SECURITIES PURCHASE AND SALE AGREEMENT

Exhibit 2.1

EXECUTION COPY

SECURITIES PURCHASE AND SALE AGREEMENT

BY AND AMONG

CORINTHIAN COLLEGES, INC.,

HEALD CAPITAL, LLC,

SP PE VII-B HEALD HOLDINGS CORP.,

SD III-B HEALD HOLDINGS CORP.,

THE SELLERS LISTED ON EXHIBIT A

AND

THE SELLERS’ REPRESENTATIVE

October 19, 2009

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SECURITIES PURCHASE AND SALE AGREEMENT

This SECURITIES PURCHASE AND SALE AGREEMENT (this “ Agreement ”) is made and entered into as of the 19th day of October, 2009, by and among Corinthian Colleges, Inc., a Delaware corporation (the “ Buyer ”), Heald Capital, LLC, a Delaware limited liability company (the “ Company ”), SP PE VII-B Heald Holdings Corp., a Delaware corporation (“ SP Holdings ”), SD III-B Heald Holdings Corp., a Delaware corporation (“ SD Holdings ”; each of SP Holdings and SD Holdings individually, a “ Holding Company ” and, collectively, the “ Holding Companies ”), the individuals and entities set forth on Exhibit A attached hereto (the “ Sellers ” and, each individually, a “ Seller ”) and Heald Investment, LLC, a Delaware limited liability company, as the Sellers’ Representative.

RECITALS

A. The Sellers are, collectively, the owners of the Stock, the Notes and the Purchased Company Membership Interests (each as defined below); and

B. On the terms and subject to the conditions contained herein, the Sellers desire to sell and the Buyer desires to purchase all of the Sellers’ right, title and interest in and to the Stock, the Notes and the Purchased Company Membership Interests.

NOW THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants which are to be made and performed by the respective parties, it is agreed as follows:

ARTICLE I

DEFINITIONS; PURCHASE AND SALE

Section 1.1 Definitions . The following terms when used in this Agreement or in any Schedule attached hereto have the meanings set forth below:

(a) “ Accrediting Body ” means any Person, whether private or quasi-private, whether foreign or domestic, which engages in the granting or withholding of accreditation of postsecondary institutions or their educational programs in accordance with standards and requirements relating to the performance, operations, financial condition and/or academic standards of such institutions, including WASC and CAAHEP.

(b) “ Accounting Arbitrator ” has the meaning set forth in Section 1.4(b)(ii) .

(c) “ Acquisition Proposal ” has the meaning set forth in Section 7.10(a) .

(d) “ Action ” has the meaning set forth in Section 2.6 .

 

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(e) “ Affiliate ” means any Person now or hereafter controlling, controlled by or under common control with another Person.

(f) “ Agreement ” has the meaning set forth in the Preamble.

(g) “ Approvals ” has the meaning set forth in Section 4.23 .

(h) “ Balance Sheet Date ” means June 30, 2009.

(i) “ Benefit Plan ” has the meaning set forth in Section 4.13(a) .

(j) “ Business Day ” means a day other than a Saturday, Sunday or other day which shall be a legal holiday in Orange County, California or on which commercial banks in Orange County, California are authorized or required by law to close.

(k) “ Buyer ” has the meaning set forth in the Preamble.

(l) “ Buyer Change of Control ” has the meaning given such term in that certain Third Amended and Restated Credit Agreement dated as of September 30, 2009, by and among the Buyer, Everest Colleges Canada, Inc., Bank of America, N.A., as Domestic Administrative Agent, Domestic Swing Line Lender and Domestic L/C Issuer, Bank of America, N.A., acting through its Canada Branch, as Canadian Administrative Agent, Canadian Swing Line Lender and Canadian L/C Issuer, U.S. Bank National Association, as Syndication Agent, Union Bank, N.A, as Documentation Agent, and each Lender from time to time party thereto.

(m) “ Buyer Indemnitees ” has the meaning set forth in Section 10.2(a) .

(n) “ Buyer Tax Issue ” has the meaning set forth in Section 7.5(a)(i) .

(o) “ CAAHEP ” means the Commission on Accreditation of Allied Health Education Programs.

(p) “ Capital Expenditures Budget ” has the meaning set forth in Section 6.3(a) .

(q) “ Change of Control Payments ” means all amounts (other than Employee Payments) that shall become payable by the Company, any Holding Company or any Subsidiary to any Person other than employees (past and present), consultants or contractors of the Company or the Subsidiaries as a result of any “change of control” or similar provision in any agreement binding on the Company, any Holding Company or any Subsidiary and triggered by the transactions contemplated by this Agreement (including, without limitation, all obligations of the Company and the Subsidiaries under interest rate or currency swap transactions (valued at the termination value thereof), including in connection with the termination at or prior to Closing of that certain International Swaps and Derivatives Association, Inc. 2002 Master Agreement by and between Bank of America, N.A. and Heald Real Estate, LLC, dated April 23, 2009), as set forth on the Consideration Spreadsheet, but excluding any such amounts paid prior to the Closing Date and excluding, for the avoidance of

 

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doubt, Transaction Expenses, Indebtedness and the consideration payable to the Sellers under this Agreement or payable pursuant to the Heald Education Transfer Agreement or the Installment Payment Retention Agreement.

(r) “ Claim Certificate ” has the meaning set forth in Section 10.4(a) .

(s) “ Closing ” has the meaning set forth in Section 1.5 .

(t) “ Closing Balance Sheet ” has the meaning set forth in Section 1.4(b)(i) .

(u) “ Closing Date ” has the meaning set forth in Section 1.5 .

(v) “ Closing Payments and Assumed Obligations ” means the sum of the amounts required to pay in full at the Closing (a) all Indebtedness, (b) all Employee Payments, (c) all Transaction Expenses, and (d) all Change of Control Payments.

(w) “ Closing Working Capital ” has the meaning set forth in Section 1.4(b)(i) .

(x) “ Closing Working Capital Final Proposal ” has the meaning set forth in Section 1.4(b)(ii) .

(y) “ Closing Working Capital Statement ” has the meaning set forth in Section 1.4(b)(i) .

(z) “ COD Income ” means the income of the Company and the Subsidiaries attributable to the reduction of the indebtedness of Heald Real Estate, LLC arising as a result of the purchase thereof pursuant to that certain Loan Purchase Agreement, dated as of February 6, 2009, by and between Allstate Life Insurance Company and Ascent-Heald, LLC and the subsequent merger of Ascent-Heald, LLC with and into Heald Real Estate, LLC, and the income of the Company and the Subsidiaries attributable to the reduction of the indebtedness of the Company arising as a result of the transaction contemplated by that certain Joint Escrow Instructions and Agreement, dated as of July 30, 2009, by and among 3D Investments, LLC, the Company, Pacific Education Foundation and Wells Fargo Bank, National Association.

(aa) “ Code ” means the Internal Revenue Code of 1986, as amended.

(bb) “ Company ” has the meaning set forth in the Preamble.

(cc) “ Company Membership Interests ” means the limited liability company membership interests in the Company.

(dd) “ Company School ” shall mean any postsecondary educational institution owned and operated by Heald College, LLC, which has been issued an Office of Postsecondary Education Identification Number by ED, including the main campus and any other campus, branch, satellite location, or other facility at which the institution offers all or any portion of an educational program.

(ee) “ Compliance Date ” means August 15, 2007.

 

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(ff) “ Compliance Review ” means any audit, program review, guaranty agency review, investigation, site visit or other review conducted by any Governmental Entity or Educational Agency with respect to a postsecondary educational institution’s compliance with Laws or Educational Laws (but excluding any routine reporting or renewal-related reviews that occur on an annual basis with respect to all institutions regulated by such Educational Agency), or any independent auditor review of a postsecondary educational institution’s compliance with the statutory, regulatory or other requirements of the Title IV Programs.

(gg) “ Confidentiality Agreement ” has the meaning set forth in Section 7.1 .

(hh) “ Consideration Spreadsheet ” means the spreadsheet attached hereto as Schedule 1.6 , as the same may be updated (as provided in Section 1.6(j) ).

(ii) “ Continuing Employee ” has the meaning set forth in Section 7.4(a) .

(jj) “ Contract ” means any written or oral contract, agreement, instrument, commitment, understanding or undertaking (including leases, franchises, bonds, guaranties, licenses, mortgages, notes, indentures, sublicenses, subcontracts and purchase orders).

(kk) “ Curriculum ” means the curriculum currently used, or used during the twelve (12) months prior to the date of this Agreement, by the Company or any of the Subsidiaries in the educational programs of the Company’s or any of the Subsidiaries’ schools in the form of computer programs or software, slide shows, texts, films, web site content, audio, videos or any other form or media, including, without limitation, the following items: (1) course objectives, (2) lesson plans, (3) exams, (4) class materials (including any interactive or computer-aided materials), (5) faculty notes, (6) course handouts, (7) diagrams, (8) syllabi, (9) sample externship and placement materials, (10) clinical checklists, (11) course and faculty evaluation materials, (12) policy and procedure manuals, and (13) other related materials. The Curriculum shall also include, without limitation, (a) all copyrights, copyright applications, copyright registrations and trade secrets to the extent incorporated in the above-listed items and to the extent owned by the Company or any of the Subsidiaries and (b) Revisions. The term “ Revisions ,” as used in this Agreement, means all periodic updates or revisions to the Curriculum as currently used, or used during the twelve (12) months prior to the date of this Agreement, by the Company or any of the Subsidiaries.

(ll) “ Deferral Date ” has the meaning set forth in Section 1.5 .

(mm) “ Dispute Notice ” has the meaning set forth in Section 1.4(b)(ii) .

(nn) “ DOL ” means the United States Department of Labor.

(oo) “ ED ” means the U.S. Department of Education.

(pp) “ ED Affiliate ” has the meaning ascribed to “affiliate” in 34 C.F.R. § 85.905.

 

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(qq) “ ED Pre-Acquisition Review Notices ” means written notices from ED following ED’s review of pre-acquisition review applications regarding the transactions contemplated herein.

(rr) “ Educational Agency ” means any Person, entity or organization, whether governmental, government-chartered, private, or quasi-private, that engages in granting or withholding Educational Approvals for, administers Student Financial Assistance to or for students of, or otherwise regulates private postsecondary schools in accordance with standards relating to the performance, operation, financial condition or academic standards of such schools, including, without limitation, ED and any Accrediting Body or State Educational Agency.

(ss) “ Educational Approval ” means any license, permit, authorization, program participation agreement, certification, accreditation, or similar approval issued or required to be issued by an Educational Agency to a Company School with respect to any aspect of the Company School’s operations subject to the oversight of such Educational Agency, including any such approval for the Company School to participate in any program of Student Financial Assistance offered by such Educational Agency, but excluding any license, permit, authorization, certification or similar approval issued to the Company Schools or the Company School’s employees on an individual basis.

(tt) “ Educational Consent ” means any approval, authorization or consent by any Educational Agency, or any notification to be made by the parties to an Educational Agency, with regard to the transactions contemplated herein, whether pre-Closing or post-Closing, which is necessary under applicable laws or regulations in order to maintain or continue any Educational Approval presently held by any Company School, as set forth on Schedule 7.11 .

(uu) “ Educational Law ” means any applicable federal, state, municipal, foreign or other Law, regulation, order or Accrediting Body standard, including without limitation the provisions of Title IV and any regulations implementing or relating thereto, issued or administered by, or related to, any Educational Agency.

(vv) “ Educational Loan ” means any student loan made, insured, or originated under Title IV.

(ww) “ Employee Payments ” means all amounts (including any bonus, severance or similar payments and all Profits Units Settlement Payments) that shall become payable (whether currently or in the future) by the Company, any Holding Company or any Subsidiary to employees (past and present), consultants or contractors of the Company, any Holding Company or the Subsidiaries as a result of the transactions contemplated by this Agreement, and set forth on Schedule 1.1(ww) , but excluding any such amounts paid prior to the Closing Date and excluding, for the avoidance of doubt, any basic severance payments resulting from the termination of any employee and any so-called double-trigger severance obligations or similar amounts that may become payable to employees following the Closing in part but not solely as a result of the transactions contemplated by this Agreement, in each case other than the severance payments set forth on Schedule 1.1(ww) .

 

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(xx) “ Encumbrance ” means any mortgage, pledge, security interest, lien, easement, charge, encumbrance, claim, option (including without limitation, rights of first refusal or similar rights) or claim of any kind.

(yy) “ Environmental Laws ” has the meaning set forth in Section 4.15(a) .

(zz) “ Environmental Release ” has the meaning set forth in Section 4.15(c) .

(aaa) “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

(bbb) “ Escrow Agent ” means JPMorgan Chase Bank, National Association.

(ccc) “ Escrow Agreement ” has the meaning set forth in Section 8.15 .

(ddd) “ Escrow Amount ” means an amount equal to Thirty-Nine Million Five Hundred Thousand Dollars ($39,500,000).

(eee) “ Escrow Fund ” has the meaning set forth in Section 1.6(g) .

(fff) “ Estimated Closing Working Capital ” has the meaning set forth in Section 1.4(a) .

(ggg) “ Estimated Closing Working Capital Adjustment ” means the Estimated Closing Working Capital minus the Working Capital Target.

(hhh) “ Estimated Holding Company CODI Liability ” means the sum of the Estimated SD Holdings CODI Liability and the Estimated SP Holdings CODI Liability.

(iii) “ Estimated SD Holdings CODI Liability ” means an aggregate amount equal to $42,295.00.

(jjj) “ Estimated SP Holdings CODI Liability ” means an aggregate amount equal to $807,705.00.

(kkk) “ Excluded Claims ” has the meaning set forth in Section 10.1 .

(lll) “ Final Closing Working Capital ” means the Closing Working Capital as finally determined pursuant to Section 1.4(b)(ii) or 1.4(b)(iii) .

(mmm) “ Final CODI Exhibit ” has the meaning set forth in Section 7.5(j)(i) .

(nnn) “ Final SD Holdings CODI Liability ” means an aggregate amount equal to the product of (i) the amount of COD Income listed on the 2009 Schedule K-1 provided by SD III-B Heald Holdings, L.P. to SD Holdings in accordance with the terms of that certain Agreement of Limited Partnership of SD III-B Heald Holdings, L.P., dated as of March 10, 2009, by and between Summit Partners SD III, L.P., as the sole general partner, and SD Holdings, as the sole limited partner and prepared in accordance with Revenue Procedure 2009-37, and (ii) 35%.

 

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(ooo) “ Final SP Holdings CODI Liability ” means an aggregate amount equal to the product of (i) the amount of COD Income listed on the 2009 Schedule K-1 provided by SP PE VII-B Heald Holdings, L.P. to SP Holdings in accordance with the terms of that certain Agreement of Limited Partnership of SP PE VII-B Heald Holdings, L.P., dated as of March 10, 2009, by and between Summit Partners SP VII, L.P., as the sole general partner, and SP Holdings, as the sole limited partner and prepared in accordance with Revenue Procedure 2009-37, and (ii) 35%.

(ppp) “ Financial Statements ” has the meaning set forth in Section 4.6(a) .

(qqq) “ Fraction ” as to a particular Seller means the number designated as the “Fraction” for such Seller as set forth on the Consideration Spreadsheet.

(rrr) “ GAAP ” means generally accepted accounting principles of the United States.

(sss) “ Governmental Consent ” has the meaning set forth in Section 4.3(a) .

(ttt) “ Governmental Entity ” means any court, arbitrational tribunal, administrative agency or commission, or other governmental or regulatory authority or agency, excluding any Educational Agency.

(uuu) “ Hazardous Material ” shall mean all materials, wastes or substances regulated, classified or otherwise characterized under any applicable Environmental Laws as “hazardous,” “toxic,” “pollutant,” or “contaminant.”

(vvv) “ Hawaii Lease ” means that certain Amended and Restated Lease, dated July 1, 1998, by and between Walgreen of Hawaii, LLC (as successor in interest to Kourin Hawaii Limited) and Heald College, LLC (as successor in interest to Pacific Education Foundation f/k/a Heald College), as amended by that certain Amendment of Lease, dated February 1, 1999, as further amended by that certain Second Amendment of Lease, dated April 27, 1999, as further amended by that certain Third Amendment to Amended and Restated Lease, dated March 28, 2001, as further amended by that certain Fourth Amendment to Amended and Restated Lease, dated December 18, 2001, as further Amended by that certain Fifth Amendment to Amended and Restated Lease, dated December 27, 2002, and as further amended by that certain Sixth Amendment to Lease, dated November 14, 2008.

(www) “ HEA ” means the Higher Education Act of 1965, 20 U.S.C. § 1001 et seq., as amended, or successor statutes thereto, and its implementing regulations promulgated by ED.

(xxx) “ Heald Education Transfer Agreement ” has the meaning set forth in Section 8.11(a) .

(yyy) “ Heald LC Facility ” means that certain Loan Agreement by and between Bank of America, N.A. and Heald College, LLC, dated as of August 27, 2007, as amended by that certain Amendment No. 1 and Limited Waiver to Loan Agreement, dated as of June 27, 2008.

 

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(zzz) “ Heald Letter of Credit ” means that certain Irrevocable Standby Letter of Credit Number 3089649 issued by Bank of America, N.A. on August 27, 2007 in favor of ED in the face amount of $15,772,985, as amended.

(aaaa) “ HEOA ” has the meaning set forth in Section 7.12(b) .

(bbbb) “ Holding Company ” and “ Holding Companies ” have the meaning set forth in the Preamble.

(cccc) “ Holding Company Restructuring ” means the restructuring contemplated by Schedule 1.1(cccc) .

(dddd) “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

(eeee) “ Indebtedness ” means, without duplication, the sum of (i) the principal amount of any indebtedness of the Company and any of the Subsidiaries for borrowed money outstanding as of the Closing (other than intra-company indebtedness), together with all prepayment premiums or penalties and such other similar amounts coming due under the documentation governing such indebtedness for borrowed money as a result of the purchase of the Stock, the Notes or the Purchased Company Membership Interests by the Buyer or the purchase of the Purchased Subsidiary Membership Interests by the Company or the repayment of the Indebtedness by the Company and/or the Buyer, and (ii) any unpaid interest owing on any such indebtedness of the Company or any of the Subsidiaries, but in each case excluding any such amounts paid prior to the Closing.

(ffff) “ Indemnification Basket ” has the meaning set forth in Section 10.2(d) .

(gggg) “ Indemnified Party ” has the meaning set forth in Section 10.4(a) .

(hhhh) “ Indemnifying Party ” has the meaning set forth in Section 10.6(a) .

(iiii) “ Installment Payment Retention Agreement ” has the meaning set forth in Section 8.11(b) .

(jjjj) “ Installment Payment Retention Amount ” means an amount equal to the maximum aggregate Installment Payments (as such term is defined in the Installment Payment Retention Agreement) that could be made to employees under all of the Installment Payment Retention Agreements entered into on or before the Closing, if the applicable employee were to receive all of his or her Installment Payments.

(kkkk) “ Intellectual Property ” means all of the following in any jurisdiction worldwide, and all rights therein: (i) patents; (ii) trademarks, service marks, trade dress, trade names, corporate names, together with all goodwill associated with the foregoing; (iii) Internet domain names; (iv) copyrights, including all copyrights in the Curriculum; (v) registrations and applications for any of the foregoing with any Governmental Entity; (vi) trade secrets and know-how; and (vii) all other intellectual property throughout the world.

 

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(llll) “ Investor Rights Agreement ” means that certain Investor Rights Agreement, dated as of March 24, 2009, by and among the Heald Investment, LLC, the Company, the Sellers party thereto and certain other Persons, as amended, modified or waived from time to time.

(mmmm) “ Investor Transfer Agreements ” has the meaning set forth in Section 7.17 .

(nnnn) “ IRS ” means the United States Internal Revenue Service.

(oooo) “ Key Employee ” means any school president, any regional vice president, or any headquarter employee with a title of vice president or higher.

(pppp) “ Knowledge ” means (and shall be limited to) (i) in the case of the Company or any Subsidiary, the knowledge of any of Nolan Miura, Eeva Deshon, Stan Phillips, John Keim, James Sparkman, John Richmond or Dennis Wood, (ii) in the case of a Seller who is a natural person, the knowledge of such Seller, (iii) in the case of Heald Investment, LLC, the knowledge of any of Bradley Palmer, Jason Woody, C.J. Fitzgerald or Leonard Ferrington, (iv) in the case of any Summit Seller or any Holding Company, the knowledge of either of C.J. Fitzgerald or Leonard Ferrington, and (v) in the case of the Buyer, the knowledge of any of Jack D. Massimino, Peter C. Waller, Kenneth S. Ord, Stan A. Mortensen, Mark L. Pelesh or Richard B. Simpson. For purposes of this Agreement, an individual (whether as a Seller or a listed person for any other Person) will be deemed to have “Knowledge” of a particular fact or matter only if (A) such individual is actually aware of such fact or matter or (B) such individual in connection with the discharge of his or her employment or other responsibilities with respect to the entity in question should reasonably be expected to have acquired knowledge of such fact or matter.

(qqqq) “ Latest Audited Balance Sheet ” has the meaning set forth in Section 4.6(a) .

(rrrr) “ Law ” means any constitutional provision, act, statute or other law, ordinance, rule, regulation or binding interpretation of any Governmental Entity and any binding and enforceable decree, injunction, judgment, order, ruling, assessment, writ, or similar form of decision or determination issued by a Governmental Entity.

(ssss) “ Leases ” has the meaning set forth in Section 4.8(b) .

(tttt) “ Liabilities ” shall mean any and all debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or otherwise, whenever or however arising (including, whether arising out of any contract or tort based on negligence or strict liability), and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto.

(uuuu) “ Loss ” and “ Losses ” have the meaning set forth in Section 10.5(b) .

 

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(vvvv) “ Material Adverse Effect ” means any event, change or occurrence which, individually or together with any other event, change or occurrence, (A) has had or would reasonably be expected to have a material adverse effect or material adverse change on the business, financial condition or results of operations of the Company and the Subsidiaries, taken as a whole, or (B) would materially impair the ability of the Sellers, the Holding Companies, the Company or the Subsidiaries to consummate the transactions contemplated in this Agreement, provided that in any such case any such effect or change resulting from (i) any events, circumstances, changes or conditions that adversely affect either the national or regional economy generally (including, without limitation, financial, banking or securities markets) or the industry in which the Company and the Subsidiaries operate, except to the extent that such events, circumstances, changes or conditions affect the Company and the Subsidiaries in a way that is materially disproportionate to the effect generally on the industry in which the Company and the Subsidiaries operate, (ii) any proposed or adopted change in Law (including Educational Law) or GAAP, except to the extent that such changes affect the Company and the Subsidiaries in a way that is materially disproportionate to the effect generally on the industry in which the Company and the Subsidiaries operate, (iii) national or international political or social conditions, including the engagement by the United States of America in hostilities or the escalation thereof, or the occurrence or the escalation of any military or terrorist attack upon the United States of America or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States of America, except to the extent that such conditions affect the Company and the Subsidiaries in a way that is materially disproportionate to the effect generally on the industry in which the Company and the Subsidiaries operate, or (iv) the execution and delivery of this Agreement, the announcement of the transactions contemplated hereby, any actions required to be taken pursuant to this Agreement or any agreement contemplated herein or consented to in writing by the Buyer, shall not be considered when determining whether a Material Adverse Effect has occurred.

(wwww) “ Material Contract ” or “ Material Contracts ” has the meaning set forth in Section 4.10 .

(xxxx) “ Minimum Claims Threshold ” has the meaning set forth in Section 10.5(e) .

(yyyy) “ Non-Purchased Company Membership Interests ” means all outstanding Company Membership Interests held by the Holding Companies.

(zzzz) “ Notes ” means those certain Promissory Notes dated March 24, 2009, issued by each of the Holding Companies to the respective holders of the Stock.

(aaaaa) “ Owned Intellectual Property ” means all Intellectual Property owned by the Company or any of its Subsidiaries, including the Owned Registered Intellectual Property.

(bbbbb) “ Owned Real Estate ” has the meaning set forth in Section 4.8(a) .

(ccccc) “ Owned Registered Intellectual Property ” has the meaning set forth in Section 4.9(a) .

 

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(ddddd) “ Pending Applications ” has the meaning set forth in Section 7.11(b) .

(eeeee) “ Permitted Encumbrance ” means (i) Encumbrances for Taxes not yet delinquent or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings and for which adequate reserves have been established; (ii) Encumbrances of lessors, lessees, sublessors, sublessees, licensors or licensees arising under lease or license arrangements; (iii) Encumbrances securing Indebtedness; (iv) mechanics liens and similar liens for labor, materials or supplies, arising in the ordinary course of business consistent with past practice and for which enforcement action has not been commenced; (v) zoning, building codes, and other land use laws regulating the use or occupancy of the Real Estate or the activities conducted thereon that are imposed by any Governmental Entity having jurisdiction over such Real Estate; (vi) easements, servitudes, covenants, conditions, restrictions, and other similar matters affecting title to any assets of the Company or any of the Subsidiaries and other title defects that do not or would not materially impair the value of or use or occupancy of such assets in the operation of the business of the Company and the Subsidiaries taken as a whole; (vii) all matters set forth on title policies or surveys made available to the Buyer; and (viii) Encumbrances set forth on Schedule 1.1(eeeee) .

(fffff) “ Permitted Securities Encumbrance ” means, (i) with respect to the Purchased Company Membership Interests, the Stock, the Notes or any Subsidiary Membership Interests, any restriction on transfer arising under applicable securities law or under the certificate of formation, limited liability company agreement, limited partnership agreement, certificate of incorporation, bylaws or similar governing documents of the issuer thereof or under any securityholders agreement, stockholders agreement or similar agreement among all or a portion of the holders of such Purchased Company Membership Interests, Stock, Notes or other equity interests (but only to the extent that any such restriction on transfer arising under any such governing documents or agreements have been or prior to the Closing will have been complied with or waived as they relate to the transactions contemplated by this Agreement), and, (ii) with respect to any Subsidiary Membership Interests, (A) Encumbrances with respect to such interests securing Indebtedness and (B) Encumbrances for Taxes not yet delinquent or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings and for which adequate reserves have been established.

(ggggg) “ Person ” means any individual, sole proprietorship, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, unincorporated organization, any other business organization or entity, or Governmental Entity.

(hhhhh) “ Policy Guidelines ” has the meaning set forth in Section 4.20 .

(iiiii) “ Post-Closing Educational Consents ” means those Educational Consents identified as Post-Closing Educational Consents on Schedule 7.11 .

(jjjjj) “ PPPA ” means a Provisional Program Participation Agreement issued to a Company School post-Closing and countersigned by or on behalf of the Secretary of ED, evidencing ED’s certification of the Company School to continue its Title IV Program participation following consummation of the transactions contemplated by this Agreement.

 

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(kkkkk) “ Pre-Closing Educational Consents ” means those Educational Consents identified as Pre-Closing Educational Consents on Schedule 7.11 .

(lllll) “ Pre-Closing Holding Company Taxes ” shall mean, with respect to any Holding Company (i) all Liability for Taxes of such Holding Company for any Tax period (or portion thereof) ending prior to or on the Closing Date; (ii) all Liability resulting by reason of the several Liability of such Holding Company pursuant to Treasury Regulation Section 1.1502-6 or any analogous state, local or foreign law or regulation, or by reason of such Holding Company having been a member of any consolidated, combined or unitary group on or prior to the Closing Date; and (iii) all Liability of such Holding Company for Taxes of any other Person pursuant to any contractual agreement entered into on or before the Closing Date.

(mmmmm) “ Pre-Closing Tax Returns ” has the meaning set forth in Section 7.5(b)(i) .

(nnnnn) “ Preferred Unit Securityholders Agreement ” means that certain Preferred Unit Securityholders Agreement, dated as of March 24, 2009, by and among the Company, the Sellers party thereto and certain other Persons, as amended, modified or waived from time to time.

(ooooo) “ Private Educational Loan ” means any student loan provided by a lender that is not made, insured or guaranteed under Title IV and is issued expressly for postsecondary educational expenses, including any loan made by a private third-party lender whether on a recourse or non-recourse basis.

(ppppp) “ Proceeding ” means any audit or other examination, or any judicial or administrative proceeding, relating to liability for or refunds or adjustments with respect to Taxes or Tax attributes.

(qqqqq) “ Profits Units Settlement Agreement ” has the meaning set forth in Section 8.12 .

(rrrrr) “ Profits Units Settlement Payments ” means an amount equal to the maximum aggregate Closing Payments and Subsequent Payments (as such terms are defined in the Profits Units Settlement Agreement) that could be made to employees under all of the Profits Units Settlement Agreements entered into on or before the Closing, if the applicable employee were to fully vest in all of his or her Subsequent Payments (if any).

(sssss) “ Program Participation Agreement ” means a Program Participation Agreement issued by ED to any Company School, whether or not on a provisional basis.

(ttttt) “ Purchase Price ” has the meaning set forth in Section 1.3 .

(uuuuu) “ Purchased Company Membership Interests ” means all outstanding Company Membership Interests other than those held by the Holding Companies.

 

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(vvvvv) “ Purchased Subsidiary Membership Interests ” means all outstanding (as of the date of this Agreement or as of the Closing) Subsidiary Membership Interests other than those held by the Company or by Heald Education, LLC.

(wwwww) “ Purchased Subsidiary Membership Interests Purchase Price ” means an amount equal to the aggregate purchase price for the Vested Profits Units (as such term is defined in the Heald Education Transfer Agreement) of all holders of Profits Units entering into the Heald Education Transfer Agreement prior to Closing.

(xxxxx) “ Real Estate ” has the meaning set forth in Section 4.8(c) .

(yyyyy) “ Releasees ” has the meaning set forth in Section 7.13(a) .

(zzzzz) “ Rental Real Estate ” has the meaning set forth in Section 4.8(b) .

(aaaaaa) “ Required Consents ” means collectively the Governmental Consents marked with an asterisk on Schedule 4.3(a) and the Third-Party Consents marked with an asterisk on Schedule 4.3(b) .

(bbbbbb) “ Retained Rights ” means: (i) the rights of any Seller Releasor under this Agreement or any agreement entered into with the Buyer or any of its subsidiaries in connection herewith; (ii) the rights of any Seller Releasor that is an employee of the Company or any Subsidiary for wages, bonus or other compensation (but only to the extent such amounts are included in the calculation of the Final Closing Working Capital) or other employee benefits to which such Seller Releasor is specifically entitled to under the Benefit Plans as a result of such Seller Releasor’s employment by the Company or any of its Subsidiaries and which do not represent liabilities (as determined in accordance with GAAP) of the Company or any Subsidiary as of the Closing (but excluding any equity interest, direct or indirect, in the Company or any of its Subsidiaries), and (iii) only with respect to those Seller Releasors who are also directors, managers, managing members or officers of the Company or any Subsidiary, the rights of any such Seller Releasor to indemnification, reimbursement or advancement of expenses as a director, manager, managing member or officer pursuant to the operating agreement of the Company or any Subsidiary, but solely with respect to third party claims made after the Closing (even if based on occurrences prior to the Closing as long as such Seller Releasor did not have knowledge of such claim prior to the Closing).

(cccccc) “ Salida Lease ” has the meaning set forth in Section 10.5(j) .

(dddddd) “ SD Holdings ” has the meaning set forth in the Preamble.

(eeeeee) “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(ffffff) “ Securityholders Agreement ” means that certain Amended and Restated Securityholders Agreement, dated as of March 24, 2009, by and among the Company, the Sellers party thereto and certain other Persons, as amended, modified or waived from time to time.

 

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(gggggg) “ Seller ” and “ Sellers ” have the meaning set forth in the Preamble

(hhhhhh) “ Seller Indemnitees ” has the meaning set forth in Section 10.3(a) .

(iiiiii) “ Seller Releasors ” has the meaning set forth in Section 7.13(a) .

(jjjjjj) “ Sellers’ Representative ” has the meaning set forth in Section 12.14(a) .

(kkkkkk) “ Sellers’ Representative Expense Amount ” means an amount equal to Five Hundred Thousand Dollars ($500,000).

(llllll) “ Sellers’ Representative Expense Fund ” has the meaning set forth in Section 1.6(h) .

(mmmmmm) “ Seller Tax Issue ” has the meaning set forth in Section 7.5(a)(ii) .

(nnnnnn) “ SP Holdings ” has the meaning set forth in the Preamble.

(oooooo) “ State Educational Agency” means any state educational licensing authority, agency, department, board or commission that provides a license, certification, exemption or other authorization necessary for a postsecondary institution (whether its main campus, branch campus, additional location, satellite or other facility thereof) to provide postsecondary education in that state.

(pppppp) “ Stock ” means all outstanding capital stock of the Holding Companies.

(qqqqqq) “ Straddle Period ” shall mean any taxable year or period beginning before or on and ending after the Closing Date.

(rrrrrr) “ Straddle Period Tax Returns ” has the meaning set forth in Section 7.5(b)(i) .

(ssssss) “ Student Financial Assistance ” means any form of student financial assistance, grants or loans that is sponsored by any Educational Agency or other Governmental Entity, including the Title IV Programs and any other program authorized by the HEA and administered by ED, but only to the extent that such financial assistance program provided more than $75,000 in revenue to the Company and its Subsidiaries in the year ended December 31, 2008.

(tttttt) “ Subsequent Payment Retention Amount ” has the meaning set forth in Section 1.6(d) .

(uuuuuu) “ Subsidiary Membership Interests ” means the limited liability company membership interests in the Subsidiaries.

(vvvvvv) “ Subsidiaries ” means Heald Education, LLC, a Delaware limited liability company, Heald Real Estate, LLC, a Delaware limited liability company, and Heald

 

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College, LLC, a California limited liability company, and “ Subsidiary ” means any of the foregoing individually, as applicable.

(wwwwww) “ Substantial Control ” shall have the meaning set forth at 34 C.F.R. § 668.174(c)(3).

(xxxxxx) “ Summit Seller ” means each of the entities identified as a “Summit Seller” on Exhibit A attached hereto.

(yyyyyy) “ Tax ” or “ Taxes ” means any and all federal, state, local and foreign taxes, assessments and other governmental charges of any kind, duties, impositions and liabilities, including without limitation those based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, alternative minimum, windfall profits, estimated, customs, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity.

(zzzzzz) “ Tax Benefit ” means, with respect to any Loss subject to indemnity under Article X, an amount by which the Tax liability of a party (or a group of corporations filing a Tax Return that includes the party), with respect to a taxable period, is reduced solely as a result of such Loss (i.e., taking into account all other items of deduction and loss prior to such Loss) or the amount of the portion of any Tax refund actually received that is generated solely as a result of such Loss (i.e., taking into account all other items of deduction and loss prior to such Loss).

(aaaaaaa) “ Tax Distribution ” means (i) a “Tax Distribution” as defined in the operating agreement of Heald Capital, LLC, as in effect on the date of this Agreement, (ii) so-called “tax distributions” under the operating agreement of Heald Education, LLC, as in effect on the date of this Agreement, and (iii) any distribution by a Subsidiary to fund such a tax distribution by Heald Capital, LLC or Heald Education, LLC.

(bbbbbbb) “ Tax Return ” means any return, declaration, report, claim for refund, information return or other document (including any related or supporting schedule (including, without limitation, Schedule K-1), attachment, statement or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax of any party or the administration of any Laws, regulations or administrative requirements relating to any Tax, including any amendment thereof.

(ccccccc) “ Third-Party Claim ” has the meaning set forth in Section 10.6(a) .

(ddddddd) “ Third-Party Consents ” has the meaning set forth in Section 4.3(b) .

(eeeeeee) “ Title IV ” means Title IV of the HEA.

(fffffff) “ Title IV Programs ” means the programs of federal student financial assistance administered pursuant to Title IV.

 

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(ggggggg) “ TPPPA ” means a Temporary Provisional Program Participation Agreement issued to a Company School post-Closing and countersigned by or on behalf of the Secretary of ED, continuing the Company School’s certification to participate in the Title IV Programs on an interim basis following the Closing.

(hhhhhhh) “ Transaction Expenses ” means all out-of-pocket costs, fees and expenses incurred by the Company or any of the Subsidiaries in connection with the negotiation, preparation and performance of and compliance with this Agreement and the transactions contemplated hereby (including the fees and expenses of legal counsel, accountants, investment bankers or other representatives and consultants), that were not paid by the Company or any of the Subsidiaries prior to the Closing; provided that in no event shall “Transaction Expenses” include any liabilities or obligations incurred or arranged by or on behalf of the Buyer or its pre-Closing Affiliates in connection with the transactions contemplated hereby.

(iiiiiii) “ WARN Act ” has the meaning set forth in Section 4.14(f) .

(jjjjjjj) “ WASC ” means the Accrediting Commission for Community and Junior Colleges of the Western Association of Schools and Colleges.

(kkkkkkk) “ Working Capital ” means, without duplication, the result of (x) the sum of the current assets of the Company and the Subsidiaries, minus (y) the sum of the current liabilities (other than the Closing Payments and Assumed Obligations) of the Company and the Subsidiaries, in each case determined on a consolidated basis in accordance with GAAP applied on a basis consistent with and using the same classifications, methodologies, practices, estimation techniques, judgments, assumptions and principles used in the preparation of the Latest Audited Balance Sheet (in each case only to the extent in accordance with GAAP) and with no adjustment for purchase accounting, provided that current assets for purposes of this definition shall be deemed to include (i) up to $789,554 (plus earnings thereon) of restricted cash held by the Company to secure its obligations respecting Company Membership Interests distributions, (ii) up to $10,500,000 (plus earnings thereon) of restricted cash collateralizing the Heald Letter of Credit and (iii) up to $3,286,157 (plus earnings thereon) of restricted cash held by Heald Real Estate, LLC per the requirements of the terms of the Indebtedness of such Subsidiary, in each case, to the extent such amounts of restricted cash are still reflected in the books of account of the Company at the Closing.

(lllllll) “ Working Capital Basket ” has the meaning set forth in Section 1.4(c) .

(mmmmmmm) “ Working Capital Shortfall ” has the meaning set forth in Section 1.4(c) .

(nnnnnnn) “ Working Capital Target ” means $1.00.

(ooooooo) “ 401(k) Plan ” has the meaning set forth in Section 7.4(c) .

(ppppppp) “ 90-10 Report ” has the meaning set forth in Section 7.12(b) .

 

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(qqqqqqq) “ 90-10 Reporting Systems ” has the meaning set forth in Section 7.12(b) .

Section 1.2 Securities Purchase and Sale . Subject to the terms and conditions set forth herein, at the Closing each of the Sellers will (and subject to the occurrence of the Closing hereby does) sell and the Buyer will (and subject to the occurrence of the Closing hereby does) purchase all of each Seller’s right, title and interest in and to the Stock, the Notes and the Purchased Company Membership Interests.

Section 1.3 Purchase Price . The total purchase price to be paid (to be distributed in the manner set forth in Section 1.6 ) for the Stock, the Notes, the Purchased Company Membership Interests and the Purchased Subsidiary Membership Interests (the “ Purchase Price ”) shall be equal to (i) Three Hundred Ninety-Five Million Dollars ($395,000,000) plus (ii) the Estimated Closing Working Capital Adjustment (which for the avoidance of doubt may be a positive or negative amount).

Section 1.4 Working Capital Adjustment .

(a) Determination of Initial Adjustment . At least one (1) Business Day and not more than three (3) Business Days prior to the Closing Date, the Company shall deliver to the Buyer a closing statement setting forth the Company’s good faith estimate of Working Capital as of 12:01 a.m. Pacific Time on the Closing Date (the “ Estimated Closing Working Capital ”).

(b) Disputed Adjustment .

(i) No later than ninety (90) days following the Closing, the Company shall, and the Buyer shall cause the Company to, prepare and deliver to the Sellers’ Representative (A) an unaudited consolidated balance sheet of the Company and the Subsidiaries as of 12:01 a.m. Pacific Time on the Closing Date (the “ Closing Balance Sheet ”), and (B) a special report (the “ Closing Working Capital Statement ”) setting forth the Company’s calculation of Working Capital as of 12:01 a.m. Pacific Time on the Closing Date (the “ Closing Working Capital ”). The Closing Balance Sheet shall be prepared in accordance with GAAP applied on a basis consistent with and using the same classifications, methodologies, practices, estimation techniques, assumptions and principles used in the preparation of the Latest Audited Balance Sheet. The Closing Working Capital set forth on the Closing Working Capital Statement shall be derived from the Closing Balance Sheet and prepared in accordance with the definition of Working Capital. During the forty-five (45) days following delivery of the Closing Balance Sheet and Closing Working Capital Statement and during any period of dispute with respect thereto thereafter, the Company and the Buyer shall provide the Sellers’ Representative and its representatives with reasonable access during normal business hours to the books, records (including work papers, schedules, memoranda and other documents to the extent such materials are in the possession of the Buyer or any of its subsidiaries (including the Company and the Subsidiaries) and access thereto may be granted without obtaining the consent of a third party), supporting data, facilities and employees of the Buyer, the Company and the Subsidiaries solely to the extent necessary

 

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for purposes of their review of the Closing Balance Sheet and the Closing Working Capital Statement.

(ii) If the Sellers’ Representative disputes the accuracy of the Closing Working Capital set forth on the Closing Working Capital Statement (it being understood and agreed that the Sellers’ Representative may dispute the underlying items on the Closing Balance Sheet from which the Closing Working Capital is derived and not solely the derivation thereof), the Sellers’ Representative shall provide written notice of such dispute to the Buyer no later than forty-five (45) days following delivery of the Closing Working Capital Statement (the “ Dispute Notice ”), which notice shall set forth in reasonable detail those items that the Sellers’ Representative disputes (it being agreed that the Sellers’ Representative may not dispute the definition of Working Capital or the related definitions referred to therein), and the amounts of any adjustments that are necessary in the Sellers’ Representative’s judgment for the computations contained in the Closing Working Capital Statement to conform to the requirements of this Agreement, and the basis for the Sellers’ Representative’s suggested adjustments. The Sellers’ Representative shall be deemed to have agreed with all other items and amounts set forth in the Closing Working Capital Statement. During the thirty (30) day period following delivery of a Dispute Notice, the Buyer and the Sellers’ Representative shall negotiate in good faith with a view to resolving their disagreements over the disputed items, and the provisions of Rule 408 of the Federal Rules of Evidence and any applicable similar state rule regarding inadmissibility of offers to compromise and of statements made in compromise negotiations when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount shall apply to all such negotiations (unless otherwise agreed in writing by the Buyer and the Sellers’ Representative). If the Buyer and the Sellers’ Representative resolve their differences over the disputed items in accordance with the foregoing procedure, the Final Closing Working Capital shall be deemed to be the amount agreed upon by them and reflected in a written statement setting forth the amount of the Final Closing Working Capital signed by the Buyer and the Sellers’ Representative. If the parties fail to resolve their differences over all of the disputed items within such thirty (30) day period, then (A) each of the Buyer and the Sellers’ Representative shall, within five (5) Business Days, deliver to the other a statement (the “ Closing Working Capital Final Proposal ”) setting forth the Buyer’s or the Sellers’ Representative’s, as applicable, final proposal with respect to the Closing Working Capital which shall be binding on such party for purposes of the expense allocation set forth in Section 1.4(b)(iii) (it being understood and agreed that the Buyer may not propose an amount for any line item indicating lower Closing Working Capital than the amount for such line item in the Closing Working Capital Statement and the Sellers’ Representative may not propose an amount for any line item indicating higher Closing Working Capital than the amount for such line item (if any) in the Dispute Notice), and (B) upon the written request of either the Buyer or the Sellers’ Representative after delivery of the Closing Working Capital Final Proposals, both the Buyer and the Sellers’ Representative shall, within ten (10) Business Days after the receipt of such request, submit all unresolved disputed items (and only such unresolved disputed items, which for the avoidance of doubt shall include all unresolved disputed items existing in the Closing Working Capital Final Proposals) to Grant Thornton LLP (the “ Accounting Arbitrator ”) to make a binding determination as to such unresolved

 

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disputed items in accordance with this Agreement. If the Sellers’ Representative does not timely deliver a Dispute Notice, the Closing Working Capital set forth in the Closing Working Capital Statement shall be deemed to be the Final Closing Working Capital.

(iii) The Accounting Arbitrator will be requested, as a term of its engagement, to render its written decision with respect to all disputed items (and only with respect to any unresolved disputed items) submitted to it no more than sixty (60) days from the date of referral or as soon as practicable thereafter. Such written decision (A) shall be delivered to both the Buyer and the Sellers’ Representative, (B) shall set forth the Accounting Arbitrator’s determination of the unresolved items submitted to it, and (C) shall be final and binding upon the parties and enforceable by any court of competent jurisdiction. The Buyer and the Sellers’ Representative are each entitled to submit to the Accounting Arbitrator a statement and supporting materials setting forth such party’s position with respect to the unresolved items submitted to the Accounting Arbitrator, and the Accounting Arbitrator shall review such submissions and shall render its determination based solely on such submissions (and not on the basis of an independent review) and in accordance with the definitions, guidelines and procedures set forth in this Agreement. In resolving any disputed item, the Accounting Arbitrator may not assign a value to any item greater than the greatest value for such item claimed by either the Buyer or the Sellers’ Representative or less than the least value for such item claimed by either the Buyer or the Sellers’ Representative. The Closing Working Capital set forth on the Closing Working Capital Statement, as adjusted to reflect the negotiated resolution of disputed items by the Buyer and the Sellers’ Representative and the resolution of all other disputed items by the Accounting Arbitrator shall be deemed to be the Final Closing Working Capital. The fees and expenses of the Accounting Arbitrator shall be paid by the Sellers, provided that such fees and expenses shall be paid by the Buyer in the event that the Closing Working Capital set forth in the Closing Working Capital Final Proposal delivered by the Buyer differs from Final Closing Working Capital as ultimately determined by the Accounting Arbitrator in an amount that is greater than the amount by which the Closing Working Capital set forth in the Closing Working Capital Final Proposal delivered by the Sellers’ Representative differs from Final Closing Working Capital as ultimately determined by the Accounting Arbitrator. In the event that the Sellers are responsible for such fees and expenses, such fees and expenses of the Accounting Arbitrator due from the Sellers pursuant to this Section 1.4(b)(iii) shall be deducted from the Escrow Amount (in which event the Buyer and the Sellers’ Representative agree to provide joint written instructions to the Escrow Agent to release such amounts to the Buyer), and no Person may seek such amounts directly from the Sellers.

(c) Payment to the Buyer . If the Estimated Closing Working Capital is greater than the Final Closing Working Capital, then an amount equal to (i) the Estimated Closing Working Capital, less (ii) the Final Closing Working Capital (the “ Working Capital Shortfall ”) shall be due to the Buyer individually and ratably (and not jointly and severally) from the Sellers in accordance with their respective Fractions. A distribution of an amount of up to $1,000,000 less any fees of the Accounting Arbitrator deducted from the Escrow Fund pursuant to Section 1.4(b) (the “ Working Capital Basket ”) that is equal to the Working Capital Shortfall from the Escrow Fund shall be the sole and exclusive remedy for the Buyer for

 

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payment of any Working Capital Shortfall up to the amount of the Working Capital Basket (and the portion of the funds held in the Escrow Fund equal to such portion of the Working Capital Shortfall shall be the Buyer’s sole and exclusive source of recovery for such amounts). For any amount of Working Capital Shortfall in excess of Working Capital Basket, the Buyer shall have the right, but not the obligation, to deduct such amounts from the Escrow Fund or seek such amounts directly from the Sellers individually and ratably based on each such Seller’s Fraction (and not jointly and severally). In the event that any amount is to be deducted from the Escrow Fund pursuant to this Section 1.4(c) , the Buyer and the Sellers’ Representative agree to provide joint written instructions to the Escrow Agent to release such amount to the Buyer. The Buyer acknowledges and agrees that the working capital adjustment provided for in this Section 1.4 , and the dispute resolution provisions provided for in this Section 1.4 , shall be the sole and exclusive remedies for the matters addressed herein. For the avoidance of doubt, and without limiting the generality of the foregoing or the ability of the Buyer to seek indemnity for a breach of this Section 1.4 , no claim for indemnification pursuant to Article X may be asserted by the Buyer solely for the payment of a Working Capital Shortfall that is the subject of this Section 1.4 .

(d) Payment by the Buyer . If the Final Closing Working Capital is greater than the Estimated Closing Working Capital, then the Buyer shall, within three (3) Business Days after the determination of the Final Closing Working Capital in accordance with Section 1.4(b) , pay an amount of cash in the aggregate equal to (i) the Final Closing Working Capital, less (ii) the Estimated Closing Working Capital, by wire transfer of immediately available funds, to the Sellers’ Representative (for further delivery to the Sellers in accordance with their respective Fractions).

(e) Adjustment Payments . Any payment pursuant to Section 1.4(c) or Section 1.4(d) shall be deemed to be an adjustment to the Purchase Price.

Section 1.5 Closing . Unless this Agreement shall have been terminated pursuant to Article XI , and subject to the satisfaction or waiver of all of the conditions set forth in Articles VIII and IX , the closing of the transactions contemplated hereby (the “ Closing ”) shall take place at the offices of O’Melveny & Myers LLP, 610 Newport Center Drive, 17th Floor, Newport Beach, California, or such other place (including by electronic transmission) as the Buyer and the Sellers’ Representative shall agree, at 12:01 a.m. Pacific Time on the first Business Day of the first month in 2010 following the satisfaction or waiver of all conditions set forth in Articles VIII and IX (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), or at such other date, time or place as the Sellers’ Representative and the Buyer shall agree in writing; provided , that (i) at any time from and after the first day Business Day following the satisfaction or waiver of all conditions set forth in Article VIII (other than those conditions set forth in Sections 8.3 , 8.1 and 8.2 (solely with respect to delivery of the certificates referenced therein), 8.11(a) (solely with respect to consummation of the transfers contemplated by the Heald Education Transfer Agreement as described therein), 8.14 , 8.17 and, if applicable, 8.10 , that by their nature are to be satisfied at the Closing, in each case, which would be satisfied if the Closing were to occur within two Business Days of such Business Day), the Company may deliver written notice certified by an authorized officer of the Company to the Buyer that all such conditions set forth in Article VIII have been satisfied (or with respect to those conditions set forth in Sections 8.3 , 8.1 and 8.2 (solely with

 

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respect to delivery of the certificates referenced therein), 8.11(a) (solely with respect to consummation of the transfers contemplated by the Heald Education Transfer Agreement as described therein), 8.14 , 8.17 and, if applicable, 8.10 , that by their nature are to be satisfied at the Closing, would each be satisfied if the Closing were to occur within two Business Days of such delivery) (the date of such written notice, the “ Deferral Date ”), and (ii) as long as all such conditions were actually satisfied or waived as of the Deferral Date, effective as of the Deferral Date, Buyer hereby irrevocably waives all conditions set forth in Article VIII (other than the condition set forth in Sections 8.3 , 8.1 and 8.2 (solely with respect to delivery of the certificates referenced therein), 8.11(a) (solely with respect to consummation of the transfers contemplated by the Heald Education Transfer Agreement as described therein), 8.14 , 8.17 and, if applicable, 8.10 , that by their nature are to be satisfied at the Closing, in each case, which would be satisfied if the Closing were to occur within two Business Days of such Business Day) from and after such date (and thereafter all such conditions shall be deemed satisfied for all purposes under this Agreement, such that the Buyer shall be obligated to consummate the transactions contemplated by this Agreement to take place at the Closing under this Agreement even if one or more of such conditions are no longer satisfied on the Closing Date so long as all such conditions were satisfied as of the Deferral Date). The date on which the Closing occurs is herein referred to as the “ Closing Date .”

Section 1.6 Payment of Purchase Price . The Purchase Price shall be distributed as follows, in each case as reflected on the Consideration Spreadsheet:

(a) Estimated Payment . At the Closing, the Buyer shall pay to the Sellers by wire transfer of immediately available funds in accordance with, and to the accounts designated by the Company on behalf of the Sellers in, the Consideration Spreadsheet an aggregate amount in cash equal to the result of: (i) Three Hundred Ninety-Five Million Dollars ($395,000,000), minus (ii) the sum of the Closing Payments and Assumed Obligations, plus (iii) the Estimated Closing Working Capital Adjustment (which for the avoidance of doubt may be a positive or negative amount), minus (iv) the Escrow Amount, minus (v) the Purchased Subsidiary Membership Interests Purchase Price, minus (vi) the Sellers’ Representative Expense Amount, minus (vii) the Estimated Holding Company CODI Liability, and minus (viii) the Installment Payment Retention Amount.

(b) Purchased Subsidiary Membership Interests Purchase Price . At the Closing, the Buyer (on behalf of the Company) shall pay to the holders of the Purchased Subsidiary Membership Interests (pursuant to the terms of the Heald Education Transfer Agreement entered into between the Company and such holders), by wire transfer of immediately available funds in accordance with, and to the accounts and in the amounts designated by the Company on behalf of the holders of the Purchased Subsidiary Membership Interests in, the Consideration Spreadsheet, an aggregate amount in cash equal to the Purchased Subsidiary Membership Interests Purchase Price in satisfaction of the Company’s obligations under the Heald Education Transfer Agreement.

(c) Installment Payment Retention Amount . At the Closing, the Buyer (on behalf of the Company) shall retain a portion of the Purchase Price in an aggregate amount equal to the Installment Payment Retention Amount. Such amount shall be held by the Buyer for payment to those holders of Purchased Subsidiary Membership Interests who have entered

 

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into Installment Payment Retention Agreements in accordance with the terms of the Installment Payment Retention Agreements. In the event that any such holder fails to satisfy any of the conditions required of such individual under the terms of his or her Installment Payment Retention Agreement such that he or she forfeits his or her rights to a portion of the Installment Payment Retention Amount, such portion of the Installment Payment Retention Amount shall promptly be paid by the Buyer, by wire transfer of immediately available funds, to the Sellers’ Representative (for further delivery to the Sellers in accordance with their respective Fractions). In the event of a Buyer Change of Control or a sale of the Company and its Subsidiaries by the Buyer to a third party, the Buyer will cause all remaining Installment Payment Retention Amounts to be placed in a third-party escrow account pursuant to an agreement to which the Sellers’ Representative is party for disbursement to the participants and the Sellers’ Representative (on behalf of the Sellers) in accordance with the terms of the Profits Units Settlement Agreements and this Agreement.

(d) Employee Payments . At the Closing, the Company or a Subsidiary shall make all Employee Payments (other than the aggregate amount of Subsequent Payments (as defined in the Profits Units Settlement Agreement) to be made under the Profits Units Settlement Agreements (such aggregate amount, the “ Subsequent Payment Retention Amount ”), and the Buyer (on behalf of the Company or one of its Subsidiaries) shall retain a portion of the Purchase Price in an aggregate amount equal to the Subsequent Payment Retention Amount. Such amount shall be held by the Buyer for payment to those individuals who have entered into Profits Units Settlement Agreements in accordance with the terms of the Profits Units Settlement Agreements. In the event that any such individual fails to satisfy any of the conditions required of such individual under the terms of his or her Installment Payment Retention Agreement such that he or she forfeits his or her rights to a portion of the Subsequent Payment Retention Amount, such portion of the Subsequent Payment Retention Amount shall promptly be paid by the Buyer, by wire transfer of immediately available funds, to the Sellers’ Representative (for further delivery to the Sellers in accordance with their respective Fractions).

(e) Transaction Expenses . At the Closing, the Buyer (on behalf of the Company and the Subsidiaries) shall pay all Transaction Expenses.

(f) Change of Control Payments . At the Closing, the Buyer (on behalf of the Company and the Subsidiaries) shall make all Change of Control Payments.

(g) Escrow Amount . At the Closing, the Buyer shall deposit with the Escrow Agent an amount in cash equal to the Escrow Amount, as collateral for certain indemnification obligations of the Sellers pursuant to Article X of this Agreement. The Escrow Amount shall be held by the Escrow Agent in a separate escrow account (the “ Escrow Fund ”) established pursuant to the Escrow Agreement. The portion of the Escrow Amount allocable to each Seller (and deducted from each Seller’s share of the Purchase Price otherwise payable to such Seller at the Closing as set forth on the Consideration Spreadsheet) shall be determined by multiplying the Escrow Amount by such Seller’s Fraction. The Buyer, on the one hand, and the Sellers, on the other hand (as a Transaction Expense), shall share equally all fees of the Escrow Agent in connection with the Escrow Agreement and the administration of the Escrow Fund, as provided in the Escrow Agreement.

 

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(h) Sellers’ Representative Expense Amount . At the Closing, the Buyer shall deposit in an account of and designated by the Sellers’ Representative an amount in cash equal to the Sellers’ Representative Expense Amount to be held in a separate deposit account of the Sellers’ Representative (the “ Sellers’ Representative Expense Fund ”) and used by the Sellers’ Representative for the payment of fees, costs and expenses incurred by the Sellers’ Representative in the performance of the Sellers’ Representative’s duties pursuant to the terms of Section 12.14 . The Sellers’ Representative shall keep reasonably detailed records of the costs and expenses paid by the Sellers’ Representative from the Sellers’ Representative Expense Fund and shall provide access to such records to any Seller upon written request of the holders of a majority interest of the Fractions. The Sellers’ Representative shall release to the Sellers in accordance with their respective Fractions all remaining funds then held in the Sellers’ Representative Expense Fund at any time that it determines. Following the release of such funds, the Sellers’ Representative shall provide, upon written request of the holders of a majority interest of the Fractions, a final accounting of all fees, costs, expenses and other amounts paid by the Sellers’ Representative from the Sellers’ Representative Expense Fund.

(i) Delivery of Certificates . At the Closing, each Seller shall deliver to the Buyer one or more certificates (or a lost certificate affidavit and indemnity agreement in the form attached hereto as Exhibit B ) representing all the Stock such Seller is selling pursuant to the terms hereof, duly endorsed in blank for transfer or accompanied by duly executed stock powers or equivalent instruments in proper form.

(j) Consideration Spreadsheet . The Consideration Spreadsheet attached hereto sets forth the name of each Seller, the amount of cash such Seller is entitled to receive at the Closing pursuant to this Section 1.6 , the Purchased Subsidiary Membership Interests Purchase Price (and the methodology of determining such amount) and the portion thereof each holder of vested Purchased Subsidiary Membership Interests is entitled to receive at the Closing pursuant to this Section 1.6 , the Installment Payment Retention Amount (and the methodology of determining such amount) and the portion thereof each holder of unvested Purchased Subsidiary Membership Interests is entitled to receive under their respective Installment Payment Retention Agreement (subject to forfeiture in accordance with the terms thereof), each based on the assumptions set forth therein, and sets forth the recipients and amounts of any Closing Payments and Assumed Obligations as of the date hereof. No later than two (2) and no earlier than four (4) Business Days prior to the Closing, the Company shall deliver to the Buyer (i) an updated Consideration Spreadsheet setting forth the final calculations of the amounts due at the Closing to each Seller pursuant to this Section 1.6 and the Purchased Subsidiary Membership Interests Purchase Price and Installment Payment Retention Amount and the recipients thereof pursuant to the Heald Education Transfer Agreement and the Installment Payment Retention Agreement, and (ii) the recipients and amounts of any Closing Payments and Assumed Obligations to be paid by the Buyer. Each of the parties hereto acknowledges and agrees that the Consideration Spreadsheet attached hereto sets forth the methodology for allocating the Purchase Price but contains only estimates of the amounts actually payable at Closing. Without limiting the generality of the foregoing, each of the parties hereto acknowledges and agrees that the portion of the Purchase Price that will be payable to the Sellers of the Holding Companies will be the portion of the Purchase Price otherwise allocable to the Non-Purchased Company Membership Interests; provided , that (A) the Estimated SP Holdings CODI Liability shall reduce the portion of the Purchase Price payable to the Seller of

 

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the Stock of SP Holdings (and not any portion of the Purchase Price payable to any other Seller), and (B) the Estimated SD Holdings CODI Liability shall reduce the portion of the Purchase Price payable to the Seller of the Stock of SD Holdings (and not any portion of the Purchase Price payable to any other Seller).

Section 1.7 Withholding . Notwithstanding any other provision in this Agreement, the Buyer (and any other Person that has any withholding obligation with respect to any payment made pursuant to this Agreement) shall be entitled to deduct and withhold from the payments to be made pursuant to this Agreement any Taxes required to be deducted and withheld with respect to the making of such payments under the Code or any other applicable provision of Law. To the extent that amounts are so withheld pursuant to this Section 1.7 , such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Person in respect of which such deduction and withholding was made.

Section 1.8 Purchase Price Allocation . The Buyer and the Sellers’ Representative shall allocate the portion of the Purchase Price allocated to and paid for the Purchased Company Membership Interests for Tax purposes among the assets of the Company and the Subsidiaries in accordance with the allocation principles set forth on Schedule 1.8 , including determining the portion of the gain or loss recognized by each holder of Purchased Company Membership Interests upon the sale of such holder’s Purchased Company Membership Interests pursuant to this Agreement that is attributable to the Company’s and the Subsidiaries’ “unrealized receivables” and “inventory items” (as such terms are defined in Section 751 of the Code). Neither the Buyer nor the Sellers, nor any of their respective Affiliates, shall take any position on any Tax Return (including IRS Form 8594), before any Governmental Entity or in any judicial proceeding which is inconsistent with such allocation of the Purchase Price unless required to do so by applicable Law.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF EACH OF THE SELLERS

Each Seller, individually on behalf of himself, herself or itself only (and not jointly and severally), hereby represents and warrants to the Buyer as follows:

Section 2.1 Ownership of Stock, Notes and/or Membership Interests . Such Seller is the sole owner, beneficially and of record, of the Stock, the Notes and/or the Purchased Company Membership Interests, as applicable, set forth opposite his, her or its name on the Consideration Spreadsheet, free and clear of any Encumbrance (other than Permitted Securities Encumbrances). At the Closing, the Buyer will acquire valid title to and complete ownership of the Stock, the Notes and/or the Purchased Company Membership Interests, as applicable, set forth opposite such Seller’s name on the Consideration Spreadsheet, free and clear of any Encumbrances (other than Permitted Securities Encumbrances).

Section 2.2 Authority of Such Seller . Such Seller has the full right, capacity and power to enter into this Agreement and the other agreements contemplated hereby to which such Seller is a party and to carry out the transactions contemplated hereby or thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated

 

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herein and therein. This Agreement has been duly authorized, executed and delivered by such Seller and constitutes a valid and binding obligation, enforceable against such Seller in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally.

Section 2.3 No Violation . Neither the execution and delivery of this Agreement and the other agreements contemplated hereby to which such Seller is a party, nor the consummation of the transactions contemplated hereby or thereby by such Seller will (i) if such Seller is an entity, violate, breach or be in conflict with any provisions of its articles of incorporation or bylaws or other equivalent governing documents, (ii) with or without the giving of notice or passage of time, or both, violate, or be in conflict with, or create an Encumbrance under or constitute a default (or give rise to any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any Contract to which such Seller is a party or by which such Seller is bound where such violation, conflict or default would have a material adverse effect on such Seller’s performance under this Agreement and the other agreements contemplated hereby to which such Seller is a party or the consummation of the transactions contemplated hereby or thereby, or (iii) subject to compliance with the HSR Act and obtaining the Educational Consents set forth on Schedule 7.11 , violate any statute or law or any judgment, decree, order, regulation or rule of any court or Governmental Entity to which such Seller is subject.

Section 2.4 Consents and Approvals .

(a) Except for compliance with the HSR Act and the Educational Consents set forth on Schedule 7.11 , no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity or Educational Agency is required to be made or obtained by such Seller in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby, other than any such consent, approval, authorization, declaration, filing or registration the failure of which to make or obtain, individually or in the aggregate, would not have an adverse effect on such Seller’s performance under this Agreement and the other agreements contemplated hereby to which such Seller is a party or the consummation of the transactions contemplated hereby or thereby.

(b) No consent, approval or authorization of, or notice to any counterparty to any Contract to which such Seller is bound must be made or obtained by such Seller in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby, other than any such consent, approval, authorization or notice the failure of which to make or obtain, individually or in the aggregate, would not have an adverse effect on such Seller’s performance under this Agreement and the other agreements contemplated hereby to which such Seller is a party or the consummation of the transactions contemplated hereby or thereby.

Section 2.5 Brokers’, Finders’ Fees, etc. There are no rights to brokerage commissions, finders’ fees or similar compensation in connection with the transactions

 

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contemplated by this Agreement based on any arrangement or agreement made by or on behalf of such Seller or any of his, her or its Affiliates (other than the Company and its Subsidiaries), officers, employees or directors, and such Seller has neither received a written claim for such compensation nor has Knowledge of any such claim (whether written or oral).

Section 2.6 Litigation . There is no action, suit, proceeding, hearing, order, charge, complaint, claim or (insofar as the subject thereof has any Knowledge) investigation (each an “ Action ”) at law or in equity before any Governmental Entity or Educational Agency pending or, insofar as such Seller has Knowledge, threatened, against such Seller or affecting any of its properties or assets, which would have an adverse effect on such Seller’s performance under this Agreement and the other agreements contemplated hereby to which such Seller is a party or the consummation of the transactions contemplated hereby or thereby.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE HOLDING COMPANIES

Each Holding Company, individually and on behalf of itself only (and not jointly and severally), hereby represents and warrants to the Buyer as follows:

Section 3.1 Ownership of Membership Interests . As of immediately prior to the Closing and after giving effect to the Holding Company Restructuring, such Holding Company will be the owner, beneficially and of record, of all of the Non-Purchased Company Membership Interests set forth opposite its name on Schedule 3.1 free and clear of any Encumbrance (other than Permitted Securities Encumbrances).

Section 3.2 Holding Company Organization; Authorization

(a) Such Holding Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation. Schedule 3.2(a) correctly lists with respect to such Holding Company its jurisdiction of incorporation, each jurisdiction in which it is qualified to do business as a foreign corporation and its respective directors and officers. Such Holding Company has made available to the Buyer complete and correct copies of the charter and bylaws of such Holding Company as now in effect, and no amendments thereto are pending. The charter and bylaws of such Holding Company shall be in full force and effect as of the Closing. Such Holding Company is not in violation of any of the provisions of its charter or bylaws.

(b) Such Holding Company has full corporate power and authority to enter into this Agreement and the other agreements contemplated hereby to which such Holding Company is a party and to carry out the transactions contemplated hereby or thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated herein and therein. The directors of such Holding Company and the applicable Sellers holding Stock in such Holding Company in their capacity as the stockholders of such Holding Company have taken all action required to authorize the execution and delivery of this Agreement and the other agreements contemplated hereby to which such Holding Company is a party, the performance of such Holding Company’s obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby or thereby. No other corporate

 

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proceedings on the part of such Holding Company are necessary to authorize the execution, delivery and performance by such Holding Company of this Agreement and the other agreements contemplated hereby to which such Holding Company is a party. This Agreement is a valid and binding agreement of such Holding Company, enforceable against it in accordance with its terms except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally.

Section 3.3 Holding Company Capitalization; Subsidiaries and Affiliates .

(a) Schedule 3.3(a) sets forth the authorized, issued and outstanding capital stock of such Holding Company as of the date of this Agreement and the holders of record thereof. All such Stock has been duly authorized, is validly issued in accordance with applicable laws, and is fully paid and non-assessable. Except for the Stock set forth on Schedule 3.3(a) , there are no other issued and outstanding capital stock of such Holding Company, or securities convertible into or exchangeable or exercisable for capital stock outstanding, and there are no outstanding options, warrants, rights, Contracts, commitments, understandings or arrangements by which such Holding Company is bound to issue, transfer, repurchase, redeem or otherwise acquire or retire any capital stock or other securities of such Holding Company.

(b) Other than the portion of the Non-Purchased Company Membership Interests set forth on Schedule 3.1 , after giving effect to the Holding Company Restructuring and as of immediately prior to the Closing, such Holding Company will not own any capital stock or other equity securities of any other Person and will not have any other type of interest (whether ownership or other) in any other Person. Such Holding Company is not subject to any obligation or requirement to provide funds for, or to make any investment (in the form of a loan, capital contribution or otherwise) to or in, any Person.

Section 3.4 No Violation . Neither the execution and delivery of this Agreement nor the other agreements contemplated hereby to which such Holding Company is a party nor the consummation of the transactions contemplated hereby or thereby by such Holding Company will (i) violate, breach or be in conflict with any provisions of its certificate of incorporation or bylaws or (ii) with or without the giving of notice or passage of time, or both, violate, or be in conflict with or create an Encumbrance under or constitute a default (or give rise to any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any Contract to which such Holding Company is a party or by which such Holding Company or any of such Holding Company’s assets may be bound or (iii) subject to compliance with the HSR Act and obtaining the Educational Consents set forth on Schedule 7.11 , violate any statute or law or any judgment, decree, order, regulation or rule of any court or Governmental Entity or Educational Agency to which such Holding Company is subject.

Section 3.5 Consents and Approvals .

(a) Except for compliance with the HSR Act and the Educational Consents set forth on Schedule 7.11 , no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity or Educational Agency is required to be made or

 

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obtained by such Holding Company in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby.

(b) No consent, approval or authorization of, or notice to any counterparty to any Contract to which such Holding Company is bound must be made or obtained by such Holding Company in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby.

Section 3.6 Brokers’, Finders’ Fees, etc. There are no rights to brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of such Holding Company or any of its Affiliates (other than the Company and its Subsidiaries), officers, employees, or directors and such Holding Company has neither received a written claim for such compensation nor has Knowledge of any such claim (whether written or oral).

Section 3.7 Litigation . There is no Action at law or in equity before any Governmental Entity or Educational Agency pending or, insofar as such Holding Company has any Knowledge, threatened, against such Holding Company or affecting any of its properties or assets. Such Holding Company is neither a party to nor bound by any currently effective order, judgment, injunction, or decree, nor has entered into any settlement agreement since the date of its incorporation. Such Holding Company does not currently intend to initiate any Action.

Section 3.8 Holding Company Operations . Except for the negotiation, execution, delivery and performance of this Agreement and any of the other agreements contemplated hereby to which it is a party, such Holding Company, since the date of its incorporation, has not carried on any business or conducted any operations other than acquiring and holding ownership (directly or indirectly as a limited partner of SP PE VII-B Heald Holdings, L.P. or SD III-B Heald Holdings, L.P.) of the Non-Purchased Company Membership Interests. Except as set forth on Schedule 3.8 , such Holding Company is not party to or otherwise bound by any Contract.

Section 3.9 No Undisclosed Liabilities . Except as set forth on Schedule 3.9 and for its obligation to perform its covenants and agreements under this Agreement (but excluding any Liabilities for breach of any such covenants or agreements), such Holding Company has no Liabilities. Such Holding Company has no indebtedness for borrowed money outstanding as of the date hereof, other than the Notes issued by such Holding Company which are being acquired by the Buyer hereunder.

Section 3.10 Taxes .

(a) Such Holding Company has timely filed all federal and all other Tax Returns required to have been filed by it. All Tax Returns filed by such Holding Company are true, correct and complete. Such Holding Company has timely paid all Taxes that have become due or payable (whether or not shown on a Tax Return).

 

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(b) No written claim for assessment or collection of Taxes has been received by such Holding Company that has not been fully resolved. There is no presently pending audit examination, request for information, refund claim, litigation, proceeding, proposed adjustment or matter in controversy with respect to any Taxes of or with respect to such Holding Company. Such Holding Company has no Knowledge that any such action or proceeding has been threatened. No written claim has been received from a jurisdiction in which Tax Returns have not been filed by such Holding Company to the effect that such Holding Company is or may be subject to taxation by such jurisdiction.

(c) Such Holding Company has not engaged in a transaction that constitutes a “reportable transaction” as such term is defined in Treasury Regulation Section 1.6011-4(b)(1).

(d) Such Holding Company is not currently, and has not been during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

(e) Such Holding Company is not and has not been a member of any affiliated group filing a consolidated federal income Tax Return or a member of a combined, consolidated or unitary group for any state, local or foreign Tax.

(f) Such Holding Company is not subject to any extension of, and has not filed any waiver with respect to, any statute of limitations applicable to the assessment or collection of any Tax.

(g) Such Holding Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other Persons.

(h) There are no Tax liens on any assets of such Holding Company other than for Taxes not yet due and payable.

(i) Such Holding Company has not distributed to its stockholders or security holders stock or securities of a controlled corporation, and stock or securities of such Holding Company have not been distributed, in a transaction to which Section 355 of the Code applies (i) since the date of such Holding Company’s incorporation or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement.

(j) Such Holding Company is not a party to nor bound by any closing or other agreement with any Governmental Entity with respect to Taxes.

(k) Such Holding Company will not have any liability following the Closing under any Tax sharing, Tax allocation or Tax indemnification agreement entered into prior to the Closing. Such Holding Company does not have any liability for the Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract or otherwise.

 

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(l) Such Holding Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date, (B) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date, (C) installment sale or open transaction disposition made on or prior to the Closing Date, (D) prepaid amount received on or prior to the Closing Date or (E) election pursuant to Section 108(i) of the Code made effective on or prior to the Closing Date, except with respect to the COD Income.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Buyer as follows:

Section 4.1 Limited Liability Company Organization; Authorization .

(a) The Company and the Subsidiaries are duly organized, validly existing and in good standing under the laws of their respective jurisdictions of formation and have all requisite limited liability company power and authority to carry on their respective businesses as now conducted and to own or lease and operate their respective property and assets. Except as set forth on Schedule 4.1(a) , the Company and the Subsidiaries are duly qualified or licensed to do business as foreign companies in good standing in each state of the United States in which the conduct of their respective businesses or the ownership or leasing of their respective property requires such qualification, other than any such state in which the failure to be so qualified or licensed would not be material to the Company and the Subsidiaries taken as a whole. Schedule 4.1(a) correctly lists with respect to the Company and the Subsidiaries its jurisdiction of formation, each jurisdiction in which it is qualified to do business as a foreign corporation and its respective managers and executive officers. The Company has made available to the Buyer complete and correct copies of the respective operating agreements, certificates of formation and other charter documents of the Company and the Subsidiaries as now in effect, and no amendments thereto are pending. The respective operating agreements and certificates of formation of the Company and the Subsidiaries shall be in full force and effect as of the Closing. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective operating agreement or certificate of formation.

(b) The Company has full limited liability company power and authority to enter into this Agreement and the other agreements contemplated hereby, and to carry out the transactions contemplated hereby and to perform its obligations hereunder and thereunder. The managing member of the Company has taken all action required to authorize the execution and delivery of this Agreement, the performance of the Company’s obligations hereunder and the consummation of the transactions contemplated hereby. No other limited liability company proceedings on the part of the Company or any of the Subsidiaries are necessary to authorize the execution, delivery and performance by the Company of this Agreement or any other agreement contemplated hereby or the consummation of any of the transactions contemplated hereby or thereby. This Agreement and the other agreements contemplated hereby to which the

 

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Company is a party are valid and binding obligations of the Company, enforceable against it in accordance with their respective terms except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally.

Section 4.2 No Violation . Except as set forth on Schedule 4.2 , neither the execution, delivery and performance by the Company of this Agreement and the other agreements contemplated hereby nor the consummation of the transactions contemplated hereby or thereby will (i) violate, breach or be in conflict with any provisions of the respective operating agreements and certificates of formation of the Company or any of the Subsidiaries, (ii) with or without the giving of notice or the passage of time, or both, violate, or be in conflict with or constitute a default (or give rise to any right of or automatic termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any Material Contract or any Approval to which the Company or any Subsidiary is a party or by which any of their respective assets may be bound, (iii) result in the creation or imposition of any Encumbrance upon any property, assets or equity of the Company or any of the Subsidiaries, or (iv) subject to compliance with the HSR Act and obtaining the Governmental Consents and the Educational Consents set forth on Schedule 7.11 , violate any Law to which the Company or any of the Subsidiaries are subject.

Section 4.3 Consents and Approvals .

(a) Except for the consents set forth on Schedule 4.3(a) (“ Governmental Consents ”) and the Educational Consents set forth on Schedule 7.11 , and except for compliance with the HSR Act, no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be made or obtained by the Company or any of the Subsidiaries in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby.

(b) Except for the consents set forth on Schedule 4.3(b) (“ Third-Party Consents ”), no consent, approval or authorization of, or notice to any counterparty to any Material Contract must be made or obtained by the Company or any of the Subsidiaries in connection with the execution, delivery and performance of this Agreement and the other agreements contemplated hereby or the consummation of the transactions contemplated hereby or thereby.

Section 4.4 Capitalization . Schedule 4.4 sets forth the authorized, issued and outstanding membership interests of each of the Company and the Subsidiaries as of the date of this Agreement and the holders of record thereof. All issued and outstanding Company Membership Interests and Subsidiary Membership Interests have been duly authorized, are validly issued in accordance with applicable laws, and are fully paid. Except as set forth on Schedule 4.4 , all outstanding Subsidiary Membership Interests are directly owned by the Company free and clear of any Encumbrance (other than Permitted Securities Encumbrances). Except for the Company Membership Interests and Subsidiary Membership Interests set forth on Schedule 4.4 , there are no other issued and outstanding membership interests of the Company or any of the Subsidiaries, or securities convertible into or exchangeable or exercisable for such

 

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membership interests outstanding, and except as set forth on Schedule 4.4 there are no outstanding options, warrants, convertible securities, rights, Contracts, or other securities by which the Company or the Subsidiaries are or may be bound to issue, transfer, repurchase, redeem or otherwise acquire or retire any membership interests or other securities of the Company or the Subsidiaries.

Section 4.5 Subsidiaries and Affiliates .

(a) Except as set forth on Schedule 4.5(a) , neither the Company nor any of the Subsidiaries owns any capital stock or other equity securities of any other Person and has no other type of interest (whether ownership or other) in any other Person. The interests of the Company and the Subsidiaries in any Person as set forth on Schedule 4.4 or Schedule 4.5(a) are owned by the Company or the Subsidiaries, as applicable, free and clear of any Encumbrance (other than Permitted Securities Encumbrances). Except as set forth on Schedule 4.5(a) , neither the Company nor any of the Subsidiaries is subject to any obligation or requirement to provide funds for, or to make any investment (in the form of a loan, capital contribution or otherwise) to or in, any Person (other than the Company or any of its Subsidiaries).

(b) Schedule 4.5(b) sets forth a list of each Person who holds units in Heald Education, LLC and, if applicable, the vesting schedule of such units. Except as set forth on Schedule 4.5(b) , there are no other issued and outstanding units of Heald Education, LLC, or securities convertible into or exchangeable or exercisable for units outstanding, and there are no outstanding options, warrants, rights, Contracts or arrangements by which Heald Education, LLC is bound to issue, transfer, repurchase, redeem or otherwise acquire or retire any units or other securities of Heald Education, LLC.

Section 4.6 Financial Statements .

(a) Schedule 4.6 sets forth (i) the audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2008 (the “ Latest Audited Balance Sheet ”) and the related audited statements of operations and members’ equity and cash flows for the fiscal year then ended, (ii) the audited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 2007 and the related audited statements of operations and members’ equity and cash flows for the period from August 15, 2007 until December 31, 2007, and (iii) the unaudited consolidated balance sheet of the Company at August 31, 2009 and the related unaudited statements of operations, members’ equity and cash flows for the eight (8) months then ended (collectively, the financial statements described in clauses (i), (ii) and (iii) of this Section 4.6(a) are referred to herein as the “ Financial Statements ”). Such Financial Statements present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the dates thereof, and the results of operations, changes in members’ equity and cash flows of the Company and the Subsidiaries for the periods indicated, in conformity with GAAP consistently applied throughout such periods (subject, in the case of unaudited Financial Statements, to normal year-end adjustments not material in amount, and any other adjustments described therein and the absence of footnotes thereto).

(b) The Company and the Subsidiaries do not have any Liabilities of the type required to be reflected on or reserved against in, or to be disclosed in the notes to, a

 

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consolidated balance sheet prepared in accordance with GAAP except for (i) Liabilities to the extent reflected on or reserved against in the Financial Statements, or disclosed in the notes thereto, (ii) Liabilities arising after the date of this Agreement in connection with the transactions contemplated by this Agreement to the extent included in the Closing Payments and Assumed Obligations, (iii) their respective obligations to perform their respective covenants and agreements under this Agreement (but excluding any Liabilities for breach of any such covenants or agreements), (iii) Liabilities to the extent included in Indebtedness or Final Closing Working Capital, (iv) Liabilities for Tax Distributions to the extent paid prior to Closing, (v) Liabilities that are readily apparent based on the substance of the disclosure of any Schedule to this Agreement, and (vi) Liabilities that are not material and that have arisen in the ordinary course of business since the Balance Sheet Date.

Section 4.7 Absence of Certain Changes . Except as set forth on Schedule 4.7 , since the Balance Sheet Date, the Company and the Subsidiaries have conducted their respective businesses only in the ordinary course of business and there has not been by or with respect to the Company and the Subsidiaries:

(a) any damage, destruction or loss to their respective property not covered by insurance in excess of $50,000 individually or $150,000 in the aggregate;

(b) any transfer, issuance, sale, redemption or disposal, or authorization of thereof, of any debt obligations or other securities of the Company or the Subsidiaries or grant of options, warrants, calls or other rights to purchase or otherwise acquire membership interests of the Company or the Subsidiaries;

(c) any (i) grant of severance, termination or bonus payments or benefits to any member, manager, director, officer or Key Employee of the Company and any of its Subsidiaries, (ii) increase in the compensation, bonus or pension, welfare, severance or other benefits of, payment of any bonus to, or grant of any new equity awards to any member, manager, director, officer or Key Employee of the Company or any of its Subsidiaries (except, in each case, in the ordinary course of business consistent with past practice), (iii) entry into any employment, severance, change in control, termination, deferred compensation or similar agreement with any member, manager, director, officer or employee of the Company or any of its Subsidiaries, or (iv) establishment, adoption, amendment or termination of any Benefit Plan, in each case, except as required by applicable Law or as required under any existing Material Contract disclosed on Schedule 4.10 or as required by a Benefit Plan disclosed on Schedule 4.13(a) ;

(d) any termination or suspension of any member, manager, officer or Key Employee by the Company or any Subsidiary;

(e) any sale, assignment, pledge, transfer, conveyance, lease, license or other disposition of any assets (other than Intellectual Property) of the Company or any of the Subsidiaries (except, in each case, in the ordinary course of business consistent with past practice and in amounts not in excess of $25,000 individually or $100,000 in the aggregate and except for the disposition in the ordinary course of business consistent with past practice of obsolete, nonfunctioning or damaged items of personal property), or any sale, assignment,

 

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pledge, transfer, conveyance, license or other disposition of any Owned Intellectual Property (except for non-exclusive licenses to students, faculty, customers, suppliers, service providers or consultants in the ordinary course of business consistent with past practice);

(f) except in the ordinary course of business, any abandonment or lapse of any right to use any Owned Registered Intellectual Property;

(g) any declaration, setting aside, issuance, making or paying of any dividend or other distribution (whether in cash, stock, personal or real property or other thing of value) in respect of the Company’s or any of the Subsidiaries’ membership interests (other than Tax Distributions) or any direct or indirect redemption, purchase or other acquisition of any membership interests of the Company or any of the Subsidiaries;

(h) any action that would cause the Buyer to be unable to obtain valid title to the Stock, the Company Membership Interests or the Subsidiary Membership Interests at the Closing free and clear of Encumbrances (other than Permitted Securities Encumbrances) (including pledging any of the Stock, the Company Membership Interests or the Subsidiary Membership Interests as security for obligations of the Sellers or the Company);

(i) any incurrence of, or entering into any Contract regarding, capital expenditures in excess of $50,000 in any one case or $250,000 in the aggregate (other than capital expenditures consistent with the capital expenditures budget of the Company and the Subsidiaries for the fiscal year ending December 31, 2009, as in effect on the date of this Agreement and a copy of which was made available to the Buyer);

(j) any change in the Company’s or any of the Subsidiaries’ authorized or issued membership interests, or any recapitalization, reclassification, stock split or like change in the membership interests, of the Company or the Subsidiaries;

(k) any amendment, or authorization of amendment, to the Company’s or any of the Subsidiaries’ respective operating agreements and certificates of formation;

(l) any entry into, modification or termination of any labor or collective bargaining agreement, or any commitment or creation of any liability to any labor organization relating to any employees of the Company or any of the Subsidiaries;

(m) any termination or failure to renew any insurance coverage by the Company or any Subsidiary;

(n) any termination or failure to renew, or action that would reasonably be expected to result in the nonrenewal of, any Approvals, including any Educational Approvals, by the Company or any Subsidiary;

(o) except in accordance with their terms, any termination, renewal or renegotiation of any Material Contract or any default in any obligation under any such Material Contract by the Company or any Subsidiary which remained uncured for more than fifteen (15) days;

 

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(p) any sale or discount of accounts receivable, notes receivable, student contracts receivable or installment payment plans (whether by discount to the debtors or by sale to any third party) by the Company or any Subsidiary, except in the ordinary course of business consistent with past practice and in an arm’s length transaction;

(q) made, amended or changed any income tax election; made a request for a Tax ruling or entered into a closing agreement; settled or compromised any Tax claim, action, suit, litigation, arbitration, investigation, audit or controversy; filed any amendments to any previously filed Tax Returns; surrendered any right to claim an amount of refund of any Taxes; and, except as required by applicable Law or GAAP, made any change to any of its methods of accounting or methods of reporting income or deductions for Tax or accounting practice or policy from those employed in the preparation of its most recent Tax Return, but only to the extent such action would likely increase in any material respect the Tax liability of the Holding Companies, the Company, or any of its Subsidiaries for a taxable period beginning after the Closing Date;

(r) any failure to manage its respective cash and working capital in the ordinary course of business consistent with past practice, including but not limited to the failure to pay any accounts payable when due, other than in the ordinary course of business consistent with past practice;

(s) any acquisition, by merger or consolidation with, or by purchase of an equity interest in or all or a substantial portion of the assets of, or by any other manner, any Person or division thereof or any securities of any Person;

(t) any loan, or any commitment to make any loan, or other extension of credit by the Company or the Subsidiaries to or for the benefit of the Sellers or any of their respective Affiliates (other than the Company or any of the Subsidiaries);

(u) any charitable contribution or incurrence of any non-business expense in excess of $100,000 in the aggregate;

(v) any change in the accounting methods, principles or practices used by the Company or any of the Subsidiaries; or

(w) any agreements or commitments, whether oral or in writing, to take any action described in this Section 4.7 .

Section 4.8 Title to Properties; Encumbrances .

(a) Schedule 4.8(a) lists the address and description of each parcel of real property owned by the Company and the Subsidiaries (the “ Owned Real Estate ”). With respect to each parcel of Owned Real Estate:

(i) The Company or one of the Subsidiaries has good and marketable fee simple title, free and clear of any Encumbrance (other than Permitted Encumbrances), except as set forth on Schedule 4.8(a)(i) ;

 

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(ii) Except as set forth on Schedule 4.8(a)(ii) , neither the Company nor any of the Subsidiaries has leased or otherwise granted to any Person the right to use or occupy the Owned Real Estate or any portion thereof; and

(iii) There are no outstanding options, rights of first offer or rights of first refusal to purchase the Owned Real Estate or any portion thereof or interest therein.

(b) Schedule 4.8(b) lists all real property that is leased and used or occupied by the Company and the Subsidiaries in connection with its business (the “ Rental Real Estate ”) and the leases, subleases and agreements by which such Rental Real Estate is used and occupied (the “ Leases ”), true and complete copies of which have been made available to the Buyer. With respect to each of the Leases and the Rental Real Estate:

(i) The Company or one of the Subsidiaries has leasehold title to the Rental Real Estate, free and clear of any Encumbrance (other than Permitted Encumbrances), except as set forth on Schedule 4.8(b)(i) ; and

(ii) There are no leases, subleases, concessions or other agreements to which the Company or the Subsidiaries is a party granting to any Person the right to use or occupancy of any portion of the Rental Real Estate and no Person (other than the Company and the Subsidiaries) occupies any part of the Rental Real Estate, except as set forth on Schedule 4.8(b)(ii) .

(c) The Owned Real Estate and Rental Real Estate (collectively, the “ Real Estate ”) comprise all of the real property used in the business of the Company and the Subsidiaries; and neither the Company nor any of the Subsidiaries is a party to any agreement or option to purchase any real property or interest therein.

(d) Insofar as the Company has any Knowledge, (i) all of the buildings and building systems included in the Real Estate are structurally sound with no defects (ordinary wear and tear excepted), and (ii) except as set forth on Schedule 4.8(d)(ii) , no repairs or improvements are needed to the buildings or building systems for the operation of the business as currently conducted thereon.

(e) Neither the Company nor any of the Subsidiaries has received written notice of any condemnation, expropriation or other proceeding in eminent domain affecting any parcel of Owned Real Estate or any portion thereof or interest therein.

(f) Insofar as the Company has any Knowledge, the Real Estate is in compliance with all applicable building, zoning, subdivision, health and safety and other land use laws, including The Americans with Disabilities Act of 1990, as amended, and all insurance requirements affecting the Real Estate.

Section 4.9 Intellectual Property .

(a) Schedule 4.9(a) lists all patents and applications for patents, trademark registrations, service mark registrations or corporate name registrations and applications for the foregoing, domain names, and copyright registrations and applications for copyright registration

 

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owned by the Company or any of the Subsidiaries (“ Owned Registered Intellectual Property ”). Insofar as the Company has any Knowledge, the U.S. trademark registrations that are Owned Registered Intellectual Property are validly filed and registered and subsisting.

(b) Except as set forth on Schedule 4.9(b) , (i) the Company or any of the Subsidiaries is the exclusive owner of all right, title and interest in and to the Owned Registered Intellectual Property, as applicable, and (ii) the Company or any of the Subsidiaries have title, free and clear of all Encumbrances (other than Permitted Encumbrances), to the Owned Intellectual Property, as applicable. Except as set forth on Schedule 4.9(b) , the conduct of the business by the Company and the Subsidiaries is not conflicting with, infringing or misappropriating, and has not, within the three (3) years prior to the date hereof, conflicted with, infringed or misappropriated, the rights of any third Person. Except as set forth on Schedule 4.9(b) , there have been no proceedings against the Company or any of its Subsidiaries or claims in writing received by the Company or any of its Subsidiaries within the three (3) years prior to the date of this Agreement, and there are no pending proceedings against the Company or any of its Subsidiaries or pending claims in writing received by the Company or any of its Subsidiaries, alleging that the Company or any of its Subsidiaries is infringing, misappropriating or violating any Intellectual Property rights of a third Person.

(c) Except as set forth on Schedule 4.9(c) , the Company or the Subsidiaries own or possess a license to use all Intellectual Property used in the present operation of their business.

(d) Except as set forth on Schedule 4.9(d) , the Company has no Knowledge, as of the date of this Agreement, (i) that any third party is infringing any Owned Intellectual Property, or (ii) of any pending claim against the Company or any of the Subsidiaries contesting the validity, registrability or enforceability of any Owned Intellectual Property.

(e) Except as set forth on Schedule 4.9(e) and insofar as the Company has any Knowledge, (i) except pursuant to Material Contracts set forth on Schedule 4.10(o) , the Company and the Subsidiaries are not required to make any payments to any third party with respect to use of the Curriculum by the Company and the Subsidiaries, (ii) assuming receipt of all applicable Third Party Consents, the execution, delivery and performance of this Agreement shall have no effect on the Company’s or the Subsidiaries’ right to use the Curriculum and shall not require the Company or the Subsidiaries to make any additional payments to any third party with respect to the Curriculum; and (iii) no employee of the Sellers, the Company or the Subsidiaries owns any part of the Curriculum.

(f) Except as set forth on Schedule 4.9(f) , during the past six (6) months, the Company and the Subsidiaries have taken commercially reasonable measures to maintain the confidentiality of all confidential information in their possession and developed, used or held for use in the operation of the business. Except as set forth on Schedule 4.9(f) , all persons (including employees, agents, consultants or service providers) contributing to or participating in the creation, development or authorship of any Owned Intellectual Property, including without limitation, the part of the Curriculum that is Owned Intellectual Property, within the scope of their employment or engagement with the Company or any of the Subsidiaries either (i) created, developed or authored such Owned Intellectual Property within the scope of their

 

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employment as employees with the Company or any of the Subsidiaries, or (ii) are party to an assignment agreement that has accorded the Company or any of the Subsidiaries full ownership of, and all right, title and interest in and to, such Owned Intellectual Property.

(g) Except as set forth on Schedule 4.9(g) , the use by the Company and its Subsidiaries of the student and other third-party personally identifiable data in the possession of the Company and the Subsidiaries is not in violation with any privacy policy of the Company and its Subsidiaries, or any data-sharing agreement, confidentiality agreement or non-disclosure agreement to which the Company or any of the Subsidiaries is a party.

(h) (i) Except as set forth on Schedule 4.9(h)(i) , all employees of the Company and the Subsidiaries contributing to or participating in the creation, development or authorship of any Intellectual Property used in the operation of the business of the Company or any of the Subsidiaries within the scope of their employment with the Company or any of the Subsidiaries have signed an invention assignment agreement with the Company and/or a Subsidiary in substantially the form made available to the Buyer, and (ii) the individuals listed on Schedule 4.9(h)(ii) were employees of the Company or a Subsidiary at the time they made any contributions to the Curriculum.

Section 4.10 Material Contracts . Schedule 4.10 lists all of the following Contracts to which the Company or the Subsidiaries is a party or is bound (each, a “ Material Contract ” and collectively, the “ Material Contracts ”) (with such Schedule including the applicable subsection(s) of this Section 4.10 to which such Contract is responsive):

(a) Contracts that cannot be terminated upon thirty (30) days’ or less notice without penalty and have an unexpired term of six (6) months or more or involve annual commitments in excess of $200,000 (but excluding all student enrollment agreements in customary form);

(b) Contracts with any Holding Company or any Seller or any of their respective Affiliates or any officer, manager, director, employee or Affiliate of the Company or the Subsidiaries, other than Contracts required to be disclosed pursuant to Section 4.10(i) or Section 4.10(k) and customary Contracts with current or former employees of the Company and the Subsidiaries regarding the ownership, appropriation or non-disclosure of confidential information;

(c) Contracts that constitute an obligation in respect of borrowed money;

(d) Contracts that constitute a guaranty by the Company or any Subsidiary of obligations of any Person other than the Company or any Subsidