 601(b)(10).
(1)			Incorporated by reference to exhibit filed with the registrant’s Current Report on Form 8-K (File No. 001-33810) filed with the SEC on September 2, 2021.

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 thereunto duly authorized.


						AMERICAN PUBLIC EDUCATION, INC.
			/s/ Angela Selden			November 8, 2021
			Angela Selden
			President and Chief Executive Officer
			(Principal Executive Officer)


			/s/ Richard W. Sunderland, Jr.			November 8, 2021
			Richard W. Sunderland, Jr.
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

Exhibit 10.3

Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed, and has been marked with “[***]” to indicate where omissions have been made.

THIRD AMENDED AND RESTATED INFORMATION TECHNOLOGY SERVICES AGREEMENT

DATED AS OF OCTOBER 1, 2016

BY AND BETWEEN

COLLEGIS, LLC

AND

RASMUSSEN COLLEGE, INC.,

A PUBLIC BENEFIT CORPORATION

TABLE OF CONTENTS

ARTICLE I DEFINITIONS 1

ARTICLE II SERVICES 2

2.1Performance of Services 2

2.2Growth in Services 2

2.3Case Study/Reference Client 3

2.4Technology Evolution 3

ARTICLE III FEES FOR SERVICES 3

3.1Consideration 3

3.2Invoices and Payment Terms 3

3.3Change of Circumstances 3

ARTICLE IV CONTRACT ADMINISTRATION 3

4.1Liaison between Parties 3

4.2Ownership of Software, Data, and Information Technology Equipment 3

4.3Use of Technology and Equipment. 4

4.4Use of Software and Access to Personnel 4

4.5Use of Third Party Software/Hardware 4

ARTICLE V PERFORMANCE 4

5.1Status Reporting 4

5.2Disaster Recovery 4

5.3Audit Rights/Access to Records 4

5.4Service Level 5

ARTICLE VI DISPUTES 5

6.1Dispute Resolution and Escalation Procedures 5

6.2Non-Binding Mediation 5

6.3Equitable Relief 5

ARTICLE VII WARRANTIES, INDEMNIFICATION, AND LIMITATIONS OF LIABILITY

7.1 Collegis’ Warranties 5

7.2Indemnification by Collegis 6

7.3LIMITATION OF LIABILITY 6

7.4Provision of Insurance 6

ARTICLE VIII TERM, EXTENSION, AND TERMINATION 7

8.1Term 7

8.2Extension 7

8.3Termination for Breach by Collegis 7

8.4Provisions Relating to Termination 8

8.5Termination for Breach by Rasmussen 8

8.6Transition 8

ARTICLE IX OWNERSHIP OF WORK PRODUCT AND INTELLECTUAL PROPERTY 9

9.1Rasmussen License 9

9.2Collegis License 10

9.3Reserved Rights 10

9.4Custom Work Product 10

9.5Infringements 10

9.6Residuals 10

9.7CBE Modules and Courses 10

ARTICLE X CONFIDENTIALITY OF PROPRIETARY MATERIAL 11

10.1Confidential Information 11

10.2Treatment of Confidential Information 11

ARTICLE XI MISCELLANEOUS 11

11.1Assignment 11

11.2Governing Law 11

11.3WAIVER OF JURY TRIAL 12

11.4Mandatory Arbitration 12

11.5Force Majeure 12

11.6Notices 12

11.7Integration of Agreement 13

11.8Amendment 13

11.9Severability 13

11.10Waiver 13

11.11Binding Effect 13

11.12Authority 13

11.13Expenses for Enforcement 13

11.14Independent Contractor 13

11.15Compliance With Laws 13

11.16Publicity 13

11.17Nondiscrimination/Employment 14

11.18Non-Solicitation 14

11.19Each Party Responsible for its Agents and Employees 14

THIRD AMENDED AND RESTATED INFORMATION TECHNOLOGY SERVICES AGREEMENT

THIS THIRD AMENDED AND RESTATED INFORMATION TECHNOLOGY SERVICES AGREEMENT (the “Agreement”) is made this 1st day of October, 2016 by and between Collegis, LLC, a Delaware limited liability company (“Collegis”) and Rasmussen College, Inc., a Public Benefit Corporation, a Delaware corporation (“Rasmussen”) (Collegis and Rasmussen are sometimes collectively referred to herein as the “Parties” and, as the context requires, individually referred to herein as a “Party”).

WHEREAS, pursuant to that certain Second Amended and Restated Information Technology Services Agreement by and between the Parties made effective as of October 1, 2015 (“Superseded Agreement”), Rasmussen purchased certain management information services from Collegis in support of the management and operation of Rasmussen’s information technology;

WHEREAS, the Parties desire to amend and restate the Superseded Agreement on the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual agreements contained herein, the Parties hereby agree as follows:

ARTICLE I DEFINITIONS

The following definitions shall apply to this Agreement:

1.1“Additional Services” shall mean services which are outside the scope of Services (as hereinafter defined). The scope of Services is based upon existing information technology serving Rasmussen’s existing business with a certain hardware and software configuration, a specified number of input/output devices and workstations, and other network components in existence at the time this Agreement is entered into (the “Environmental and Technology Profiles”). Additional Services shall result from changes required to the scope of Services due to:

(a)A change that both Parties agree is material in the Environmental and Technology Profiles, such as, but not limited to, adding additional equipment or new applications which require additional staff to support or the information technology volume drivers of Rasmussen’s business increasing or changing materially;

(b)The ownership or mission of Rasmussen changing in a way which results in a material change in information technology required to serve the business emphasis or business operations of Rasmussen after the change; or

(c)Rasmussen requesting new services which are outside the scope of Services if such changes cause a change in the level of resources reasonably required to deliver the Services described in a SOW, unless the Services are modified such that the Services, as modified, can be delivered within the available level of resources. If the Services are not so modified, then such changes shall be Additional Services and shall be dealt with as provided for in Section 2.2 of this Agreement.

1.2 “Collegis’ Site Director” shall mean and refer to the person appointed by Collegis who will be delegated the duty and responsibility of maintaining liaison with Rasmussen and overseeing performance by Collegis of its obligations under this Agreement.

1.3“Disaster” shall mean the occurrence of one or more events that impacts the delivery of a material portion of the Services.

1.4“Effective Date” shall mean and refer to October 1, 2016. Such date shall be the date this Agreement becomes effective and from which date all time periods shall be measured unless otherwise provided in the body of this Agreement.

1.5“Executive Representative” shall mean a person designated by either Party who is authorized on behalf of the Party making the designation to bind that Party to agreements, including, but not limited to agreements intended to resolve disputes under this Agreement.

1.6“IT Steering Committee” or “ITSC” shall mean and refer to the committee appointed by Rasmussen who will be delegated the duty and responsibility of maintaining liaison with Collegis and overseeing performance by Rasmussen of its obligations under this Agreement.

1.7“Office of Information Technology” shall mean and refer to any of Collegis’ data centers and offices.

1.8“Rasmussen’s Site Director” shall mean and refer to the person appointed by Rasmussen who will serve on the ITSC and be the primary point of contact with Collegis related to its obligations under this Agreement.

1.9“Services” shall mean and refer individually and collectively to the tasks and services which Collegis has agreed to perform hereunder, which tasks and services are described with particularity in an SOW.

1.10“Service Change Process” shall mean the process for adding any Additional Services as set forth in the applicable SOW.

1.11“Student Enrollment” shall mean a unique residential or online student enrolled in a program of study at Rasmussen.

1.12“SOW” shall mean a Statement of Work executed under this Agreement.

1.13“Term” shall mean, with respect to each Service, the Initial Term and any Renewal Term, as such terms are defined in an SOW.

1.14“Termination Date” shall have the meaning set for in Section 8.4.

ARTICLE II SERVICES

2.1Performance of Services. Starting on the Effective Date and during the Term of the Agreement, Collegis shall perform the Services in the manner described in the applicable. SOW. This Agreement to provide Services takes into account Rasmussen’s determination that Collegis possesses the requisite expertise and management ability to provide the Services. Unless otherwise specifically set forth in an SOW, Collegis will perform the Services in the manner and at a level of service (including with respect to timing and priority) consistent with past practices with respect to that performed for Rasmussen prior to the Effective Date. Without limiting the foregoing, Collegis will use commercially reasonable efforts to provide the Services in accordance with the specific performance standards (“Service Levels”) set forth on an exhibit to an applicable SOW.

2.2Growth in Services. If Additional Services are required or requested, then Collegis and Rasmussen shall confer as to the extent of Additional Service and agree upon a fee to be charged for the Additional Services prior to Collegis being obligated to provide such Additional Services. Any request for Additional Services will be subject to the Service Change Process in accordance with the provisions of an SOW. In the event Collegis provides Additional Services prior to the time a fee structure is agreed, Rasmussen will be responsible for any payments owing for the Additional Services from the date the Additional Services began to the date the fee structure was agreed upon. For the avoidance of doubt, Collegis shall have no obligation to provide any Additional Services unless the Parties have agreed upon a fee for such Additional Services. The Parties shall timely execute a Service Change Order (“Change Order”) for any Additional Services that are agreed upon.

2.3Case Study/Reference Client. Rasmussen acknowledges and agrees that it shall serve as a case study and reference client for Collegis. In this regard, Rasmussen agrees to allow Collegis to include reference to Rasmussen and the Services performed hereunder in a portfolio

designed to market Collegis’ services to third parties, including on Collegis’ website. Written or other descriptions or depictions of, or included in, any case study or reference including Rasmussen shall be subject to the advance written consent of Rasmussen through Kevin Delano, Chief Financial Officer, which consent shall not be unreasonably withheld.

2.4Technology Evolution. Collegis shall use commercially reasonable efforts to prevent the versions of its hardware, software and systems used in performing the Services from becoming a version that is no longer supported by its vendor or manufacturer such that they are not sufficient to enable the performance of the Services in accordance with this Agreement and applicable SOWs, except as otherwise consented to by Rasmussen.

ARTICLE III FEES FOR SERVICES

3.1Consideration. As consideration for the Services provided hereunder, Rasmussen shall pay Collegis an amount equal to the fees set forth on an Exhibit to the applicable SOW (the “Fees”), plus any applicable sales, use, or similar tax imposed on, or payable with respect to, any Fees payable pursuant to this Agreement. Such Exhibit to an SOW shall include all applicable Fees and the methodology for calculating such Fees.

3.2Invoices and Payment Terms. Collegis shall submit invoices or make payments to Rasmussen in accordance with the invoice and payment schedule set forth on an Exhibit to an SOW. Each invoice shall include an explanation in reasonable detail of the calculation of the Fees. Failure to timely issue an invoice shall not relieve Rasmussen of its obligation to pay Collegis when invoices are rendered. All undisputed balances shall be due within forty-five (45) days after receipt by Rasmussen of an invoice.

3.3Change of Circumstances. Collegis and Rasmussen acknowledge that there are current and future risks that are not within either Party’s control that may impede, limit, or adversely affect the attainment of the intended financial or operational goals and values reflected in this Agreement for one or both Parties. Collegis’ and Rasmussen’s Executive Representatives shall review business and technology strategy, and related budgetary and financial consequences, at an annual meeting. Such meeting shall be scheduled to coordinate with Rasmussen’s fiscal year planning process, so that any changes agreed upon by the Parties can be reflected in the annual plans of the Parties.

ARTICLE IV CONTRACT ADMINISTRATION

4.1Liaison between Parties. Rasmussen shall appoint a Site Director and members to the ITSC, and Collegis shall appoint a Site Director. Collegis’ Site Director shall be reasonably available for consultation with Rasmussen’s ITSC regarding work contemplated to be performed under this Agreement. The Parties’ liaisons shall meet as provided in Section 5.1 hereof to discuss performance under this Agreement, and to determine in a collective manner the work that is to be done by Collegis under this Agreement, subject to the provisions of an SOW. The Rasmussen ITSC or Rasmussen’s Site Director shall be the only people authorized on behalf of Rasmussen to direct Collegis’ performance and the nature and scope of work to be accomplished using the resources made available to Rasmussen pursuant to this Agreement. The Collegis Site Director shall be the only person authorized on behalf of Collegis to commit to perform Services for Rasmussen pursuant to this Agreement. The liaisons shall be responsible for attempting to resolve any disputes between the Parties before submission of the dispute to mediation as provided for in Section 6.2 and before seeking arbitration or judicial resolution of any dispute.

4.2Ownership of Software, Data, and Information Technology Equipment. Subject to Article IX below, Rasmussen reserves and retains the right, title, and interest in any and all computing equipment, software, systems, data, output, and other materials or property except that which is explicitly furnished by Collegis or third parties who retain such rights themselves (the “Computing Assets”). Upon expiration or earlier termination of this Agreement, Collegis shall cease using and shall return to Rasmussen any Computing Assets provided by Rasmussen in as good condition as when turned over to it, reasonable wear and tear excepted. All costs relative to information technology equipment and supplies for Rasmussen’s computing functions shall be the responsibility of Rasmussen.

4.3Use of Technology and Equipment. At no charge to Collegis, Rasmussen shall provide Collegis access to all existing equipment, equipment services, programs, and supplies, and any additional equipment, equipment services, programs, and supplies that are added by mutual agreement of Collegis and Rasmussen from time to time, necessary to support the Services and any Additional Services. Rasmussen shall provide Collegis’ staff with access to all such equipment so that Collegis may perform its obligations under this Agreement.

4.4Use of Software and Access to Personnel. For purposes of performance under this Agreement, Collegis shall have complete access to all Rasmussen software programs and related material necessary to provide the Services and any Additional Services. Collegis shall also have reasonable access to Rasmussen’s management, professional, and operating personnel necessary for performance under this Agreement, as well as to all materials, records, discs, tapes, or other information necessary to perform the Services contemplated hereby.

4.5Use of Third Party Software/Hardware. Collegis shall be solely responsible for obtaining the right for Rasmussen to use the software and hardware in the Office of Information Technology which shall be set forth on an Exhibit to an SOW. Collegis shall obtain all material permissions required from third party vendors, including sublicenses if any are required for the software and hardware set forth on an Exhibit to an SOW. Rasmussen shall fully cooperate with Collegis as needed for obtaining any necessary licenses or sublicenses.

ARTICLE V PERFORMANCE

5.1Status Reporting. Collegis’ Site Director shall conduct regular meetings with Rasmussen’s ITSC and such other persons as may be designated by Rasmussen to formally review Collegis’ performance under the terms of this Agreement. These meetings shall be conducted at a time and location mutually agreed upon. Collegis shall also prepare regular status reports and tactical plans which document past activities and outline planned activities. The form and frequency of such status reports and tactical plans shall be mutually agreed upon.

5.2Disaster Recovery.

(a)Collegis shall develop, maintain and provide to Rasmussen a disaster recovery plan (the “Disaster Recovery Plan”) in accordance with the parameters which shall be outlined on an Exhibit to an SOW. Collegis may update and/or revise its Disaster Recovery Plan provided that it notifies Rasmussen in advance and shall acquire Rasmussen’s prior written consent if such update and/or revision would reasonably be expected to adversely affect Rasmussen directly.

(b)Collegis shall implement its Disaster Recovery Plan immediately upon the occurrence of a Disaster or other comparable outage and, upon such implementation, the Disaster Recovery Plan shall operate in accordance with its terms.

5.3Audit Rights/Access to Records.

(a)Upon notice from Rasmussen, Collegis shall provide auditors and inspectors of Rasmussen or any regulatory authority having jurisdiction over Rasmussen with reasonable access to the Office of Information Technology for the purpose of performing audits or inspections of Rasmussen (including Collegis’ provision of any Services for Rasmussen). Collegis shall provide such auditors and inspectors any assistance that they may reasonably require in performing their audit or inspection.

(b)If any audit by an auditor designated by Rasmussen or a regulatory authority having jurisdiction over Rasmussen or Collegis results in Collegis or Rasmussen being notifiedthat the Services performed in the Office of Information Technology by Collegis are not in compliance with any generally accepted accounting principles or other audit requirements relating to the Services performed under this Agreement, Collegis and Rasmussen shall mutually agree on any changes required to comply.

5.4Service Level. Collegis shall provide Services in accordance with the Service Levels which shall be set forth on an Exhibit to an SOW.

ARTICLE VI DISPUTES

6.1Dispute Resolution and Escalation Procedures. All disputes between the Parties under this Agreement shall be resolved in accordance with the following procedures. Prior to commencement of non-binding mediation, as provided for in Section 6.2, the Parties shall first seek to resolve any dispute by a meeting between their respective liaisons, but only after notice of default if one is alleged and the requisite opportunity to cure. Such meeting shall take place within forty-eight (48) hours after either Rasmussen’s Site Director or Collegis’ Site Director (individually referred to as a “Party’s Representative” and collectively referred to as the “Parties’ Representatives”) formally notifies the other Party’s Representative that a meeting is being requested. Such notification shall be made in writing requesting the meeting (a “Meeting Request”) and shall be delivered by email, by prepaid U.S. mail return receipt requested, by hand delivery, or express delivery and shall be deemed made when received. A Meeting Request shall state what the subject discussion of the requested meeting shall be with as much specificity as is reasonably possible so that the Parties can come to the meeting prepared to have a meaningful discussion and the meeting can be productive. If the dispute is not resolved at the requested meeting, then either Party’s Representative may notify the other Party’s Representative at such meeting that they will request the dispute be submitted to the respective Executive Representatives of the Parties for resolution. A follow-up request for a meeting of the Executive Representatives shall be made in writing in the same manner as the Meeting Request, no later than forty-eight (48) hours after the end of the meeting of Rasmussen’s Site Director and Collegis’ Site Director. The meeting of the Executive Representatives shall take place at a time and place mutually agreed to by the Executive Representatives no later than seven (7) days following the end of the meeting of Rasmussen’s Site Director and Collegis’ Site Director. If the Executive Representatives are unable to resolve the dispute, or if either of the Executive Representatives fails to meet with the other for any reason, then the dispute may be immediately submitted to non-binding mediation as provided for in Section 6.2.

6.2Non-Binding Mediation.

(a)In the event the Parties cannot resolve a dispute which arises between them in accordance with the procedure set out in Section 6.1, the Parties shall then submit the dispute to non-binding mediation. Either Party may request mediation by sending a written notice to the other Party, and the mediation shall be held in a mutually agreeable place, at a mutually agreeable time, within thirty (30) days of the date of request for mediation. The Parties shall select a mediator who is acceptable to both of them, and if they cannot agree on a mediator, then each shall select its own mediator, and the two mediators shall serve in tandem to mediate the dispute.

(b) If as a result of the mediation the Parties do not resolve their dispute, or if the mediation has continued without resolution for at least forty-five (45) days after the original request for mediation was made, then either Party shall have the right to submit the dispute to arbitration in accordance with Section 11.4. In the event a dispute is submitted to arbitration, but this Agreement has not been terminated by the Party submitting the dispute to arbitration, then the Party not submitting the dispute to arbitration shall continue to perform under this Agreement unless the Party who submits the dispute to arbitration materially breaches this Agreement and the other Party would otherwise have the right to terminate this Agreement in accordance with its terms.

6.3Equitable Relief. Notwithstanding the provisions of this Article VI, either Party may seek equitable relief at any time.

ARTICLE VII

WARRANTIES, INDEMNIFICATION, AND LIMITATIONS OF LIABILITY

7.1Collegis’ Warranties.

(a)Collegis warrants that all of the staff it assigns to perform work under this Agreement shall be competent to perform the services rendered by them in furtherance of this Agreement and that they shall perform those services in a good and workmanlike manner in accordance with applicable commercially reasonable trade and professional standards.

(b)COLLEGIS EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE.

(c)Collegis warrants that it has and, through the Term hereof, shall have, the full authority, right, and power to use all hardware and software, including licensed software as set forth on an Exhibit to an SOW, used and to be used in the provision of Services hereunder.

(d)Collegis shall maintain adequate supporting material to enable Collegis to update or regenerate, as necessary, data files, printer outputs and other data. For the purposes of this provision, the term “adequate supporting material” shall mean and refer to all source records of data input into the computer system managed by Collegis for Rasmussen for the previous seven (7) days. In the event of loss, damage, or destruction of data or failure in operation of any Service, system or program due to the sole negligence of Collegis, Collegis’ liability for direct damages resulting therefrom shall include either the replacement, repair, reconstruction, redevelopment, or regeneration (all collectively referred to as “replacement”), at Rasmussen’s option, of the lost, damaged or destroyed data or repair or replacement of the service, system or program from Rasmussen’s supporting material in the method deemed most suitable by Collegis for such action. Collegis shall not be liable for any damages resulting or arising from Rasmussen’s failure to perform its obligations under this Agreement.

7.2Indemnification by Collegis. Collegis shall indemnify, defend and hold harmless Rasmussen, its affiliates, and its and their officers, directors, and employees from and against all liabilities, damages, costs or expenses (including reasonable attorney’s fees) resulting from (a) any breach or default by Collegis with respect to any representation, warranty or covenant of Collegis pursuant to this Agreement or any willful or grossly negligent act or omission of or by Collegis, its employees, contractors or agents, (b) any violation of law by Collegis, its employees, contractors or agents, and (c) any claim that any hardware, software or other materials used by Collegis in the performance of its obligations under the Agreement infringes a third party intellectual property right. For the avoidance of doubt, Collegis shall not be responsible for schedule delays, inaccuracies or other consequences resulting from incorrect Rasmussen data, lateness in delivery of Rasmussen’s data or the failure of equipment or personnel under Rasmussen’s control. Rasmussen shall promptly notify Collegis of any claim to indemnification, and Collegis shall have the right, at its election and expense, to assume sole control over the defense of any third party claim with Rasmussen cooperating in such defense as reasonably requested. No Party shall settle any third party claim without the other Party’s prior written consent, such consent not to be unreasonably withheld.

7.3LIMITATION OF LIABILITY. NEITHER PARTY’S TOTAL CUMULATIVE LIABILITY UNDER THIS AGREEMENT SHALL EXCEED [***] DOLLARS ($[***]) OR THE AMOUNT OF LIABILITY ACTUALLY COVERED AND PAID OUT BY SUCH PARTY’S INSURANCE COVERAGE WITH RESPECT TO THE APPLICABLE CLAIM, WHICHEVER IS GREATER. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING IN ANY MANNER FROM THE ACTIVITIES CONTEMPLATED BY THIS AGREEMENT, WHETHER UNDER CONTRACT, TORT, OR ANY OTHER CAUSE OF ACTION, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. THE FOREGOING LIMITATIONS OF LIABILITY SHALL NOT APPLY TO (A) ANY DAMAGES ARISING FROM A BREACH OF ARTICLE X (CONFIDENTIALITY) OR (B) ANY DAMAGES ARISING OUT OF A PARTY’S FRAUD OR WILLFUL MISCONDUCT.

7.4Provision of Insurance.

(a)By Collegis. Throughout the Term of this Agreement, Collegis shall maintain in full force and effect comprehensive general liability insurance with limits in an amount of not less than $[***] per occurrence and $[***] in the aggregate. Throughout the Term of this Agreement, Collegis shall

maintain in full force and effect a policy of Worker’s Compensation Insurance covering all of its employees assigned to render services under this Agreement providing for statutory limits. Rasmussen agrees that any liability of Collegis to Rasmussen (to the extent not excluded under Section 7.3 above) in connection with bodily injury, death or property damage is hereby limited to the amounts of insurance as set forth in this Section.

Collegis shall provide Rasmussen a certificate of insurance certifying that coverage as required by this Agreement has been obtained and shall remain in force as specified by this Agreement. Collegis shall maintain comprehensive property damage insurance insuring the hardware and software, to the extent insurable, in the full replacement amount.

(b)By Rasmussen. Throughout the Term of this Agreement, Rasmussen shall maintain in full force and effect comprehensive general liability insurance with limits in an amount of not less than $[***] per occurrence and $[***] in the aggregate. Throughout the Term of this Agreement, Rasmussen shall maintain in full force and effect a policy of Worker’s Compensation Insurance covering all of its employees assigned to render services under this Agreement under the direction of Collegis, providing for statutory limits. Collegis agrees that any liability of Rasmussen to Collegis (to the extent not excluded under Section 7.3 above) in connection with bodily injury, death or property damage is hereby limited to the amounts of insurance as set forth in this Section. Rasmussen shall provide Collegis a certificate of insurance certifying that coverage as required by this Agreement has been obtained and shall remain in force as specified by this Agreement.

ARTICLE VIII

TERM, EXTENSION, AND TERMINATION

8.1Term. The initial term of this Agreement shall commence on the Effective Date and, with regard to the Services identified in the applicable SOW, shall remain in effect, unless terminated pursuant to Section 8.3 or 8.5 hereof, for the period specified for each such Service as set forth on an Exhibit to an SOW (the “Initial Term”). At the end of the Initial Term for each Service, the Agreement as it relates to such individual Service shall automatically renew for the renewal term (or such longer period as the Parties may mutually agree) specified for such Service on such Exhibit (each, a “Renewal Term”) unless a Party provides written notice of non-renewal to the other Party with regard to such Service prior to the commitment date specified on such Exhibit for such Service.

8.2Extension. With respect to each Service, at least sixty (60) days, or such other time period as agreed to in writing between the Parties, prior to the commencement of the notice period specified on an Exhibit to an SOW specifying the Term, Rasmussen shall provide Collegis an estimate of its post-Initial Term volume requirements, if any. Thereafter, Rasmussen shall fully cooperate with Collegis in developing a Fee estimate for any Renewal Term. With respect to each Service, at least thirty (30) days prior to the commencement of the notice period specified on an Exhibit to an SOW specifying the Term, Collegis shall (a) provide Rasmussen with the updated Fee that would apply to the Renewal Term and (b) update the applicable SOW, as necessary, for any changes to the termination date of the Renewal Term. Upon the commencement of any Renewal Term, the applicable SOW and the attached Exhibits and Schedules shall be updated as applicable.

8.3Termination for Breach by Collegis. This Agreement may be terminated by Rasmussen prior to the expiration of its then existing term upon the occurrence of a default. A default shall include any one of the following:

(a)Failure by Collegis to timely perform any material obligation under this Agreement (an “Event of Default”) after requisite notice and opportunity to cure as provided for in Section 8.4;

(b)Any representation or warranty made by Collegis herein or in any document executed in connection herewith, or in any document or certificate furnished in connection herewith or pursuant hereto shall have been incorrect in any material respect at the time made;

(c)Collegis (i) files a petition in bankruptcy or for the approval of a plan of reorganization or arrangement under applicable bankruptcy laws or similar bodies of laws of any jurisdiction, or any involuntary petition in bankruptcy or plan of reorganization or similar action is filed against Collegis and is not dismissed within sixty (60) days, or an admission is made seeking the relief therein provided; (ii) is unable, or admits in writing its inability to pay its debts as they become due; (iii) makes an assignment for the benefit of creditors; (iv) files a petition or applies to any tribunal for the appointment of a custodian, receiver or any trustee for all or a substantial part of its assets; (v) by any act or omission indicates its consent, approval of, or acquiescence in the appointment of a receiver, custodian or trustee for all or a substantial part of its property; (vi) is adjudicated as bankrupt; (vii) becomes insolvent however otherwise evidenced; or (viii) ceases doing business as a going concern (all such events being defined as a “Bankruptcy Event”); or

(d)Destruction of Rasmussen’s property as a result of negligence or intentional misconduct, theft or material intentional misrepresentation on the part of a Collegis employee which has a material adverse effect upon Rasmussen.

8.4Provisions Relating to Termination.

(a)Upon the occurrence of an Event of Default, Rasmussen may give written notice of default to Collegis identifying in reasonable detail the nature of the Event of Default. Thereupon, Collegis shall have sixty (60) days from receipt of such written notice to correct in all material respects the Event of Default. Notwithstanding the foregoing to the contrary, in the event Collegis exercises its commercially reasonable best efforts to timely commence cure following receipt of written notice of any default, but is unable to complete cure within the appropriate cure period for reasons not solely within its control, then Rasmussen shall extend the time to cure for a period of time which is reasonable under the circumstances, not to exceed thirty (30) days in any event. If Collegis timely cures the Event of Default, then the notice of default shall be ineffective. If Collegis does not timely cure the Event of Default, then this Agreement may be terminated by Rasmussen within sixty (60) days of expiration of the cure period by written notice of termination setting forth the effective date of termination (the “Termination Date”). The Parties acknowledge and agree that the Services are material to Rasmussen’s business and timely performance is of the essence. Further, the Parties agree that any prolonged failure of the Services may cause irreparable harm to Rasmussen.

(b)In the event of a Bankruptcy Event, no notice of default shall be required and the Termination Date shall occur on the date of the Bankruptcy Event. In the event of a default described in Section 8.3(b) or 8.3(d), Rasmussen may terminate this Agreement upon notice to Collegis.

(c)Except for termination under Section 8.3 based on a Collegis breach, Rasmussen shall pay Collegis in full for all Services rendered up to and including the Termination Date, any deferred costs as may be provided for in a SOW, any accrued interest on past due payments, and any other sums due hereunder, all of which shall be due and payable in full in any event prior to or on the Termination Date.

(d)Notwithstanding the foregoing to the contrary, a default on the part of Rasmussen, not involving failure to timely pay monies due hereunder, shall not result in suspension of performance of the Services by Collegis until an orderly transition from Collegis’ performance of Services to some other party can be effected, not to exceed ninety (90) days in any event. During such transition period Rasmussen shall be responsible for paying all Fees which are required for payment hereunder.

8.5Termination for Breach by Rasmussen. If, but only if, Rasmussen fails to pay Collegis when due undisputed charges under this Agreement totaling at least two (2) invoice periods’ portion of the Fees, and fails to make such payment within five (5) days after the date Rasmussen receives notice of non-payment from Collegis, Collegis may terminate this Agreement as of a date specified in the notice of termination.

8.6Transition.

(a)With respect to each Service, prior to any scheduled termination, Collegis shall develop a plan for the orderly transition of the Service (the “Transition Plan”) such that after transition Rasmussen will be able to assume the performance of such Service or a third party of Rasmussen’s choice can take over performance of such Service in place of Collegis. The Transition Plan shall be developed by Collegis in conjunction with Collegis’ employees on site, Rasmussen’s executives and administrators, and such other persons as shall be designated by Rasmussen. Rasmussen shall fully cooperate with Collegis to develop the Transition Plan. The Transition Plan shall be completed no later than six (6) months prior to any scheduled termination of a Service. It shall cover, inter alia, the training of Rasmussen’s or a third party’s personnel in the operation and maintenance of the systems used and operated by Collegis and the mutually agreed upon transfer of such Collegis personnel, if any, as shall be employed by Rasmussen or such third party upon a termination of a Service.

(b)Collegis shall effect all transition activities associated with the orderly termination of each applicable Service within ninety (90) days of receipt of notice from Rasmussen of its acceptance of the Transition Plan. Collegis’ fees for services related to effecting transition activities and/or the Transition Plan, if not otherwise covered by the applicable SOW, shall be mutually agreed to by the parties; provided, however, that the transition costs to be paid by Rasmussen will include, among other things, the cost of Collegis personnel devoted to the transition (as opposed to devoted to regular operations), necessary external consulting services, additional hardware and software costs, any third party contract termination penalties (i.e., for long-term contracts that Collegis entered into on behalf of Rasmussen for network, telecom, data center services, etc.), and increased rates until the Termination Date if Collegis is no longer eligible for discounts after restructuring long term contracts.

(c)The Parties shall mutually agree in the Transition Plan to roles and responsibilities associated with a full transition, including, but not limited to: Project Executive Representative, Project Manager, Network Engineer, Voice Engineer, Microsoft Exchange Engineer, PSC Lead, Application Architects (with subject matter experts (“SMEs”) in the applicable applications), Postgres and SQL Server Database Administrators, LMS SMEs for each LMS hosted at the time of transition, LMS Course Production SMEs, IT Support Services Lead, Quality Assurance Testing Leads, and Analysts. This transition team shall be in addition to the Collegis and Rasmussen team members responsible for the Services otherwise to be provided until the end of the Transition Plan. For the avoidance of doubt, if only a subset of the Services is being transitioned, these roles will be adjusted accordingly.

(d)In the event of termination of this Agreement following the occurrence of an Event of Default and failure to cure which results in a written notice of termination being issued by Rasmussen, Collegis shall immediately upon the issuance of the notice of termination develop a Transition Plan in accordance with the procedures set forth in this Section 8.6 above except, however, that the Transition Plan shall be completed, to the extent possible, no later than the Termination Date, or thirty (30) days after the date of the notice of termination, whichever is later.

(e)In the event it is not possible for transition to be completed before the Termination Date, Collegis shall continue to perform such Services as may be required by Rasmussen in order to operate Rasmussen’s computing system, at Collegis’ rates then in effect, until such time as an orderly transition may be completed, but no later than ninety (90) days after, adjusted to reflect then current market rates, the Termination Date; provided, however, that if termination results from Rasmussen’s failure to timely pay sums due Collegis, then Collegis shall continue to perform such Services as may be required by Rasmussen after the Termination Date, at Collegis’ rates then in effect, but only if Rasmussen pays for such Services in advance.

ARTICLE IX

OWNERSHIP OF WORK PRODUCT AND INTELLECTUAL PROPERTY

9.1Rasmussen License. Subject to the terms and conditions of this Agreement, Rasmussen hereby grants to Collegis a nonexclusive, nontransferable, royalty-free license to use, execute, reproduce, display, perform and modify Rasmussen software and other intellectual property used in Rasmussen’s own operations solely for the purpose of performing the Services for Rasmussen. Collegis acquires no right, title or interest in any Rasmussen software or other intellectual property, other than the rights of use authorized by this Agreement.

9.2Collegis License. Subject to the terms and conditions of this Agreement, Collegis hereby licenses to Rasmussen for use during the Term of this Agreement, Collegis’ software, methodologies, procedures, trade secrets and other intellectual property used from time to time in, or created by Collegis during, the performance of Services, to the extent necessary for Rasmussen to receive and make use of the Services. Upon expiration or termination of this Agreement, Collegis agrees to license to Rasmussen or a successor contractor to use, execute, reproduce, and display, but not to sell, license or sublicense to others, such Collegis software created by Collegis during the Term of this Agreement solely with respect to its engagement with Rasmussen and not otherwise generally for use by Collegis, which is reasonably necessary to Rasmussen’s continuing operations and to the performance of similar services by Rasmussen or a successor contractor. All such licenses shall be without warranty, in form and substance reasonably satisfactory to Collegis, and contain customary provisions for the protection of Collegis’ intellectual property consistent with this Agreement.

9.3Reserved Rights. Except for the licenses expressly granted above, this Agreement grants no license or other rights to either Party to any patents, copyrights or other intellectual property of the other Party. Each Party reserves all rights in its ideas, concepts, know-how, methodologies, processes, technologies, algorithms, techniques and other intellectual property of every kind and description, including all improvements, enhancements or modifications, and all derivative works based upon such intellectual property (such as, for example, improvements in Collegis’ proprietary methods of performing information services (which shall remain Collegis’ exclusive property), or scholarly work copyrighted by Rasmussen or its employees and/or agents and made available to students electronically by Collegis on behalf of Rasmussen (which remains property of Rasmussen or its employees and/or agents, as appropriate)).

9.4Custom Work Product. Except as otherwise provided above and in Section 9.7, all software, documentation, inventions, works of authorship and intellectual property developed by Collegis or its subcontractors expressly for Rasmussen in connection with the performance of Services shall be “Custom Work Product.” Prior to delivery of a set of services, should Collegis determine the Custom Work Product would be useful to Collegis, Collegis shall notify Rasmussen in writing and the Parties will execute a separate written agreement detailing the provision of the deliverables useful to both Parties. Except as otherwise provided above, all Custom Work Product shall be Rasmussen’s exclusive property and are “works for hire” within the meaning of U.S. copyright laws. If any such Custom Work Product is not considered a work made for hire under applicable law, Collegis hereby irrevocably assigns to Rasmussen, without further consideration, all of Collegis’ right, title and interest in and to such Custom Work Product. Collegis shall execute any documents and take any other actions reasonably requested by Rasmussen to accomplish the purposes of this Section. Rasmussen may apply for patent, copyright or other intellectual property rights with respect to such newly developed intellectual property in all countries, and Collegis will extend reasonable cooperation in order to obtain and retain such registrations and other protections as Collegis deems advisable. Rasmussen grants Collegis a nonexclusive license to use all such Custom Work Product in the performance of Services for Rasmussen. Any open source software included by Collegis in a Custom Work Product shall comply with general industry protocol and standards.

9.5Infringements. Each Party covenants to perform its responsibilities under this Agreement in a manner that does not, to the knowledge of the applicable Party, infringe, or constitute an infringement or misappropriation of, any patent, trade secret, copyright or other intellectual property right of any third party.

9.6Residuals. Nothing contained in this Agreement shall restrict either Party from the use of any ideas, concepts, know-how, methodologies, processes, technologies, algorithms or techniques relating to the performance of information technology services which either Party, individually or jointly, (a) owns prior to the Effective Date, (b) except as otherwise provided herein, develops or discloses under this Agreement, or (c) develops or obtains independently during the Term, provided that in doing so such Party does not breach its obligations of confidentiality or infringe the intellectual property rights of the other Party, or third parties, who have licensed or provided materials to the other Party.

9.7CBE Modules and Courses. Notwithstanding anything to the contrary contained herein, the ownership of any and all competency based education (“CBE”) modules and courses (including any

previously co-developed CBE modules and/or courses by Rasmussen and Collegis) shall be solely governed by a separate Joint Development Agreement dated April 11, 2016 by and between Rasmussen and Collegis.

ARTICLE X CONFIDENTIALITY OF PROPRIETARY MATERIAL

10.1Confidential Information. For purposes hereof, “Confidential Information” shall mean student records, employee records and files, software, business, customer, marketing, financial and other non-public information, reports, or trade secrets relating to the business of Collegis or Rasmussen, as applicable, and created or learned by Rasmussen or Collegis, as applicable, in connection with the performance of this Agreement.

10.2Treatment of Confidential Information. Rasmussen and Collegis shall each treat the other’s Confidential Information as proprietary. Each of Rasmussen and Collegis shall

i.exercise due care to keep in confidence and not disclose Confidential Information to any individual other than its own employees who have a “need to know” in order to perform the respective obligations of Rasmussen or Collegis, as applicable, under this Agreement; (ii) not duplicate or publish any Confidential Information; and (iii) use Confidential Information only for the purposes authorized herein. The foregoing obligations shall not apply to Confidential Information if, and only to the extent that, it:

(a) is or becomes public knowledge through no fault of the Parties or the recipient thereof;

(b)was previously known by the recipient and was not obtained from another in violation of an agreement between that other party and the party to whom the Confidential Information belongs;

(c)is lawfully provided to the recipient without restriction by an independent

third party; or

(d) must be disclosed pursuant to applicable law or regulation; or

(e)is independently developed without use of the disclosing party’s

Confidential Information; provided, however, that with respect to the exception in Section 10.2(a), the recipient shall first establish that the full particulars of the Confidential Information are, in the combination disclosed to the recipient, well known or generally used within the industry, not merely that the individual features are in the public domain or available in isolated segments in two or more readily-available public sources; and provided, further, that the burden shall be on the recipient to prove the applicability of any of the above exceptions by documentary evidence. Upon termination, at the request of the disclosing party, the receiving party shall either destroy or return to the disclosing party all copies of the Confidential Information and all other materials furnished to the receiving party by the disclosing party in connection with this Agreement or containing the Confidential Information, in the possession of its employees, agents or advisors. Notwithstanding the foregoing, a receiving party (and its agents and advisors) will be entitled to retain copies of Confidential Information solely for legal or regulatory archival purposes and in accordance with internal document retention policies.

ARTICLE XI MISCELLANEOUS

11.1Assignment. This Agreement may not be assigned by either Party without the prior written consent of the other Party. A sale, merger or consolidation of either Party with or into another entity or a change of control of either Party shall not constitute an assignment for purposes of this provision.

11.2Governing Law. The internal laws of the State of Illinois (without reference to its principles of conflicts of law) govern the construction, interpretation and other matters arising out of or in connection with this Agreement and each of an SOW(s), Exhibits, and Schedules hereto and thereto (whether arising in contract, tort, equity or otherwise).

11.3WAIVER OF JURY TRIAL. EACH PARTY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH OR HEREAFTER AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE AN ARBITRATOR (AS SET FORTH BELOW) AND NOT BEFORE A JURY.

11.4Mandatory Arbitration. Except with respect to each Party’s right to obtain injunctive relief for violation or threatened violation of the confidentiality provisions set forth in Article X of this Agreement, any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement, which the Parties are unable to resolve by mutual agreement, shall be settled by submission by either Party of the controversy, claim or dispute to binding arbitration in Chicago, Illinois (unless the Parties agree in writing to a different location), before a single arbitrator in accordance with the rules of the American Arbitration Association then in effect. In any such arbitration proceeding the Parties agree to provide all discovery deemed necessary by the arbitrator. The decision and award made by the arbitrator shall be final, binding and conclusive on the Parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof. Each Party shall bear its costs and expenses in any such arbitration and one-half of the arbitrator’s fees and costs; provided, however, that the arbitrator shall have the discretion to award the prevailing Party reimbursement of its reasonable attorney’s fees and costs.

11.5Force Majeure. If either Collegis or Rasmussen is prevented from performing any task hereunder, in whole or in part, as a result of an act of God, war, civil disturbance, labor disputes outside of either Party’s control, or other cause beyond either Party’s reasonable control, such failure to perform shall not be grounds for termination of this Agreement; provided, however, that such force majeure condition shall not excuse a Party’s obligation to perform those tasks (such as tasks relating to Disaster recovery) that are not prevented by the force majeure condition.

11.6Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly received (a) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt; (b) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) business days after being deposited in the U.S. mails; and (c) if given by courier or other means, when received or personally delivered, and in any such case, addressed as follows

If to Collegis: If to Rasmussen:

Collegis, LLC

1415 West 22nd Street, Suite 400 Oak Brook, IL 60523

Attention: CFO

Email: [***]

Rasmussen College, Inc.

1415 West 22nd Street, Suite 400 Oak Brook, IL 60523

Attention: CFO

Email: [***]

A Party may change the address for receiving notices under this Agreement by providing written notice of the change of address to the other Party.

11.7Integration of Agreement. This Agreement, together with an SOW(s), Schedules, and Exhibits hereto, and any written amendments executed by both Parties, embodies the entire agreement and understanding between the Parties and supersedes all prior understandings and agreements, whether written or oral, between the Parties relating to the subject matter hereof.

11.8Amendment. The Parties may amend this Agreement (including a SOW, Schedule, or Exhibit hereto) only by a written agreement signed by each Party to be bound by the amendment and that identifies itself as an amendment to this Agreement.

11.9Severability. Each provision of this Agreement is intended to be severable in whole and in part. Whenever possible and to the maximum extent, each provision of this Agreement shall be interpreted in a manner as to be effective and valid under applicable law. If any provision of this Agreement, in whole or in part, shall be prohibited or invalid under such law, such provision or part thereof shall be ineffective to the extent of such prohibition or invalidity without prohibiting or invalidating the remainder of such provisions of this Agreement.

11.10Waiver. No term, provision or condition of this Agreement shall be waived except in a writing signed by both Parties hereto and any such written waiver in any one or more instances shall not be deemed to be a further or continuing waiver of any such term, provision or condition of this Agreement.

11.11Binding Effect. This Agreement and all future amendments shall inure to the benefit of, and shall be binding on, both Parties and their heirs, successors and assigns. Rasmussen agrees that Collegis may pledge or assign the net sums of money due and to become due to it hereunder to any bank, lending agency or institution as collateral security.

11.12Authority. Each of the Parties represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement; (b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate or other action; (c) it has duly and validly executed and delivered this Agreement; and

(d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

11.13Expenses for Enforcement. Each Party shall bear its own attorneys’ fees and costs incurred in the event of any suit, hearing or mediation proceeding brought to enforce the provisions of this Agreement.

11.14Independent Contractor. It is understood and agreed that Collegis is acting as an independent contractor in performance of its obligations hereunder. Nothing herein contained shall be construed as creating the relationship of principal and agent, or employer and employee, or partnership or joint venture between Collegis and Rasmussen, or between any employee of Collegis and Rasmussen. Both Parties acknowledge that Collegis is not an employee for state or federal tax purposes. Collegis shall retain the right to perform services for others during the Term of this Agreement.

11.15Compliance With Laws. Collegis and Rasmussen expressly agree that during the Term of this Agreement they shall observe and comply with all relevant laws, including, without limitation, federal, state, and local laws, ordinances, orders, decrees, and regulations.

11.16Publicity. Neither Rasmussen nor Collegis shall advertise, issue press releases, or otherwise publicize this Agreement or activities relating to this Agreement (including, but not limited to execution of this Agreement or the Services or deliverables provided by Collegis to Rasmussen pursuant to this Agreement), without the other Party’s prior written consent. To the extent permitted by

law, the Parties agree to keep confidential and to not reveal to any third party the terms of this Agreement.

11.17Nondiscrimination/Employment. Neither Rasmussen nor Collegis shall, in the performance of this Agreement, engage in any unlawful discrimination against any person because of race, color, religion, national origin, sex, handicap or age. Collegis represents that it is not in violation of any federal, state or local law relating to the employment of its Office of Information Technology staff. The Office of Information Technology staff is not covered by any collective bargaining agreement.

11.18Non-Solicitation. During the Term and for a period of one (1) year thereafter, neither Party shall solicit, interfere with, or induce any person, who is or was, during the immediately prior six (6) month period, an employee or consultant of the other Party, to discontinue his, her or its relationship with the other Party, or (ii) accept employment by, or enter into a business relationship with itself, or any other entity or person unless the other Party has approved of such business or employment relationship beforehand in writing.

11.19Each Party Responsible for its Agents and Employees.

(a)Collegis shall have the full and exclusive right to select, and shall have full and complete authority and control over and responsibility for, all employees, independent contractors or agents employed or otherwise used by Collegis in connection with the performance of the Services on behalf of Rasmussen (“Collegis Managed Services Personnel”). None of the Collegis Managed Services Personnel shall be, or shall be deemed to be Rasmussen Personnel for any purposes and Rasmussen shall have no control over, and no duty, liability or responsibility, of any kind, to the Collegis Managed Services Personnel or with respect to the acts or omissions of any Collegis Managed Services Personnel.

(b)Rasmussen shall have the full and exclusive right to select, and shall have full and complete authority and control over and responsibility for, all employees, independent contractors or agents employed or otherwise used by Rasmussen in connection with its performance under this Agreement (“Rasmussen Personnel”). None of the Rasmussen Personnel shall be, or shall be deemed to be Collegis Managed Services Personnel for any purposes and Collegis shall have no control over, and no duty, liability or responsibility, of any kind, to the Rasmussen Personnel or with respect to the acts or omissions of any Rasmussen Personnel.

[Signature page follows]

IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

COLLEGIS, LLC

By: /s/ Patrick Branham

Name: Patrick Branham

Title: Chief Administrative Officer

RASMUSSEN COLLEGE, INC., A PUBLIC BENEFIT CORPORATION

By: /s/ Thomas M. Slagle

Name: Thomas M. Slagle

Title: Chief Executive Officer

Exhibit 10.4

Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed, and has been marked with

“[***]” to indicate where omissions have been made.

STATEMENT OF WORK #4

This Statement of Work #4 (“SOW”) is entered into as of the 15th day of March, 2019 (the “SOW Effective Date”) by and between Collegis, LLC, a Delaware limited liability company (“Collegis”) and Rasmussen College, LLC, a Delaware limited liability company (“Rasmussen”) in accordance with and subject to the terms of the Third Amended and Restated Information Technology Services Agreement between the parties dated October 1, 2016 (the “Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Agreement.

WHEREAS, the parties desire to execute this SOW to govern the management of information services from the SOW Effective Date through the Term, as that term is defined in Exhibit B hereto, and this SOW shall supersede the Statement of Work #3 dated October 1, 2016 as of the SOW Effective Date.

NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties hereby agree as follows:

1.Scope of Services.

1.1This SOW describes the Information Technology Services that Rasmussen receives from Collegis as further defined below (“Services”). The Services include only what is expressly described herein and only apply to those products and services identified herein, including those described in any Exhibits or Schedules attached hereto. Any service outside the scope of this SOW is subject to the Service Change Process in accordance with Section 11 herein and Section 2.2 of the Agreement. For avoidance of doubt, Collegis hereby agrees and acknowledges that the Services to be provided hereunder do and shall include all Services of the type and/or substance previously provided by Collegis to Rasmussen under the Agreement. Collegis shall perform the Services in a manner consistent with specific, written and reasonable guidance and direction provided by Rasmussen from time to time; provided that any such guidance and direction is consistent and not in conflict with the express terms of the Agreement and this SOW.

1.2Hours of Coverage. Collegis’ staffed hours of operation for Level 1 – Personal Support Services are 24/7; and Level 2 – Central Office Services are Monday - Friday, 8 AM to 5 PM Central Standard time; and Level 2 – Central Office and Campus support is 8 AM to 5 PM local time, excluding holidays (“Hours of Coverage”). The Personal Support Center (“PSC”) will engage Level 2 resources after hours for service impacting events. Level 2 – Central Office Services are Data Center, Network, and Application/Platform Support services.

1.3Language Supported. The language supported will be English.

2.Student Learning Support Services. Student Learning Support Services is comprised of Data Center Services, Learning Management System (“LMS”) Services, Network and Voice Services, and Personal Support Center Services as described below.

IT Statement of Work #4

2.1.Data Center Services. Collegis will provide Rasmussen data center facilities necessary to support the Rasmussen application portfolio and business, including, but not limited to, voice, network, infrastructure, monitoring, backup and recovery.

a.Hosting. Hosting services include a physically secured data center space, including power and environmental control, rack space, and network bandwidth.

b.Data Center Network.

i.Internet. An internet connection is provided with Collegis- managed firewalls for all external facing applications.

ii.MPLS (WAN) Connection. Dedicated connections are provided for internal facing applications. These connections are shared by Collegis clients.

iii.General. Public IP addresses are provided for all websites and NAT (network address translation) configuration for all existing servers on the firewalls. SSL certificate management and renewals is provided.

c.Virtualization and Storage Environment. The server and data storage environments are shared resources that leverage host virtualization and SAN storage technologies. The virtualization hypervisor and SAN storage will be configured for high availability.

d.Monitoring Services. The application environments will be monitored using Collegis’ monitoring services. The environments are monitored for up/down, disk space, CPU/Memory usage, and network latency. Web based applications will have an HTTP response check for up/down and page load time. Critical alarms for service down situations are responded to 24/7 through the PSC Services Level 2 escalation process.

e.Backup and Restore. Backup and restore services for the data center are performed daily on production servers and servers that have been specifically requested. All backups are moved off-site daily. Restoration time is custom and determined based on the size of the data set, dependencies on system state, and system restoration point. Backups are retained for [***] days. Restore services are limited to data that has been backed-up by this service.

f.DNS (Domain Name Services). Collegis will provision, configure, and publish DNS and manage procurement and annual renewal of domains. Rasmussen and Collegis will perform an annual review of all DNS names to be renewed or retired where appropriate. Rasmussen will be invoiced annually for active domain names.

g.URL Redirection. Current URL’s will be maintained, including redirection.

h.Operating System Management. Operating System Management includes administration, patching, and security configuration of all servers


			2			IT Statement of Work #4

provisioned and managed for Rasmussen by Collegis. Software applications installed on the server are considered separate from the Operating System.

i.Anti-Virus Services. Anti-Virus software will be included in the standard configuration of Windows operating systems. Anti-virus updates will be provided in accordance with software vendor deployment. Rasmussen agrees to require employees to leave anti-virus enabled on all systems.

2.2Learning Management System Services. Collegis will provide operations and support services for the LMS as defined in Schedule 3 in the areas of Course Administration, Course Production, and System Administration.

i.Course Administration.

1.Course Creation. Collegis shall provide [***] hours annually for consulting services provided towards the design, development, and deployment of competency-based education (“CBE”), Taskstream, Alternative Credentials, and similar programs and projects; provided that any other consulting services for or relating to any CBE programs and/or projects shall only be pursuant to a Change Order, and the remainder of this SOW shall not otherwise apply to CBE programs and/or projects. A course will be created in the LMS from the master course data, including course cloning, from data provided by Rasmussen within the Student Information System (“SIS”) defined in Schedule 3. Courses cloned must be designed by the Rasmussen Instructional Designer (“ID”) and built by the Collegis Production team. The Collegis LMS Administrator will release the courses two (2) weeks prior to the term start. Corrections or issues identified by the instructor and reported to the PSC are routed to the Rasmussen Maintenance, Revision, and Improvement (“MRI”) team for review. The MRI team will collaborate with the LMS team to perform any changes and/or corrections. The LMS Administrator will make the requested changes and reclone the course. Courses that are not ready for release two (2) weeks prior to the term start due to a delay in the development process outside of Collegis’ control will not have the full two (2) week faculty review cycle. Issues identified within the late courses will be addressed on a best effort basis. The types of courses provided are: Faculty/Staff Training, Term Courses, Orientations, Assessments, and Resource Centers. The Faculty/Staff Training courses are created on an as needed basis. Cloning and enrollments are included with a [***] week lead time. The types of courses run are based on the campus schedule. Course and term lengths will follow the below chart:


			3			IT Statement of Work #4

[***]

Changes in the term weeks will be subject to the Service Change Process. Courses are created three (3) weeks before the term start. Faculty is enrolled two (2) weeks before the start of the term, and students are enrolled the weekend before the start. Orientations are run four (4) weeks prior to the term start. Students are enrolled as needed up to the start of the term. Rasmussen will release the term’s final course data in the SIS no later than three (3) weeks from the start of the term in order for the courses to be available for faculty access two (2) weeks before the start of a term. In circumstances where the standard timeline cannot be met, Collegis and Rasmussen will meet to determine the requirements and best course of action. Course creation requests not submitted through the SIS will be subject to the Service Change Process.

ii.Enrollments. The SIS is the system of record for all enrollments. Faculty course section assignments will be created in the SIS and faculty (i.e., instructors, teaching assistants, and observers) are enrolled into sections as needed. Students are enrolled through a SIS/LMS integration. If Rasmussen requests custom enrollment procedures, the request may be subject to the Service Change Process. Collegis will respond within [***] hours on business days for emergency enrollments and replacements. Faculty course section assignments will be created in the SIS no later than [***] weeks from the start of the term and student enrollment will be created in the SIS no later than [***] days from the start of the term. In circumstances where the standard timeline cannot be met, Collegis and Rasmussen will meet to determine the requirements and best course of action. Late submissions, late changes, and certain courses not in the SIS are exceptions to this enrollment process and will be handled manually. Manual intervention is resource intensive and must be kept to a minimum. Collegis will provide [***] hours per term to resolve enrollment issues of this nature.


			4			IT Statement of Work #4

iii.Cisco WebEx. Collegis will provide access to Cisco WebEx and manage issues reported to the PSC. Collegis will attempt to resolve the issue before escalating to the vendor. Issues escalated to the vendor will be managed in accordance with the vendor’s Service Level Agreement. Faculty and staff members’ access will be administered and managed. Rasmussen is responsible for providing a list of staff and faculty requiring access. Any increase in the scope beyond the current faculty and staff is subject to the Service Change Process. Licensing, platform usage, and audio usage fees for Cisco WebEx are and will remain the financial responsibility of Rasmussen. Collegis will assist with providing information and guidance towards optimizing the usage fees. Rasmussen will be responsible for implementing policies that govern the usage of Cisco WebEx.

iv.Integrations. For the Learn LMS, account creation, course creation and enrollments are managed through an integration framework called ‘SIS Framework’. The Rasmussen Learn instance integrations are currently manually run by the LMS Engineering team.

b.Course Production. Collegis will provide production services for the production of graphic and media elements and the assembly of courses inside the LMS based on content generated and developed by the Rasmussen Development team. Timelines defined below are dependent upon Rasmussen delivering required information within the required timelines. Information and materials delivered outside of the timelines will impact Collegis’ ability to perform as defined below; any course materials to be provided by Rasmussen that are delivered to the Collegis production time after the agreed-upon scheduled delivery dates will be considered custom work and will be billed against Block Hours. In circumstances where the standard timeline cannot be met, Rasmussen and Collegis will meet to determine the requirements and best course of action.

i.New Course Production. Course Production services will be provided for new or redeveloped courses designed by the Rasmussen Development team. For each development round, course production will be limited to a total of [***] 11-week online courses or a combination of courses that are the equivalent course production workload of [***]11-week online courses. Collegis designed course content map templates will be completed by the Rasmussen ID and Collegis will convert the maps to a full course in the LMS. Course content includes content pages with links to PowerPoint presentations, Word documents, videos, media, quizzes, assignment submission areas, course discussion areas, and any additional activities found within the LMS and specified by the ID in the course content map. Each term, the courses will be prepared for cloning by the LMS Production team. In Blackboard, this includes setting weekly release dates. Recurring course preparation items that must be done manually will be considered custom work and are subject to the Service Change Process (e.g., recreating TurnItIn Drop Boxes). Quizzes must be delivered using Respondus or in Respondus importable format. Quizzes delivered in any other format will be considered custom work and are

subject to the Service Change Process. If available, PDF files of the first three (3) weeks of required readings from a textbook will be added to the course.

ii.Multimedia Creation. The Collegis Production team creates multimedia elements from requirements outlined in the media storyboards developed by the Rasmussen ID team. Media that was not designed by the ID team may be considered custom work and subject to the Service Change Process. Multimedia activities are limited to [***] hours per quarter. If Rasmussen requests multimedia activities in excess of these limits, Collegis and Rasmussen will mutually agree on a method to increase capacity and funding of any additional costs.

iii.Course Updates. Production services will be limited to a total of 100 hours per quarter. The Rasmussen MRI team and the Collegis Course Production team will mutually develop a process to track against the allocated hours per quarter. Production services will include the updating, changing, or editing of course content, including text, images or media, and assessments. Course update requests that will require Collegis Course Production team work beyond the allocated 100 hours per quarter are subject to the Service Change Process. All course updates must be delivered by the Rasmussen Development team in the form of a standard update template containing all information needed for successful completion of the update.

iv.Forecasting and Scheduling. Rasmussen will provide a forecast of courses planned for development, including the residential lab components, if applicable. The forecast will project four (4) quarters in advance and will be updated quarterly. Placeholder names may be used for courses not yet determined. Four (4) weeks prior to the start of development for each quarter, Rasmussen’s ID team liaison will schedule a meeting with the Collegis Course Production team to review the proposed schedule.

v. Additional Production Requests. Course production requests that fall outside of the Course Development process or Rasmussen’s MRI team will be escalated to Rasmussen’s ID team liaison to determine whether the request should be prioritized and submitted through the Course Development process.

vi.On Time Delivery of Content. For new or redeveloped courses, complete course content will be delivered to the Collegis Production team at one of three quarterly drop dates. The drop dates are the Friday of weeks 7, 8, and 9 of the academic quarter. Approximately one-third of courses will be delivered at each drop date. Delivery of fewer than [***] courses at either of the first two (2) drop dates will be considered custom work and subject to the Service Change Process. Course content that is delivered past the final drop date is not guaranteed to be produced in time for the term start. All course updates must be delivered by week 10 of the academic quarter to guarantee that the work is completed in time for the

next academic quarter. For standard online courses, the courses will be delivered within [***] business days.

vii.Policy Changes. Rasmussen will notify Collegis of any changes to the policies defined on the syllabi in the online courses at least eight (8) weeks prior to the start of the term in which the new policies go into effect. The new policies must be provided to Collegis in full and final form in a Word document.

viii.Post Production. The Collegis Production team simultaneously produces the course and a demo of the course in the LMS. Prior to cloning the individual sections and enrolling students, Rasmussen will review the built course within [***] days of course production. The Rasmussen ID assigned to the course will coordinate the implementation of any changes with the Collegis Production team. The changes to the courses at this point are limited to typos or other minor errors or an element of the course not working properly as originally designed. At this point, the addition of content or redesign of course elements would be subject to the Service Change Process. Course cloning will begin after Rasmussen signs-off and approves the master course.

ix.Communication. Collegis will produce and distribute a weekly status report detailing the status of all course production and course update activities.

x.Custom Reporting from LMS. Collegis understands that custom reports are sometimes needed to investigate issues within the system or to inform business decisions based on data only available in the LMS. In such cases, Collegis will provide Rasmussen with [***] non-accruable hours per month to aid in the creation of custom queries to facilitate information gathering. Cumulative requests that exceed the [***] hour per month allocation will be charged to Block Time (as defined below).

xi.Video. Collegis generated video activities are limited to [***] hours per quarter, including pre-production, production, and post-production. Video requirements in excess of these limits are considered custom work and subject to the Service Change Process. If video is requested, the Subject Matter Expert (“SME”) will create the script with consultation from the Rasmussen ID and the Collegis Audio/Visual Production team. If requested, Collegis may acquire the proper talent to act in the video, secure a location to film the video, and obtain release forms from all talent used in the videos. Collegis will provide a camera operator and the necessary equipment to film the video. Collegis will edit the video to align with the script and add required title screens or bumpers. For SME generated video, if requested, Collegis will edit the video to add title screens or bumpers. Collegis will upload the video to the streaming media server (defined in Schedule 3) and provide access to the video and the html code to embed the video in the course. Standard video services include in-house talent, filming in Oak

Brook, IL, and use of current equipment. Requirements or requests outside of these standards may incur additional costs. Collegis will fund the additional costs up to the amount set in the annual budget setting process. Investment requirements will be evaluated on a case by case basis prior to incurring any costs. The media server is a Collegis shared resource; therefore, Rasmussen will not be provided direct access to the server. Collegis will provide the video at the request of Rasmussen. Incorporation of MediaSpace technology (as defined in Schedule 3) into courses is restricted to the courses listed in Schedule 5, Table 4. The use of this technology in additional courses will require additional funding and will be managed through the Project and Portfolio Governance Process.

c.LMS System Administration.

i.Activities. All LMS hosted by Collegis may be updated with application service packs and patches (when available) provided by the LMS provider. Enhancements and upgrades will be evaluated and applied as agreed between Rasmussen, Collegis, and the application supplier. The updates will be downloaded to a development environment and compared to the current installed base. Any local customizations will be identified and carried forward to the updated environment. Nightly application maintenance will be performed to remove web and file server temporary files, session log aggregation and truncation, and perform application restarts.

ii.Tier 3 LMS Support. The Collegis LMS Engineering team provides support services for the resolution of incidents as escalated from Rasmussen. Mass emails and public announcement services may be provided for technology related incidents. Course restorations will be provided from backup. A restoration usually begins the day of the request, but may take longer depending on the circumstances, given the event is less than [***] days in the past. Backups are retained for [***)] days; therefore, any request more than [***] days after an event cannot be restored. Dispute investigations will provide comprehensive reporting on student activity in a course or in the systems, including messages sent between faculty and students and exam submissions. If a course restore is required to complete the investigations, notification time since the event will impact the time required to complete the investigation.

iii.Third Party Integrations. Collegis provides support for existing third party integrations as listed in Schedule 5, Table 5. While Collegis will make all best efforts to work with these providers to facilitate the resolution of any issues experienced by the Rasmussen user community, Collegis is not ultimately responsible for these external services and cannot be held accountable if said services are unavailable.

d.File Storage and Distribution. Course files uploaded and stored in the LMS are restricted to a maximum of [***]GB. Faculty uploaded files are restricted to [***] MB.

2.3Network and Voice Services. Collegis will provide network and voice infrastructure between Rasmussen Central Offices, data centers, and Campuses (as defined in Schedule 1) consistent with current designs.

a.Network. Network services include management and monitoring of all bandwidth, routers, switches, connectivity, and related devices. This network infrastructure is shared by Rasmussen, Collegis, and Collegis clients.

i.Internet. Internet access is provided for the Central Offices and Campus locations with active monitoring and management.

ii.MPLS. MPLS (WAN) connectivity is provided at the Central Offices and Campus locations with active monitoring/management and capacity as defined in Schedule 4, Table 5. Any increase in capacity will be subject to the Service Change Process. Rasmussen is responsible for the monthly datacom service fees and applicable taxes for the MPLS (and Internet where applicable) circuits at each Campus location. Rasmussen is responsible for the monthly datacom service fees and applicable taxes for the Maitland, Twin Cities, and Oak Brook Central Office locations on an agreed-upon allocation basis. Collegis may invoice Rasmussen for these fees as a pass-through charge.

iii.Wireless. Wireless connectivity is provided for the Central Offices and Campus locations. A private SSID with appropriate security will be used by Rasmussen staff; a public SSID will be provided for student and guest access and will provide restricted access to the Internet.

b.Voice. Voice services include management of voice and phone hardware, software, provisioning of services and 800 numbers, configuration of systems, and contract/billing services with providers. Rasmussen is responsible for the monthly telecom service fees and applicable taxes for voice circuits, toll-free fees, long distance fees, and audio conferencing fees associated with Rasmussen employee and Campus and Central Office usage of telecom services. Rasmussen is responsible for the monthly telecom service fees and applicable taxes for the Maitland, Twin Cities, and Oak Brook Central Office locations on an agreed-upon allocation basis. Collegis may invoice Rasmussen for these fees as a pass-through charge.

i.Voice Hardware. Collegis will procure handsets and accessories for voice services according to the Voice Products listed in Schedule 1, Table 4.4. A dedicated extension and a 2 button handset are standard equipment. Rasmussen will own and fund the asset and be responsible for any purchasing and licensing costs incurred by Collegis upon approval and prior to procurement.

ii.Provisioning and Configuration Management. Collegis will provide management services for routers, call recording usage, DSP resources, and DID. Collegis will provide voice gateway configurations and call flows to support program requirements subject to the capabilities of the system. Any changes to configurations, call flows, or dial plans will be considered MOVE/ADD/CHANGE activity. Phone configuration, support, and testing are provided in accordance with the new hire support as defined in Section 4.1.h.

iii.Voice System Maintenance. Maintenance activities for voice services include system reboots, installation of patches and upgrades, and management of local numbers (DID) and toll free numbers. Collegis will provide coordination and management of any third party vendors providing voice services.

iv.Voice Mail. Rasmussen staff and faculty members will be provided with voice mail services. Voice mails are stored within the email system and subject to email data services in accordance with Section 4.2.

v. Call Recordings. Software licensing and recording capabilities are provided for admissions, student services, financial aid, and the central reception team. Collegis will provide administration and configuration of the recording system. Recordings are retained for [***]. Each recorded extension, as designated by Rasmussen, requires a license. The quantity of licenses allocated to Rasmussen is defined in Schedule 4, Table 2. Additional licenses will be funded by Rasmussen. Desktop software, if required, for managing recordings is included.

vi.Audio Conferencing. Collegis provides audio conferencing services through a third party audio conferencing provider. Each Rasmussen staff member authorized to host audio conferences will be assigned a unique pin. Collegis will manage the assignment, reassignment, and decommissioning of conference numbers. The cost of usage of third party audio conferencing services is paid directly by Rasmussen to the vendor. Rasmussen will notify Collegis of numbers to be de-provisioned.

vii.Video Conferencing. Video conferencing for Central Office locations is provided through the technology installed in the conference rooms as defined in Schedule 1, Table 4.2. Any changes or move requests for Video Conferencing will be requested through the PSC. A web based video conferencing solution is provided, including support and access administration.

viii.Electronic Fax. Collegis provides electronic fax services to Rasmussen. Additions and modifications to fax numbers will be processed through the PSC.

ix.Call Reporting. The capability to provide reports on the call data by agent per day is provided. Collegis will provide training materials and assistance to Rasmussen authorized users. Rasmussen authorized users are responsible for creating and producing any required reports.

x.International Calling. International calling capabilities may be enabled on employee phones on a per request basis. International calls may experience call quality issues due to telecom carrier routing and telecom carrier infrastructure problems that cannot be controlled by Collegis. Third party telecom costs for international calling will be provided as pass-through charges or directly billed to Rasmussen.

xi.Soft Phone Support. Collegis will install and configure the Cisco Soft Phone application on Rasmussen employee computers on a per request basis. Incremental software licensing is required for each installation and the licensing costs will be provided as a pass-through charge to Rasmussen.

3.Personal Support Center Services.

3.1Single Point of Contact. Collegis will provide a single point of contact to receive, manage, and process service requests. Collegis will provide a support telephone number (toll- free where available) and an email address. The telephone number may include an automated call distributor to route requests to other departments. The contact information is listed in Schedule 1, Table 3.5. Collegis will also establish a VIP Hotline, for use only be Rasmussen executives, during major start periods; the VIP Hotline will prioritize inbound calls to supersede all other queues that come into the PSC (“VIP Calls”). These VIP Calls will be treated using the Severity 1 priority level; if immediate resolution cannot be achieved within the PSC, the VIP Call will be immediately escalated via the Collegis Buzzline to engage Level 2 Teams to expedite resolution to the reported problem. The VIP Hotline contact information is listed in Schedule 1, Table 3.5.

3.2Case Management. When a Rasmussen student or employee contacts the PSC with a new service request, a case number will be issued by Collegis’ tracking system. A detailed description of the problem and a description of the estimated business impact will be given to the PSC to accurately document and prioritize the case. Collegis manages cases from creation through closure. Dependent on Rasmussen’s request, these Services may include: receiving service requests; logging cases; assigning priority based upon criticality; processing the case; monitoring; updating the status; if necessary, escalating the case; and closing the case when completed.

3.3Student Support. Collegis will provide support to students of Rasmussen residential and online programs. A list of supported products is described in Schedule 1, Table 3.1. Collegis will provide:

a.Advice on how to use, navigate to and through, and resolve issues related to the use of the learning platforms.

b.Information pertaining to the campus, contact information, and account information.

c.Communication between student and instructor, student and advisers, and assignment explanations (not assignment help).

d.Best effort support on software installations, third party applications, and operating systems used in conjunction with the learning environment.

e.Account setup and password reset as defined in Schedule 1, Table 3.1.

f.Best effort recommendation to the student on the next best course of action to resolve the situation detailed as unsupported by the PSC. In some instances, students may need to utilize external resources (e.g., the Geek Squad, etc.) for items such as operating system error reports and viruses. For other items such as financial information and homework assistance, the PSC will refer students to Rasmussen-supplied student resources. In these instances, Rasmussen will be responsible for fielding second level support on unsupported PSC items.

3.4Minimum Student Technical Specifications. Rasmussen and Collegis will jointly agree upon the minimum student technical specifications for students to adequately use the learning technologies administered by Collegis. These specifications will include, at a minimum, student computer and minimum bandwidth requirements and will be reviewed and updated quarterly (or more frequently, if needed). Rasmussen will communicate these specifications to prospective students via the enrollment agreement and to current students via the Student Portal and other website resources. The PSC services provided to students may be reduced if a student’s personal technology does not meet the minimum student technical specifications.

3.5Employee and Faculty Support. Collegis will provide Rasmussen employees and faculty technical support by processing requests and escalating them to the proper channels for resolution as described in Schedule 1, Tables 3.2 and 3.3.

3.6Case Priority. Collegis will determine the priority of the case using the following guidelines:

a.Severity 1 Case. (1) A problem severely impacting more than one student and immediately impeding the student’s ability to turn in assignments or maintain success within a course. A workaround is not available and student success is greatly diminished. (2) A problem that critically impacts a Department, Campus or Company-Wide ability to perform standard functions impacting multiple individuals.

b.Severity 2 Case. (1) A problem severely impacting one student immediately impeding the student’s ability to turn in assignments or maintain success within a course. A workaround is not available and student success is greatly diminished.

(2) A problem that critically impacts Rasmussen’s ability to perform standard functions impacting multiple individuals.

c.Severity 3 Case. (1) A problem that directly impacts a student’s performance within a course but does not immediately impact the student’s ability to turn in assignments. (2) A problem that significantly impacts Rasmussen’s ability to perform standard functions impacting multiple people that can work around the problem.

d.Severity 4 Case. (1) A problem that does not impact the student’s overall performance within a course. (2) A minor problem that negligibly impacts Rasmussen’s ability to perform standard functions impacting one (1) person.


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3.7Service Request Processing. Once the case has been logged and a priority assigned, Collegis will perform Level 1 support consisting of identifying the cause of the case and action required to resolve it, providing problem resolution where possible, and providing operational or procedural support on supported platforms. Collegis will route service requests to the appropriate service providers, based on operational instructions Rasmussen provides to Collegis. For cases routed to Campus based departments, Collegis will attempt to transfer the caller (i.e., warm transfer). If no one at the Campus is available to take ownership of the call, the case will be placed in the Campus queue. Cases assigned to Central Offices will be escalated through the ticketing system and placed in the appropriate queue.

3.8Escalation. Collegis will escalate cases to Level 2 support where necessary to address issues requiring expertise beyond Level 1 capabilities, including, but not limited to, Level 2 – Campus. Level 2 support is provided by Collegis as defined in Schedule 1. The PSC will collaborate or escalate to the appropriate Level 2 organization to resolve the case, acting as the single point of contact for case status. For cases escalated to Campus based departments, Collegis will attempt a warm transfer. For unsuccessful warm transfers to a Campus and cases escalated to Central Offices, the case will be escalated through the ticketing system and placed in the appropriate queue for further action. Collegis Level 2 support will escalate cases to higher levels when engineers and software developers are required for in-depth, systematic problems outside the PSC knowledge base.

3.9Personal Support Service Reports. Collegis will provide Rasmussen with the standard Support Center Service Reports described in Schedule 6, Table 1 via email or another mutually agreed upon distribution method. Monthly reports will include the current and two (2) preceding months of data. Additional reports may be requested through the Service Change Process.

3.10Volume. The baseline contact capacity of the PSC is outlined in the Support Center Baseline Service Metrics detailed in Schedule 2. A contact is defined as an inbound telephone call, email, or chat session. The email number excludes superfluous emails and those received from enrollment processing, discussion forums, reply-all scenarios, and auto-replies. The current capacity is based on the maximum number of contacts per day stated in Schedule 2. When contacts exceed the maximum daily contact volume, service performance and quality may be impacted. A sustained volume in excess of the maximum for three (3) consecutive days will impact service performance. Collegis and Rasmussen agree to review the case volumes on a quarterly basis. Major holidays will have a reduced staff and may incur reduced service performance. On average, start week volume increases [***] % over normal week volume. During this time, Collegis will augment staff to cover a portion of this increase; however, service levels may be reduced dependent on call fluctuation throughout this week. Collegis will provide training to the augmented staff through an LMS and classroom setting. Collegis and Rasmussen will meet semi-annually to define training requirements and supported items.

3.11Contact Volumes Fees. Collegis and Rasmussen agree to review the contact volumes quarterly and on an annual basis. Pursuant to the Service Change Process, the cost may be adjusted if appropriate and according to the actual contact volumes.


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3.12Ticket System Training. Collegis will provide training on usage of the ticketing system and procedures and deliver such content via an LMS self-paced online classroom. Items covered will include, but are not limited to, ticket creation, escalation, documentation, closure, and reporting.

3.13Rasmussen Responsibilities.

i.Escalation. When the PSC assigns or escalates a support request to Rasmussen or its service provider (Level 2), that organization will be available during the Level 2 Hours of Coverage. Rasmussen will receive support requests through Collegis’ tracking system (i.e., tickets) or through warm transfer of a telephone call. Rasmussen will update the ticket to accurately reflect the current status of the request and close the ticket when resolved. Level 2 support will assume ownership of the ticket until resolved and closed.

ii.Training. The PSC Services are not a substitute for training. Rasmussen is responsible for training faculty, staff, and students on procedures and systems supported by the PSC.

iii. Service Change. Rasmussen will use the Service Change Process to notify Collegis of any changes in the supported environment and to request additional services.

iv. New Process and/or Technology Training. Rasmussen will provide training and required documentation to the PSC prior to the release of any new processes or technology to students. Rasmussen will provide: (a) primary and secondary contact information; (b) frequently asked questions; (c) product documentation; (d) fully functioning copies of the software or product; (e) procedure documents (e.g., how to log in); (f) administrative access to product, if applicable; (g) procedures for handling items out of scope of product (e.g., escalation of one-off scenarios); (h) definition of scope of support and support levels; and (i) training or attendance at internal training sessions.

v. Contacts. Rasmussen will provide IT/PSC Leadership with an updated contact sheet for escalations and departmental contacts within Rasmussen on a quarterly basis. The contacts will be distributed one (1) week prior to the start of the upcoming academic quarter.

4.Advanced Technology Support Services. Advanced Technology Support is comprised of Central Office and Campus Support Services and Email.

4.1Central Office and Campus Support Services. Collegis will provide support for general office technology. Services will be provided remotely and on-site, when required, for the locations listed in Schedule 1. Service requests are submitted through the PSC.

a.Personal Computers. Collegis will procure laptops in accordance with the product standards listed in Schedule 1, Table 4.1. Collegis will install, configure, and maintain the hardware and operating system, including setup after office moves.


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Rasmussen will own and fund the asset. Collegis will perform installation of approved standard software, the reimage of PC/laptops, and the removal of virus/malware. Desktop peripherals (i.e., keyboard, mouse, and monitor) will be installed along with IP phones. Rasmussen agrees to require employees to leave anti-virus enabled on all PC/laptops.

b. Asset Tracking. Collegis will track the make, model, and serial number of assets procured for Rasmussen employees, including PC/laptop, MAC computer systems, docking station, monitor, and IP phones.

c. Electronic Asset Disposal. Collegis will dispose of electronic assets at the end of usable life through an authorized asset disposal company. Any additional costs incurred will be funded by Rasmussen.

d. PC Applications/Software. Collegis will procure, configure, and maintain approved standard software as defined in Schedule 1, Table 4.3. Rasmussen will own and fund the software. Applications or software installed by non-Collegis employees or applications or software not included on Schedule 1, Table 4.3 or Schedule 10 will be supported only on a best effort basis. Software licensing compliance for these applications will be governed by Rasmussen. Employee access to computers is generally restricted to User access only meaning that software cannot be installed by the employee; software installation requests should be submitted to the Personal Support Center. Collegis will provide account management for system and infrastructure access through Active Directory. Additionally, Collegis will setup and maintain Exchange email accounts, company distribution lists, and spam services.

e. Printer, Copier, and Fax Equipment. Collegis will procure network printers, fax machines, and copiers. Collegis will configure and maintain network fax machines, copiers, and printers and manage third party vendors, when required. Rasmussen will own and fund the assets. Personal printers and any other office or personally owned equipment is not supported or maintained by Collegis unless mutually agreed upon by the parties. Rasmussen is responsible for the cost of consumables such as ink, toner, and paper.

f.Central Office Conference Rooms. Collegis will install and support the hardware and software required for audio and video meetings in Central Office conference rooms. Collegis and the Rasmussen Facility team agree to cooperate and jointly handle audio-visual needs when necessary. If any additional or specialized equipment or special handling is required for a meeting, a request will be submitted through the PSC three (3) business days prior to the meeting. Any requests made with less than the defined lead time are considered requests for expedited services. These requests will be evaluated and a determination will be made about whether Collegis has the capability of responding in the requested time. Two (2) off-site conference setups are included per year with one (1) months’ notice. Off-site conference setup includes: providing a laptop, a backup laptop, and a projector; providing input regarding audio- visual needs with third party vendors (e.g., projection screen, stand, cables, speakers, and paper boards); verifying setup; and collecting equipment after meeting completion. Off-


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site conferences are defined on a per location basis, and events held on the same day between multiple sites are deemed as one (1) conference. Additional off-site meeting setup is considered custom work and subject to the Service Change Process.

g.Campus Conference and Events. Collegis will install and support the hardware and software required for audio and video meetings in Campus conference rooms. Collegis and the Rasmussen Facility team agree to cooperate and jointly handle audio-visual needs when necessary. If any additional or specialized equipment, special handling, or travel is required for a Campus meeting or an event, a request will be submitted through the PSC three (3) weeks prior to the meeting. Any requests made with less than the defined lead time are considered requests for expedited services. These requests will be evaluated and a determination will be made about whether Collegis has the capability of responding in the requested time. Off-site conference, symposium, and graduation setups are included with one (1) months’ notice. Graduation and conference events are on a per request basis. Annual symposium events will be supported twice a year for up to three (3) locations for each event. Off-site conference setup includes: providing a laptop and a backup laptop; providing input regarding audio-visual needs with third party vendors (e.g., projection screen, stand, cables, speakers, and paper boards); verifying setup; and collecting equipment after meeting completion. Rasmussen is responsible for coordinating with third party vendors. Off-site conferences are defined on a per location basis, and events held on the same day between multiple sites are deemed as one (1) conference. Any additional costs incurred will be funded by Rasmussen. Included is one (1) all employee conference per month and one (1) off-site conference per quarter; any additional requests will be handled through the Service Change Process.

h.New Hire and Terminations. Collegis will provide support technology and infrastructure for new hires, including obtaining personal computers, office setup, and account setup. After separation of an employee, account logins will be disabled, equipment will be collected, and, if requested, a copy of the separated employee’s hard drive contents will be provided on the manager’s shared drive. Network login accounts and email mailboxes will be retained for [***] days for voluntarily separated employees and [***] days for involuntarily separated employees. A [***] day lead time is required for all employee new hire and separation requests; provided, however, a [***] day lead time is required for adjunct instructors. A maximum of [***)] full-time new hire requests and [***] adjunct faculty new hire requests per month are included. Additional or expedited requests may require additional funding by Rasmussen and Collegis will use commercially reasonable efforts to complete the activities in the time requested.

i.Campus File Storage. File servers are provided and maintained for employee data storage. The storage capacity for storing files is [***] GB for each Campus location. Additional storage beyond the [***] GB will be subject to the Service Change Process. Daily backups are performed for up to [***] GB of data and such data is retained for [***] days.


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j.Central Office File Storage. File servers are provided and maintained for employee data storage. The storage capacity for storing files is [***] terabyte for each Central Office location. Additional storage beyond the [***] terabyte will be subject to the Service Change Process. Daily backups are performed and such data is retained for [***] days.

k.Anti-Virus. Anti-virus software will be included in the standard configuration of Windows operating systems. Anti-virus updates will be provided in accordance with software vendor deployment.

l.Campus Lab Equipment. Equipment located in the lab room of a Campus will be maintained regularly, and the equipment will be reimaged and/or reconfigured prior to a term start as needed.

m. IT Lab Equipment. Equipment located in the lab room of a Campus will be maintained and reimaged and/or reconfigured upon request. IT lab equipment support is provided on a best effort basis.

n.Campus Work-Study Students. Collegis will supervise the IT-related activities of the work-study students and approve the time posted in the payroll system. The governance and compliance of federal and state law is the responsibility of Rasmussen.

o.Level 2 Support. Collegis will provide Level 2 support for application access and usage questions and issues as defined in Schedule 1, Tables 3.1 through 3.3.

p.Campus Non-IT Services. The campus ITSS employees will not be used to provide non-IT services, including facilities-related work (e.g., replacing light bulbs and moving furniture), administrative work (e.g., answering front desk phone), janitorial work, and event-related activities. In the event a local resource is required to assist with issues, such activities will be charged to Block Time.

q.Volume. The baseline case capacity for Central Office and Campus Support Services is outlined in the Baseline Service Metrics detailed in Schedule 2, Tables 1.1 and 1.2. The current capacity is based on the maximum number of cases per month. Any cases in excess of the maximum case volume, as measured on a quarterly basis, may incur an incremental fee. Collegis and Rasmussen agree to review the case volumes on a quarterly basis.

4.2Email Services. Collegis will provide email hosting services via a Microsoft Exchange environment shared between Collegis and Rasmussen. Each employee will be provided with a @Rasmussen.edu email address and mailbox. Mailbox profiles allow up to [***]GB of email, calendar, and contact data for no more than [***] of the mailbox population. For up to [***] of the population, mailbox profiles will allow up to [***]GB of email, calendar, and contact data. For mailboxes larger than [***]GB in size, email access may operate at a slower performance. Email archiving is provided via the use of the “legal hold” feature within MS Exchange 2010. Email delivery cannot be guaranteed to external providers.


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Collegis also provides support and maintenance for applications that leverage email as an integration solution, as well as outbound student communications from the LMS platforms. Email accounts for separated employees will be retained on the mail server for [***] days for a voluntary separation and [***] days for an involuntary separation. After this period, the account will be purged and deleted. Deletion of email accounts for involuntarily separated employees require approval from Rasmussen’s General Counsel prior to deletion. Anti-virus and anti-spam services are included with these email services.

4.3Campus Connect Support Services. Collegis will support Rasmussen’s Campus Connect solution which provides remote campus sharing of video and content. The Campus Connect solution is currently limited to on-campus access at one of eight (8) designated Campus locations. The solution is capable of recording video sessions and the capacity for retention is limited by the available hardware storage. Adding additional Campuses, enabling off-campus access, and/or adding additional storage for video archiving will follow the Service Change Process. The hardware and software assets required to directly support Campus Connect are owned by Rasmussen. Rasmussen will be responsible for maintaining vendor maintenance on the hardware and software. Collegis will provide faculty support during classroom hours via the PSC.

4.4Security Services.

a.Collegis will provide the following security services in accordance with commercially reasonable requirements for information security:

i.Creation, auditing, and revisions to information security controls;

ii.Network perimeter security defenses, including firewall routing and intrusion prevention and detection services;

iii.End user protection on company-supplied devices, including patch management and malware detection services; and

iv.PSC services to assist any supported user with malware detection and removal.

b.Collegis will provide support in responding to security incidents caused by the following events, but disclaims any liability arising from said events:

i.Malware, viruses, adware or other security vulnerabilities that are created or installed by an employee installing software onto their computer without assistance from Collegis.

ii.Incidents or vulnerabilities generated by Rasmussen employees that may have been initiated by their own behaviors, such as downloading software or clicking on links from spam emails.

iii.Any other failure to adhere to the Rasmussen Security Policy in place at the time of the security event.


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c.Collegis is not responsible for the security of or security incidents impacting:

i.Public users accessing sites or applications that contain malicious content;

ii.Public devices or media transported onto the Collegis network which may have been infected elsewhere; and

iii. Applications supplied by outside vendors, contractors, or students that may conflict with internal protective services causing malfunction.

5.Student Information System Services. The SIS is a fully integrated, administrative student records platform that unifies services, academic delivery, administrative management, and reporting. The SIS platform contains multiple vendors and product dependencies based on new features required. As of the Effective Date of this SOW, the core vendors include Campus Management, Global, and SchoolDocs, but are subject to change based on requirements. The SIS allows students to apply for different degree programs, store student records, and pay associated application fees, and is utilized as a repository for student data. Collegis will provide Rasmussen with administration and support services for the SIS defined in Schedule 3. The following applications are included in this SOW as part of the SIS platform:

•CampusVue Student

•DocuSign

•Faculty Portal

•SchoolDocs

•LMS Integrations with CampusVue Student

•Student Account Center

SIS Services include Support Services, Request for Change, and Projects. Requests for Change and Projects are provided through Ad-hoc Technology Services.

5.1Support Services. Support Services include (i) providing assistance to Campus and Central Office employees with procedures and issues with use of the system; (ii) support and maintenance of back-end processes and procedures such as re-indexing, data warehouse loads, and running necessary utilities; and (iii) ongoing care and maintenance of the SIS platform, including vendor upgrades, Rasmussen configurations based on requirements, and business process support where needed.

5.2Administration Services. Administration Services are provided to keep the base SIS platform up and running for users and for providing new features of the platform based on vendors’ availability. Administration Services include new user/user group creation and maintaining ASR licensing and license re-allocation within CampusVue. Administration Services also includes upgrades to the SIS platform based on the vendors’ availability. Collegis anticipates providing [***] upgrades per year and any regulatory upgrades from Campus Management for CampusVue that would be critical to Rasmussen’s business. Other vendor upgrades are dependent on features needed and those vendors’ release cycles. Collegis will


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maintain the ongoing relationships with outside vendors required for the SIS platform (i.e., SchoolDocs and Campus Management). Collegis will support, configure, and map the data from CampusVue into the Data Mart for reporting.

5.3Campus and Central Office Support. This is the ongoing support and maintenance to keep Campuses and Central Offices up and running utilizing the SIS system. These services include, but are not limited to, Campus transfers, Enrollment Dashboard discrepancies as identified by the Collegis Analytics or Rasmussen Campus teams, business process questions, DPA clean up questions, Student Account Center questions, weekly/daily/monthly data clean up exception reporting, Change of Status forms, billing, and month end process. These services further include support of existing reporting in CampusVue. Collegis will participate in a quarterly review with Rasmussen to discuss efficiencies in support. The review will allow Rasmussen the opportunity to either assume some of these support items or work with Collegis to determine better processes, which would reduce the number of hours spent on Support Services.

5.4SIS/LMS Integrations. Collegis will provide support for the existing integrations between the SIS and LMS systems currently in use by Rasmussen as defined in Schedule 5, Table 3 including course creation, deletion, enrollment, attendance, and grades. Collegis will work closely with Rasmussen employees to resolve any issue arising from the integration between these systems.

5.5SIS Course Management. Collegis will manage the day-to-day technical operations of course management for orientation and other enrollment policy and qualification courses. This includes course balancing, LMS integrations, assessment course reporting, and course reporting for faculty. Further, Collegis will manage student email account creation and residential course survey setup. Major changes to existing processes will be subject to the Service Change Process.

5.6Rasmussen Configurations. Collegis will provide all ongoing maintenance of the SIS platforms that are required based on Rasmussen requirements, including new program setup, document setup, catalog updates, and all list items configurations within the SIS platform. The maintenance and creation of courses is not included in the configuration services. Collegis is not responsible for the setup or creation of individual courses, pre-requisites, or co-requisites. Configurations that take up to [***] hours of effort will be included in these Support Services. Configurations that will take more than [***] hours of effort will be subject to the Service Change Process.

5.7Reporting. Collegis shall create, implement, and generate periodic reporting from the SIS in the areas of academics, admissions, marketing, student affairs, and leadership.

5.8Ownership. Rasmussen owns the data uploaded and stored in the SIS, and Rasmussen is accountable for the data, including the accuracy of the data. Collegis has the right to use amalgamated data anonymously for cross-client reporting. Rasmussen will own the relationship with the SIS provider. Collegis will act as Rasmussen’s agent to the provider, verify invoices, and manage vendor support services.


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6.Maintenance and Support.

6.1Applications. Maintenance and support services will be provided for applications that were purchased or licensed for use by Rasmussen and applications custom developed by Collegis for use by Rasmussen (both as defined in Schedule 10). Support services include account creation, password reset, maintaining application availability, troubleshooting and resolving issues with application functionality, and reporting software issues (i.e., bugs) to the vendor. Maintenance activities include (i) applying fixes and patches and (ii) the upkeep and maintenance of database services, including performance tuning and backup and restore of critical data. All support requests will be submitted through the PSC or other agreed upon method. The PSC will create a case and assign it to the appropriate support team. Cases will be addressed in accordance with the escalation guidelines as defined in Schedule 9. For applications that were obtained through the Project and Portfolio Governance Process but contracted by Rasmussen or not hosted by Collegis, Collegis will act as Rasmussen’s agent to the vendor. Collegis will work with the vendor and manage vendor support services, including reporting issues to the vendor’s support center and escalation when required. Schedule 10, Table 3 contains a list of applications for which Collegis provides little to no support. Maintenance and support will also be provided for modifications to existing reports generated out of the applications, such as updates to content or format, permissions, or report subscriptions.

6.2Software. Support and maintenance will be provided by Collegis for the current software release and the [***] previous major releases unless the manufacturer discontinues support for that release. For versions outside of these guidelines, any incremental costs will be funded by Rasmussen and support levels may be impacted.

6.3Physical Assets. Physical assets (as defined in Schedule 1) will be supported according to manufacturer specifications. Rasmussen agrees to fund the replacement of older equipment that is outside of the manufacturer specifications when such equipment no longer functions or becomes incompatible with current software.

7.Ad-hoc Technology Services.

7.1Service Categories. Ad-hoc Technology Services are categorized as Configuration, Request for Change (“RFC”), and Projects for applications specified in Schedule 10. New applications not specified in Schedule 10 may be subject to the Service Change Process or such Collegis activities may be counted towards the Block Time.

a.Configuration. Configuration services include configuration of existing applications in Schedule 10, enhancing or correcting reports, and correcting defects found in custom developed applications. Collegis will work with Rasmussen to deliver new system configurations based on new business processes defined by Rasmussen. Requests that are submitted by Rasmussen and are under [***] hours of effort will be counted towards the Block Time. Configuration, maintenance, and support activities required to maintain existing functionality (e.g., bug fixes) will not be counted towards the Block Time.


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b.Request for Change. Any requests submitted that exceed [***] hours of effort but fall below [***] hours will be considered a RFC. Any requests that are considered RFCs will be counted towards the Block Time. Any changes requiring outside services and/or that are beyond the capacity or expertise of Collegis staff will follow the Project and Portfolio Governance Process.

c.Projects. Any requests received that exceed [***] hours of effort will follow the Project and Portfolio Governance Process. These requests will be prioritized by the Rasmussen ITSC. Project activities will be counted towards the Block Time.

7.2Application Configuration and Development Services. Configuration and development services for current applications that were purchased or licensed for use by Rasmussen and custom applications developed by Collegis will be provided. Current applications are defined in Schedule 10. Application services include configuration, business process updates, new pick list values for an existing field, data corrections, data loads, new recipients for a workflow email or approval process, updates to existing formulas to change a calculation, bulk inquiry transfers, license re-allocation, and SharePoint site design. Enhancements and upgrades will be evaluated and applied as agreed between Rasmussen, Collegis, and the application supplier. New applications or enhancements will be subject to the Service Change Process. For supported applications (as defined in Schedule 10) that are contracted by Rasmussen or not hosted by Collegis, Collegis will act as Rasmussen’s agent to the vendor. Collegis will work with the vendor to obtain resources for approved development projects, ensure accuracy of invoices for consulting resources, and manage vendor support services. Any development or vendor resources required for additional configuration is subject to the Service Change Process.

7.3Event Video. Video resources will be provided for non-course related content such as Campus events, graduations, and guest speakers. Up to [***] hours of video activity, including pre-production, production, and post-production, will be provided by Collegis per quarter. Travel costs incurred will be funded by Collegis as defined during the budget process. Project milestones scheduling will be performed jointly by the Rasmussen project owner and the Collegis Audio/Video Production representative. The video will be edited to align with the script, and Collegis will add required title screens or bumpers. The video will be uploaded to the streaming media server and html code will be provided. Collegis will maintain the streaming media server and provide reports on the use of the video media, as requested.

8. Project and Portfolio Governance. Rasmussen will follow the Project and Portfolio Governance Process established by Collegis as defined in Schedule 8. The Rasmussen ITSC will prioritize the key initiatives which will drive the order in which Collegis performs work for Rasmussen. Funding decisions are determined through the Project and Portfolio Governance Process. All project work is considered new work and will follow the Project and Portfolio Governance Process. Operationalizing support services as a part of a project will invoke the Service Change Process. The project lifecycle process is defined in Schedule 8. Collegis will assign a Business Analyst (“BA”) as the single point of contact for all IT initiatives. The BA will maintain the IT Roadmap, manage leadership meeting deliverables, provide status of deliverables, and manage communications of issues and resolutions. IT project responsibilities include defining strategies around current and future initiatives in collaboration with Rasmussen.


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The BA will translate the initiatives and IT requirements for development and define quality assurance requirements. Additionally, Collegis will provide project management for IT involvement in small projects and rollout planning and will assist with Level 2 support requirements. The parties will execute a Service Change Order (“Change Order”) in accordance with the Service Change Process for all ITSC approved projects which require greater than [***] hours of effort.

9.Block Time.

9.1Generally. Rasmussen shall annually purchase a block of service units (the “Block Time”) that may be used by Rasmussen to fund activities or projects not specifically included in this SOW during an annual period; provided, that any such activity or project (i) shall be subject to Section 12.2 and (ii) must fall within Collegis’ then existing expertise and capabilities at the time of the request. The allocation of the Block Time units by team is defined in Exhibit A. The Block Time must be used in half-unit increments; provided, that such units shall not (i) exceed in the aggregate [***] of a single team’s capacity or (ii) exceed with respect to any single skill set [******] of that skill set’s total time, in any single month without Collegis’ prior consent. Collegis shall use commercially reasonable efforts to respond and solidify plans for any project under the Block Time. Except as provided below, any unused Block Time as of 11:59 pm on September 30 of each year shall automatically expire without refund. As applicable, Collegis shall provide a monthly statement to Rasmussen detailing the service units used from the Block Time. Any requested use of the Block Time that is expected to exceed [***] units will require approval of the Rasmussen ITSC.

9.2Rollover / Credit. Any unused Block Time will be reviewed with the ITSC and Executive Representatives during the Annual Meeting (as defined in Section 12 below) to determine if such Block Time should be “rolled over” into Rasmussen’s next fiscal year or applied in lieu of service charges, subject to Section 12.2. Notwithstanding anything to the contrary herein, unless otherwise agreed by the ITSC and Executive Representatives who shall reasonably consider the overall fairness to both parties, [***] of any unused Block Time shall be rolled over, and all Block Time that is rolled over to the next fiscal year must be used in such immediately succeeding fiscal year and will not otherwise contribute to any future rollover of Block Time.

9.3Tracking. All Projects, within the current scope of services provided by Collegis, will track their hours to Block Time. Any Projects outside the scope of the SLSS, Email Support, Student Support Services, Central Office Desktop Support, Student Information Systems Services, Salesforce and Application Support, Network Services and Campus Nexus hosting will be mutually assessed by the parties on a one-off basis to determine if Collegis has the resources and skillsets available to use Block Time with the intention to use Block Time to the fullest extent possible. The ITSC will review any such assessment on a timely basis. For the avoidance of doubt, if there are incremental out-of-pocket costs for Collegis to deliver a Project, the Service Change Process will be utilized.

10.Contracts and Licensing. Rasmussen and Collegis agree to cooperate and negotiate in good faith to determine ownership of current contracts and licensing agreements for technology used to provide Services, including ongoing funding required for the technology.


			16			IT Statement of Work #4

11.Service Change Process. Changes (including additions, deletions, or modifications) to Services defined in this SOW and all ITSC approved projects which require greater than [***] hours of effort are subject to the Service Change Process.

11.1Service Change Orders. The party requesting the change will submit a request to the other party. If the change has not already been discussed through the Project and Portfolio Governance Process, the parties will meet to discuss the requested changes and shall promptly determine the financial and schedule impact, if any, and whether, and with what modifications the proposed change is mutually agreeable. If the parties agree to the proposed changes, a written Change Order shall be created and substantially completed in the format of the template attached as Schedule 7.The Change Order will include the scope of the project, deliverables, roles and responsibilities, dependencies, cost estimates (including one-time and recurring costs), and financial responsibilities of both parties. The Change Order will be agreed upon and executed prior to beginning the project or Collegis executing a change in Services. Any services or goods that have incremental external costs will require both parties to authorize the Change Order prior to engaging external services or ordering goods. Any changes in scope to a Change Order will be evaluated and mutually agreed upon prior to any commitment to accept the change.

11.2Binding Effect. The parties will negotiate any Change Order in good faith. No Change Order will have any contractually binding effect until formally agreed to in writing by both parties, and if the parties do not agree on a Change Order, this SOW will remain in full force and effect in accordance with its terms; provided, however, that if Rasmussen initiates a Change Order, and agrees to pay Collegis’ additional fees to make such change, Collegis may not refuse to accept a Change Order provided that the terms and work therein are commercially reasonable. Collegis’ additional fees shall be based on the rates as derived from scheduled hours and total fees associated with the change or additional requested services. Additional or modifying work without Rasmussen’s consent shall not justify a claim to compensation.

11.3Annual Change Order Review. During the annual review meeting (as contemplated by Section 3.3 of the Agreement), Rasmussen and Collegis will review all Change Orders from the previous year and evaluate if the deliverables or services resulting from such Change Orders are an incremental recurring service, removal of service, or change to service, and make a determination if the SOW should be updated to reflect the impact of recurring support and maintenance. As part of this evaluation, both parties will review the financial impact to support and maintenance and agree to adjust the associated fees accordingly.

12.Annual Meeting; Flexibility and Clarity.

12.1Annual Meeting. Section 3.3 of the Agreement provides that the parties’ respective Executive Representatives shall review business and technology strategy, and related budgetary and financial consequences at an annual meeting (the “Annual Meeting”). The parties agree that the Annual Meeting shall occur at a mutually agreed upon time to correspond with Rasmussen’s annual operational planning.


			17			IT Statement of Work #4

12.2Flexibility. As part of the Annual Meeting, the parties agree to discuss the ability to re-allocate the Services within the scope and total Fee of this SOW in order to better align the services provided by Collegis with Rasmussen’s information technology priorities for the up- coming fiscal year. Collegis agrees to engage in good faith discussions and shall make best efforts to provide the flexibility to meet Rasmussen’s requests to reallocate resources, provided that if accommodating a request will impose additional costs on Collegis that are more than de minimis, Collegis shall document such costs and present them to Rasmussen. If Rasmussen agrees to cover such additional costs, Collegis shall proceed with the request. If Rasmussen determines that it shall not cover such costs, unless otherwise agreed by the parties, Collegis shall have no obligation to proceed with such requests. Notwithstanding the foregoing, to the extent Rasmussen’s requests cannot be met through a re-allocation of Block Time or within the skillset / resource availability otherwise set forth in this SOW, then the parties shall utilize the Service Change Process pursuant to Section 11. The parties acknowledge that constraints on flexibility include, without limitation, any changes that impact the overall expenses of Collegis, net new technologies, or skillsets that require Collegis to hire incremental resources to support new technologies unless those costs are offset by agreed upon or Collegis requested reductions in other services that no longer require support from Collegis. By way of example, if Rasmussen desires to sunset an application and once this migration is complete Collegis will no longer need to support such application, then Collegis agrees that best efforts attempts will be made to re- train the Collegis resources in a replacement technology. If such re-training is not commercially reasonable, Collegis will make commercially reasonable efforts to hire the resources needed to support the new technology with no negative impact to its cost structure. If this change results in net incremental staffing and/or technology costs, then the standard Service Change Process will be implemented by the parties.

12.3Clarity. Sections 2.2(a)(i) (Course Creation), 2.2(b)(i) (New Course Production), 2.2(b)(ii) (Multimedia Creation, 2.2(b)(iii) Course Updates), 2.2(b)(x) (Custom Reporting from MLS) and 2.2(b)(xi) (Video) each provide for certain service hours or development units as set forth therein. The parties acknowledge and agree that such amounts are upper limits to ensure that Collegis is staffed to meet Rasmussen’s demand in these areas, and that the hours incurred and/or development units utilized is ultimately determined (on a year-by-year basis) by the number and type of courses requested by Rasmussen. Collegis agrees to use commercially reasonable efforts to allow Rasmussen to move hours and/or development units across the above referenced service categories consistent with past practice to ensure overall fairness to both parties in all material respects, and if the total hours and/or development units exceeds the totals set forth in Section 2.2 above, such amounts can be allocated to Block Time.

12.4Compliance. Subject to the remaining provisions of this Section 12.4, Collegis shall have no independent responsibility for satisfying any statutory, Department of Education or other regulatory requirements applicable to Rasmussen. Collegis shall provide all Services in compliance with all applicable laws, rules, regulations and/or standards (taking into account any laws, rules, regulations and/or standards that apply to Collegis by virtue of Rasmussen, as the recipient of such Services, operating a business subject to educational laws, rules regulations and/or accreditation standards). In furtherance of the foregoing, Collegis shall (i) take all actions necessary to ensure such on-going compliance by Collegis and (ii) shall exercise commercially reasonable efforts to enable Rasmussen, in accordance with instructions and/or guidance provided by Rasmussen, to comply with any laws, rules, regulations and/or accreditation standards applicable to Rasmussen.

13.Maintenance Windows. Rasmussen will provide and agree to standard maintenance windows for all technology solutions used to provide the Services.

14.Course of Business Services. For the avoidance of doubt, Collegis will continue to provide IT support and services to Rasmussen in the ordinary course of business. Collegis will provide IT services for general IT requests on a day-to-day basis; provided, however, any requests which will require a significant amount of Collegis effort beyond day-to-day business support will be allocated to Block Time or subject to the Service Change Process.

15.Exhibits and Schedules. The following Exhibits and Schedules are attached hereto and incorporated by reference herein:

15.l Exhibits.

a.Exhibit A: Fees for Services

b.Exhibit B: Initial Term and Renewal Terms

c.Exhibit C: Service Levels

d.Exhibit D: Third Party Software/Hardware/Licenses

e.Exhibit E: Disaster Recovery

15.2Schedules.

a.Schedule 1: Supported Locations, Products, and Technologies

b.Schedule 2: Service Metrics

c.Schedule 3: LMS Systems

•d. Schedule 4: Data Center Services

e.Schedule 5: Learning Management System Services

f.Schedule 6: Support Center Service Reports

g.Schedule 7: Service Change Order

h.Schedule 8: Project Governance Process

i.Schedule 9: Case Escalation Guidelines

j.Schedule 10: Applications

IN WITNESS WHEREOF, the parties hereto have executed this SOW in the manner and form sufficient to bind them on the day and year written after the execution by their respective parties.

Collegis, LLC

BY: /s/ Patrick D. Branham

Name: Patrick: D. Branham

Title: Chief Administrative Officer

RASMUSSEN COLLEGE,

PUBLIC BENEFIT CORPORATION

By: /s/ Thomas Slagle

Name: Thomas Slagle

Date: March 15, 2019

Date:

March 15, 2019

EXHIBIT A

FEES FOR SERVICES

The fees for the below described services (collectively, the “Fee”) will be payable during the Term in accordance with the following schedule:

I.[***] – Upon the “lock down” date for each academic quarter, Rasmussen will report to Collegis and pay the fee described on the following schedule for [***]:

a.Up to [***] $[***] per [***]

b.From [***] to [***] $[***] per [***]

c.From [***] to [***] $[***] per [***]

d.From [***] to [***] $[***] per [***]

e.From [***] and over $[***] per [***]

II.[***] – As of the first day of each month, Rasmussen will pay $[***].

III.[***] – At the beginning of each month, Rasmussen will pay

$[***].

IV.[***]– At the beginning of each month, Rasmussen will pay $[***] of Rasmussen.

V.[***] – At the beginning of each month, Rasmussen shall pay $[***].

VI.[***] – At the beginning of each month, Rasmussen shall pay $[***].

VII.[***] - At the beginning of each month, Rasmussen shall pay $[***].

For the avoidance of doubt, the Fee includes all Services needed to carry out the annual business objectives agreed to by the Parties, excluding any Change Orders. Additionally, Rasmussen shall be responsible for any pass-through and allocated costs as stated in the SOW. Cost allocations shall be made using a mutually agreed upon allocation method.

The portion of the Fee for Student Information System Management, Salesforce and Application Support, and All Other Outsourcing Services and General Support shall be subject to an annual cost of living escalator equal to the greater of the [***] on July 1st each year or

1 [***].

[***] %, commencing on October 1, 2017.2


			28			IT Statement of Work #4

Notwithstanding anything to the contrary herein, solely with respect to items 1 through 4 in the Chart of Service Levels and Performance Credits set forth on Exhibit C, for each month where

(i) an applicable Service Level availability is under [***]% and (ii) such Service Level availability remains under [***]% in either of the immediately [***] succeeding months, Collegis shall credit Rasmussen $[***] against the Fee on the next applicable monthly invoice; provided, that the credit applicable with respect to any single month shall in no event exceed in the aggregate $[***] plus the maximum Performance Credit for such Service Level as set forth in Exhibit C. In no event shall the $[***] credit against fees set forth above be deemed a Performance Credit for purposes of this SOW.

During each contract year Collegis will track its time allocation by team in the form of block hours (the “Block Time”). If Rasmussen utilizes additional time beyond the total Block Time allocated in Table 1 below, Rasmussen may purchase additional Block Time or Collegis may charge Rasmussen for additional hours based upon the Ad-hoc Technical Services Rate Card in Table 2.

Table 1: Block Time


Team			Hours
LMS			[***]
LMS Engineering			[***]
Operations			[***]
PSC			[***]
SIS			[***]
ITSS			[***]
Apps/SQL/DBA/Sharepoint			[***]
PM/QA			[***]
TOTAL			[***]

Table 2: Ad-hoc Technical Services Rate Card


Ad-hoc Technical Services Rate Card
Department	Title	Rate/Hour
Operations	Associate Administrator	$[***]
	IT Support Specialist	$[***]
	Network Engineer	$[***]
	SR Network Engineer	$[***]
	SR Systems Engineer	$[***]
	Systems Administrator	$[***]

2 Note to Draft: Pricing needs to reflect applicable increases since October 1, 2017.


			29			IT Statement of Work #4


Applications	Application Developer	$[***]
	SQL DBA	$[***]

LMS	LMS Engineering	$[***]
	LMS Administration	$[***]
	Web Production	$[***]

SalesForce	Salesforce – Development/Support	$[***]
	Salesforce – Sr. Development/Architect	$[***]
	Salesforce – Development/Support	$[***]
	Salesforce – Sr. Development/Architect	$[***]

Project Management	Sr. Project Manager	$[***]
	QA Lead	$[***]
	Sr. QA Staff	$[***]

Additional COLA adjustment, based on CPI, will be added to rates, starting October 1, 2017.


			30			IT Statement of Work #4

EXHIBIT B

INITIAL TERM AND RENEWAL TERMS

This SOW and the Services shall commence on the Effective Date and continue until September 30, 2024 (“Initial Term”). This SOW shall automatically renew for successive two (2) year periods (each a “Renewal Term”), unless terminated by written notice at least twenty-four (24) months prior to the end of the Initial Term or a Renewal Term. “Term” shall mean the Initial Term or a Renewal Term, as applicable.


			31			IT Statement of Work #4

EXHIBIT C

SERVICE LEVELS

The online learning student support and advanced technology support service levels (“Service Levels”) are measured on a quarterly basis. All measures shall be reported by Collegis to Rasmussen and discussed by the Parties on a quarterly basis unless noted otherwise. The Parties shall meet once per quarter to review and assess performance against each Service Level and any performance issues.

Force Majeure

Service Levels missed due to a Disaster, or a force majeure event shall not be included.

Commencement of Service Levels

All Service Levels will commence on the Effective Date. Rasmussen will be eligible to receive “Performance Credits” if Collegis’ services fall below the Service Levels outlined in this Exhibit

C. The applicable Performance Credits, if any, will be credited to Rasmussen in the invoice immediately following the month following Collegis’ failure to “earn-back” the Performance Credit as set forth herein (i.e., a failure to achieve the applicable Service Level in the [***] months immediately following an initial failure).

Availability Service Level

Collegis provides Availability (as defined below) of the systems hosted by Collegis measured across all of the individual platform service components, as follows. A regular maintenance schedule and notice of any other necessary maintenance will be provided quarterly. Notwithstanding anything to the contrary, Rasmussen understands and agrees that requesting certain functions, including, but not limited to, performing updates and backups, may limit access to the platforms and such instances will not be considered a Non-Conformance (as defined below).

The term “Availability” is a percentage that shall be calculated as follows:

Availability Percentage = [***]

LMS Platform: Availability will be calculated for each hosted Rasmussen LMS instance (i.e., website). “Counted Minutes” means all minutes in a given calendar month multiplied by the number of Rasmussen LMS instances reduced by minutes that the specific Rasmussen LMS instance is not accessible due to the exceptions listed below (“Exceptions”).

Exchange Platform: For Exchange Availability, “Counted Minutes” means all minutes in a given calendar month multiplied by the number of Mailboxes reduced by minutes that the platform is not accessible due to the Exceptions listed below.


			32			IT Statement of Work #4

Exceptions:

a.Permitted interruptions (see below);

b.Issues arising from the misuse of the Platforms by Rasmussen;

c.Scheduled or requested maintenance;

d.Issues arising from services provided by (i) CenturyLink and Zayo (and/or any replacements or successors thereof who provide substantially similar services) and any telecom providers providing services to Collegis (provided that any service providers providing substantially different service levels than CenturyLink and/or Zayo shall, in the case of CenturyLink, be subject to Rasmussen’s prior approval, not to be unreasonably withheld, and in the case of Zayo, shall be subject to Rasmussen’s reasonable consultation and input) or (ii) Redhat and Microsoft or any third party application where Rasmussen is listed as the “Licensor or Asset Owner” on Exhibit D of the Agreement; and

e.Force majeure events.

“Unavailability” means any system outage and/or substantial system non-performance for which Rasmussen is not responsible, as reasonably determined by Collegis. Incidents of Unavailability shall be identified through Collegis’ monitoring system or reported by Rasmussen through Collegis’ Personal Support Center (“PSC”). When an incident is identified or reported and upon receipt of such report, Collegis will promptly issue notification to the Rasmussen designated contact. Collegis and Rasmussen will mutually agree whether or not the incident resulted in Unavailability of the platform.

An Exchange mailbox profile allows up to [***]GB of email, calendar, and contact data for no more than [***] % of the mailbox population. For up to [***] % of the population, mailbox profiles will allow up to [***]GB of email, calendar, and contact data. For mailboxes larger than [***]GB in size, email access may operate at a slower performance. Slow performance for these large mailboxes will not be included in the calculation of Unavailability.

Permitted Interruptions

Collegis may periodically interrupt access to the systems hosted by Collegis for reasons such as safety, platform changes, and testing. These interruptions will, whenever possible, be carried out at pre-scheduled times, and every effort will be made to minimize the duration. For interruptions expected to last for less than [***] hours, Collegis will provide Rasmussen with at least [***] hours’ notice, except as otherwise agreed by the Parties. For interruptions expected to last for more than [***] hours, Collegis will provide Rasmussen with [***] months’ notice, except as otherwise agreed by the Parties.

Collegis and Rasmussen recognize that the systems hosted by Collegis used to provide services will on occasion require immediate attention to rectify faults (“Emergency Maintenance”). For the avoidance of doubt, Emergency Maintenance shall not include the correction of any faults within the reasonable control of Collegis (which shall be deemed Unavailability). Collegis shall make every reasonable effort to limit interruptions of access to the platforms, but occasionally an unscheduled interruption due to Emergency Maintenance may be unavoidable. Collegis will provide Rasmussen with notice of any Emergency Maintenance as soon as reasonably practicable given the nature of and circumstances relating to the Emergency Maintenance.


			33			IT Statement of Work #4

Service Levels and Performance Credits

Ref #


Application/Platform	Items Supported	Path of Escalation
Personal Computers	Best effort is used to provide assistance to students with computer issues if system is within minimum standard guidelines as defined by the LMS or course requirements. Actual hardware is not supported and referred to an external support organization.	Collegis Escalation – Central Office and Campus Support Services External Support – referral to outside source such as vendor support web sites or 3rd party support services.
Apple Computers	Best effort is used to provide assistance to students with computer issues if system is within minimum standard guidelines as defined by the LMS or course requirements. Actual hardware is not supported and referred to an external source.	Collegis Escalation – Central Office and Campus Support Services External Support – referral to outside source such as vendor support web sites or 3rd party support services.


Mobile Hardware: Tablets, Phones; Chromebook Laptops	Best effort is used to provide assistance to students with computer issues if system is within minimum standard guidelines as defined by the LMS or course requirements. Actual hardware is not supported or is referred to an external source.	Collegis Escalation – Central Office and Campus Support Services External Support - referral to outside source such as vendor support web sites or 3rd party support services.
Operating Systems: Windows, Linux, Mac OSX Mobile Operating Systems: iOS, Android Web Browsers: Internet Explorer, Firefox, Chrome, Safari	OS version and Brower support follows manufacturer support policies. Browser support will align with application requirements. Best effort support is given on navigation and version update. Virus removal, OS restores and other OS issues are not	Collegis Escalation – Central Office and Campus Support Services External Support – referral to outside source such as vendor support web sites or 3rd party support services.


	supported and referred to an external support source.
Learning Management Systems: Engage, Blackboard, Moodle	Assist with posting of assignments, file size management, navigation of classroom environment, troubleshooting of functionality. Items not supported are: homework assistance, assignment tutoring and online research and are referred to the campus / professor.	Collegis Escalation – Learning Management Services Rasmussen Escalation –Course Development
Remote Learning Systems: Cisco WebEx	Assist with connection to live and archived classrooms. Support troubleshooting application compatibility and install issues.	Collegis functionality – Information Technology Services Rasmussen Escalation – Training and Development
Application Support: Enrollment Agreement Student Portal Student Email Adobe Products Microsoft Office Suite School of Software & Hardware Packages	Assist with download, install, utilization, and best effort of application functionality / troubleshooting.	Collegis Escalation – Information Technology Services External Support – referral to outside source such as vendor support web sites or 3rd party support services.


Student Account Management: Adobe Creative Cloud College Domain / Network Dreamspark / OntheHub FTP Student Portal Student Email Library Resources LexisNexis (eBooks) - Bookstore / VitalSource Saint Student / FA Connect Hummingbird CampusVue	Assist with login, account setup, password resets, and eBook issues.	Collegis Escalation – Central Office and Campus Support Services; Learning Management Services; Information Technology Services External Support- referral to outside source such as vendor support web sites or 3rd party support services.
Rollover / After-Hours Campus & Central Reception Telephone coverage	Initial request documentation and transfer to requested party	Collegis Escalation – None


		Rasmussen Escalation – Campus, Central Reception
Campus: Financial Aid Admissions Academics Enrollment Library Services Learning Center	Initial request documentation and all site related issues. Some instructor-student liaison assistance. Actual financial information is not provided or supported and is referred to the Rasmussen Financial Aid group.	Collegis Escalation – None Rasmussen Escalation – Campus, Central Support Team


Product	Licensor or Asset Owner	Financial Responsibility	Contract Administrator
Personal Computers	Organization of the employee that uses the computer.	Organization of the employee that uses the computer.	Collegis
Printers & Copiers	Organization that uses the majority of the pro-rata share of the office space	Organization that uses the majority of the pro-rata share of the office space	Collegis
Printer & Copier Managed Service	Rasmussen College	Allocated by usage to the organization that occupies the majority of the pro-rata share of the office space	Collegis
Telecom phone circuits	Rasmussen College	Rasmussen College	Collegis
Data network circuits	Collegis	Allocated by usage to the organization that occupies the majority of the pro-rata share of the office space	Collegis
Server Equipment (Campuses)	Rasmussen College	Rasmussen College	Collegis
Server Equipment (Offices)	Collegis	Collegis	Collegis
Server Equipment (Data Center)	Collegis	Collegis	Collegis
Network Equipment (Campuses)	Rasmussen College	Rasmussen College	Collegis
Network Equipment (Offices)	Collegis	Collegis	Collegis
Network Equipment (Data Center)	Collegis	Collegis	Collegis
Telephony (VoIP) Handsets	Organization of the employee that uses the telephone	Organization of the employee that uses the telephone	Collegis


Telephony (VoIP) Hardware & Software	Collegis	Collegis	Collegis
Microsoft Office	Rasmussen College	Rasmussen College	Collegis


Microsoft Office 365	Rasmussen College	Rasmussen College	Collegis
Microsoft Core CAL	Rasmussen College	Rasmussen College	Collegis
Microsoft SQL CAL	Rasmussen College	Rasmussen College	Collegis
Microsoft Remote Desktop CAL	Rasmussen College	Rasmussen College	Collegis
Microsoft Visio	Rasmussen College	Rasmussen College	Collegis
Microsoft Project Professional	Rasmussen College	Rasmussen College	Collegis
Microsoft System Center	Rasmussen College	Rasmussen College	Collegis
Microsoft SQL Server	Rasmussen College	Rasmussen College	Collegis
Microsoft Lync	Rasmussen College	Rasmussen College	Collegis
Microsoft SharePoint	Rasmussen College	Rasmussen College	Collegis
Microsoft Exchange	Rasmussen College	Rasmussen College	Collegis
Microsoft IT Learning Academy	Rasmussen College	Rasmussen College	Collegis
CampusVue	Rasmussen College	Rasmussen College	Collegis
SalesForce	Rasmussen College	Rasmussen College	Collegis
NICE	Collegis	Collegis	Collegis
SchoolDocs	Rasmussen College	Rasmussen College	Collegis
Blackboard	Rasmussen College	Rasmussen College	Collegis
Engage	Rasmussen College	Rasmussen College	Collegis
Cisco WebEx	Rasmussen College	Rasmussen College	Collegis
Adobe	Rasmussen College	Rasmussen College	Rasmussen College
Microsoft Dynamics (Solomon)	Rasmussen College	Rasmussen College	Rasmussen College
EZ Proxy	Rasmussen College	Rasmussen College	Rasmussen College
Sage FAS	Rasmussen College	Rasmussen College	Rasmussen College
BI360	Rasmussen College	Rasmussen College	Rasmussen College


Learning Management Systems: Engage, Blackboard Learn, Moodle	Assist with posting of assignments, file size management, navigation of classroom environment, troubleshooting of functionality, and content management.	Collegis Escalation– Learning Management Services Rasmussen Escalation– Central Office and Campus Support Services
Remote Learning Systems: Cisco WebEx, Campus Connect	Assist with connection to live and archived classrooms. Support	Collegis functionality – Information Technology Services


	troubleshooting application compatibility and install issues. Assistance with administrative functionality.	Rasmussen Escalation – Training and Development
Application Support: Salesforce Class Enrollment Agreements Microsoft Office Suite Adobe Products CampusVue Citrix Metrics Reporting Site	Initial request documentation. Preliminary troubleshooting and problem determination. Initial resolution attempt.	Collegis Escalation –Information Technology Services
Account Management:	Assist with login, account	Collegis Escalation – Central
Adobe Creative Cloud	setup, and password resets.	Office and Campus Support
College Domain / Network		Services
Student/Faculty Portal
Email		External Support - referral to
Library Resources		outside source such as vendor
LexisNexis		support web sites or 3rd party
(eBooks) - Bookstore / Vital		support services.
Source
RasReady
Hummingbird
CampusVue
Salesforce
Saint Student / FA Connect
STEP


Internet Explorer, Firefox, Chrome, Safari
Learning Management Systems: Engage, Blackboard Learn, Moodle	Assist with posting of assignments, file size management, navigation of classroom environment, troubleshooting of functionality, and content management.	Collegis Escalation – Learning Management Services Rasmussen Escalation– Course Development
Remote Learning Systems: Cisco WebEx / Campus Connect	Assist with connection to live and archived classrooms. Support troubleshooting application compatibility and install issues. Assistance with administrative functionality.	Collegis Escalation – Information Technology Services Rasmussen – Training and Development
Application Support: Salesforce Class Enrollment Agreements Microsoft Office Suite Adobe Products CampusVue Citrix Metrics Reporting Site	Initial request documentation. Preliminary troubleshooting and problem determination. Initial resolution attempt.	Collegis Escalation – Central Office and Campus Support Services; Information Technology Services
Account Management:	Assist with login, account	Escalation – Central Office and
Adobe Creative Cloud	setup, and password resets.	Campus Support Services
College Domain / Network
Student/Faculty Portal		External Support – referral to
Email		outside source such as vendor
Library Resources		support web sites or 3rd party
LexisNexis		support services.
(eBooks) - Bookstore /
VitalSource
RasReady
CampusVue
STEP
Salesforce
Saint Student


	troubleshooting and problem determination. Initial resolution attempt.
Server Application	Initial request documentation. Preliminary troubleshooting and problem determination. Initial resolution attempt.	Collegis Escalation – Information Technology Services


Type	Telephone Number	eMail
Student	[***]	[***]
Employee	[***]	[***]
VIP Hotline	[***]


Product			Versions
Personal Computers			•Lenovo T, W and x1 Series Laptops •Lenovo M Series Desktops
Personal Computer Operating Systems			•Windows •Mac/OSX
Printers / Copiers			•HP •Ricoh •Sharp


Video Conferencing Cameras			Cisco Telepresence cameras
Displays			Projectors and monitors will be supported on a limited basis as hardware failures may require equipment replacement.


Adobe Flash			Adobe Flash
Adobe Acrobat Reader			Adobe Acrobat Reader
Internet Explorer			Internet Explorer
Mozilla Firefox			Mozilla Firefox
Google Chrome
Java			Java
MS Office			MS Office
Microsoft Silverlight			Microsoft Silverlight
Cisco VPN Client
Lenovo Software			Lenovo Software (for Lenovo desktops)
WebEx Meeting Center			WebEx Meeting Center
WebEx ARF Player			WebEx ARF Player


Cisco Handsets			Two button phone – standard model deployed to staff
			Six button phone – standard model for administrative assistants
			Side car for six button phone (12 buttons, max 2 side cars) deployed to front office administrative assistants
			Conference phone, includes microphone kit
			Cordless phone, includes extra battery, base stand – upon request may be deployed to administration assistants
Headsets			Plantronics models compliant with Cisco Call Manager


Service			Quantity
Average calls per month			[***]
Average emails per month			[***]
Average chats per month			[***]
Average handle time (min) – Calls			[***]
Average handle time (min) – Chats			[***]
Maximum Contacts per day			[***]
Average Contacts per Enrollment per year			[***]


Service			Quantity*
Average cases per month			[***]
Maximum cases per month			[***]
Average cases per month per employee			[***]


Service	Definition	Metric
Total Course Production	Sum of all courses produced and prepared in a given reporting period	All courses produced and prepared in a given reporting period
New/Redeveloped Courses	Number of courses newly produced or redeveloped during a given reporting period	Courses requiring > [***] % of content updates in addition to term preparation
Updated Courses	Number of courses refreshed or updated during a given reporting period	Courses requiring [***] % of content updates in addition to term preparation


Prepared Courses			Number of courses prepared for use but not requiring content updates			Courses requiring term preparation only


Type	Product	Purpose
LMS	Engage	Learning management platform.
LMS	MyCourseLabs	Competency based learning platform based on Moodle and used by the self-directed program. Houses self-paced courses and awards badges based upon proven competency.
LMS	Blackboard Learn	Learning management platform.
LMS	Moodle	Learning management platform for competency based courses.
SIS	CampusVue	Student Information System designed to maintain student records pertaining to enrollment history, attendance, financial transactions, contact information, etc.
SIS Document Management	SchoolDocs	Document management and tracking solution.
SRM	Salesforce	Student Relationship Management system including a suite of integrated applications.
Kaltura	Kaltura MediaCenter	Streaming video server.
MediaSpace	Kaltura MediaSpace	Social video and media portal.


Ft Myers Rollover			866-940-9075
Green Bay			888-201-9144
Green Bay Rollover			866-940-9062
Kindercare Education Advisors			855-297-2939
Lake Elmo			888-813-2358
Lake Elmo Rollover			866-940-9066
MAITLAND MAIN #			866-211-4042
Mankato			800-657-6767
Mankato Rollover			866-940-9068
Mokena Campus			866-544-1788
Moorhead Campus			866-562-2758
Moorhead Rollover			866-940-9061
New Port Richey Campus			877-593-2783
Nursing Toll Free ([***] Lutchen)			866-319-8961
Ocala Campus			877-270-9984
Ocala Rollover			866-940-9064
Overland Park Campus			877-791-7180
Pasco Rollover			866-940-9072
PSC 15K Degree Hotline ([***])			855-456-8756
Ras OL - Tech n Design - All (ORL)			888-851-2372
Ras OL - Tech n Design - [***] Group (ORL)			866-967-7039
Ras OL School of Business - All (ORL)			866-544-1794
Ras OL School of Business - [***] group (ORL)			866-967-7040
Ras OL School of Education			877-820-0575
Ras OL School of Justice Studies - [***] group (MN)			866-967-7041
Ras OL School of Nursing - [***] group (MN)			877-308-9946
Ras OL Student Services (MN)			866-425-3378
Ras Online Florida			866-932-3347
Rasmussen Collections - Rings to [***]			855-456-8759
Rasmussen Collections - Rings to [***]			855-456-8758
Rasmussen Collections - Rings to [***]			855-456-8760
Rasmussen Collections - Student Accounts			855-270-9603
Rasmussen College - Centralized Admissions			866-967-7042
Rasmussen College - FA Support Team 1			866-789-5601
Rasmussen College - FA Support Team 2			844-375-0113
Rasmussen College - FA Support Team 3			855-270-0885
Rasmussen College - FA Support Team 4			844-375-0114
Rasmussen College -Student Accounts (In School Accounts Receivable)			844-558-1160


Rasmussen College -Student Accounts (Out of School Accounts Receivable)			866-491-2203
Rasmussen Graduate Initiative			877-307-5893
Rasmussen Media Relations			866-257-8253
Rasmussen National Online			866-847-5162
Rasmussen Records Active Team Fax			855-668-1623
Rasmussen Records Entrance Team Fax			877-307-5894
Rasmussen Records Exit Team Fax			877-308-9602
Rasmussen SFS Military Specialists			866-245-9627
Rasmussen Support Center			866-693-2211
RCO TCO Bachelor Completer Advising ([***])			855-275-1093
RCO TCO Student Services			866-758-7656
Reserved for Wimba (Rasco 2 Live)			877-497-5916
Reserved for Wimba (Rasco Live)			877-497-5915
Rings to [***]			866-586-3243
Rings to [***]			866-341-1233
Rockford			877-533-5825
Rockford Rollover			866-940-9067
Romeoville			866-967-7045
[***]in Bloomington Admissions (set for Nursing Call Handler)			866-319-8954
St Cloud			800-852-0460
St Cloud Rollover			866-940-9065
Student Emergency Hotline (Disaster Recovery)			866-547-4803
Student Engagement - Paid Search Call-in - [***] Request			855-270-0884
Student Engagement (Corporate Inquiry \| [***])			855-275-1098
Student Engagement Twin Cities - Central Calling Team			877-308-9939
Student Engagement Twin Cities - Click to Chat Team			877-307-4920
Student Loan Management Team Survey Line ([***])			855-725-7616
Support Center			866-224-6722
Temp used for Ras Collections - Rings DID 3084			844-559-4802
Temp used for Ras Collections - Rings DID 3809			844-559-4801
Temp used for Ras Collections - Rings DID 3822			844-559-4803
Temp used for Ras Collections - Rings DNIS 1196			844-559-4804
Tier 2 Support PSC			877-497-5917
Two MarketPointe Rollover			866-940-9070
Vantage Marketplace - [***] Request (00845039)			855-270-0776
Wausau CDA Prep Program			866-295-3110
Wausua Campus			877-265-3205


Legacy Name			Toll Free Number
RCO FL Student Affairs - Compliance Fax			877-265-3204
Romeoville FA Fax			877-791-7184
[***] Fax			877-820-0574
Fort Myers - School of Edu Fax			877-820-0578
[***] \| Student Finance Officer Fax			877-820-0579
Manager of Employee Recruitment Fax			855-275-1081
RCO TCO Student Finance Officers Fax (Twin Cities)			855-275-1085
Nursing Files Fax			855-275-1096
RCO TCO Justice Studies Internship			855-275-1097
LE/W Fin Aid Fax			855-275-1099
Faculty Records Fax ([***])			855-456-8754
Faculty Records Fax ([***])			855-456-8755
[***]/Partnership Director LEW Fax			855-456-8761
ECE Externship Fax (Ras OL)			866-852-1199
BP Admissions Fax			866-847-0685
Bloomington Campus Financial Aid Fax			866-847-1729
BP FA Fax			866-909-2200
RCO TCO Admissions Fax			866-789-5609
Lake Elmo Admissions Fax			866-967-7043
RCO TCO Student Services			866-544-1790
Extern Students submittable time sheets - Brooklyn park			866-717-6380
BP Advisors			866-621-1856
Rasmussen Records Active Team Fax			855-668-1623
TCO AcceleratED - Student Services			877-307-4914
Academic Recruiter			877-307-4921
Default Management Team Fax Distribution			877-307-5869
Rasmussen Records Entrance Team Fax			877-307-5894
Rasmussen Records Exit Team Fax			877-308-9602
[***] Fax (HR)			877-308-9938
[***] Fax (HIT Program Coordinator, Twin Cities)			877-497-5918
Student Loan Management Fax (Twin Cities) [No Longer in Use- 00591612]			877-497-5919
RCO TCO Student Finance Advisors (MN)			866-297-0229
Background Checks Fax ([***]- IL)			855-297-2943
Romeoville Admissions Fax			815-306-2603


Romeoville Nursing Fax			815-306-2604
			952-230-3006
			952-230-3007
[***] Fax			952-230-3008
Bloomington Advising Team Fax			952-230-3096
[*] Rasmussen Edu [*] echo Fax			815-534-3301
[***] Fax			630-888-3509
[***] Fax			813-435-3526
Aurora Admissions			630-888-3596
Aurora Financial Services			630-888-3597
Land O Lakes Admissions			813-435-3654
[***] Fax (Ras Academic Recruiter - MTL)			407-635-8281
[***] Fax			407-667-4412
[***] Fax			407-667-4462
Vacant			407-667-4475
BP - PTA Students Timesheets			763-496-4502
[***] Fax			763-496-4509
New Port Richey Fin Aid Fax			727-846-4996
Maitland - Ras Fax			407-618-5301
Orlando HR Fax			407-618-5338
LE/W KU Partnership Fax			651-259-6693
Mankato Reception Fax			507-385-6805
Mankato Fin Aid Fax			507-385-6890
Mankato Admissions Fax			507-385-6891
Alvin Daniels ( DOA)			785-228-7377
St Cloud Timesheets Fax			320-223-7580
Overland Park Admissions			913-491-7895
Overland Park Financial Aid			913-491-7896
Fax			715-841-8002
Eagan CSA Fax			651-259-8113
[***] Fax			352-291-8510
Ocala Efax			352-291-8586
HR Fax			630-366-2803
Accounts Payable			630-366-2861
[***] Fax			630-528-3111
[***] Fax			630-528-3112
Orlando Online FA Fax			877-791-7178
RCO AcceleratED FA Fax Line			877-820-0577
Human Capital Coordinator Chicago ([***])			855-508-8457
Florida Campuses Early Childhood Education Timesheet Fax			855-456-8753
Program Coordinator Fax ([***])			866-789-5610


Early Childhood Education Program Coordinator Fax ([***])			866-758-7660
RCO Learning Center Management Fax			866-789-5603
RCO TCO Career Services Advisors Fax			866-544-1792
KUCEU Fax Line ([***])			866-717-6369
Knowledge Universe - Lake Elmo KU Advisor Fax			866-508-4349
RCO Orlando Fax			866-373-0365
Surg Tech Program Coordinator Fax			855-297-2941
Fort Myers Financial Services Fax			239-477-2196
Travel desk Fax			630-528-3110
[***] Fax			630-366-2802
[***] Fax			630-366-2806
Rasmussen Compliance Fax			952-230-5095
[***] Fax			407-618-5413
[***] (Director)			785-228-7376
Topeka Admissions Fax			785-228-7378
Tampa Brandon Admissions Fax			813-246-7691
[***] Fax			813-246-7697
Eagan Admission Fax Line			651-259-8104
Ocala Transcripts Fax			352-291-8575
Ocala Advisors Fax			352-291-8505


Location	Type	Size
Campus	MPLS	[*] MB, [] Mb, [**] MB (Primary)
Campus	MPLS	Varies based upon locations Internet provider (Backup)
Campuses with Campus Connect	MPLS	[*] MB or [*] MB (Primary)
Campus Backup Circuit	Internet	Bandwidth varies based on local provider availability
Central Office	MPLS	[***] MB (Primary)
Central Office	MPLS	[***] MB (Backup)
Data Center	MPLS	[***]GB (Primary)
Data Center	Internet	[***]GB


	Engage	MyCourseLabs
Ready (ras_moodle_rdy)	Ras_moodle_production	Rascomp moodle production
ProCerts (rcpc_moodle_production)	Ras_mahara_production
	Trn_moodle_production
	Trn_mahara_production


Application			Storage (GB)
Engage			[***]
MyCourseLabs			[***]
Ready			[***]
ProCerts			[***]
Blackboard Learn			[***]


SIS	LMS	URL	Table
CampusVue	Engage	https://engage.rasmussen.edu
	Ready	https://ready.rasmussen.edu/
	MyCourseLabs	https://rasmussen.mycourselabs.com
	Blackboard Learn	https://learning.rasmussen.edu/


Course Number			Course Description
B271			Professional Communication (also includes B271 6 week mid-start and B271C AcceleratED)
G227			Oral Communication
HI420			Health Information Management Professional Practice Experience
NUR3177			Health Assessment
NUR3418			Introduction to Alternative and Complimentary Therapies
G171/COM1388			Communicating in Your Profession


Content			Frequency
Monthly totals for contacts and cases, average resolution time, average speed of answer (ASA)			By the 15th day of the month
Monthly averages for case response time and time to resolve, measured against guidelines, totals for opened cases, 13 month historical trends			By the 15th business day of the month
Monthly LMS course production (summarized by quarter terms, e.g., current reflects quarter to date), number of courses prepared, updated, new/redeveloped and media build			By the 15th business day of the month
Availability dashboard with summary of the month’s service outages, performance degradation, and scheduled maintenance			By the 15th business day of the month
Monthly Service Availability Baseline performance reporting for LMS, Marketing Websites, and Email			By the 15th business day of the month
Monthly percent first call resolution data by campus			By the 15th business day of the month
Ad hoc monthly reporting to identify potentially actionable differences between campuses and student, faculty, and staff case generation volume			By the 15th business day of the month


SERVICE CHANGE ORDER
Service Change Order No.:			Effective Date of Change Order:
Change Order Title/Project Name:			Requestor:
Master Agreement: Second Amended and Restated Information Technology Services Agreement dated October 1, 2015
This SERVICE CHANGE ORDER (“Change Order”), made effective as of the Effective Date of Change Order set forth above, is to Statement of Work #3 by and between Collegis, LLC (“Collegis”) and Rasmussen College, Inc., a Public Benefit Corporation (“Rasmussen”) dated October 1, 2016 (“SOW”). Except as modified or supplemented hereby, the terms of the SOW shall remain in full force and effect, unchanged hereby. All capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the
Description of the Project and/or Change: (Include scope of the change and/or project, deliverables, roles and responsibilities, and dependencies.)
Price Revision: (Insert additional fees (including one-time and recurring costs), financial responsibilities of both parties, and payment due dates.)


COLLEGIS, LLC			RASMUSSEN COLLEGE, INC., A PUBLIC BENEFIT CORPORATION
By: _			By: _
Name:			Name:
Title:			Title:
Date:			Date: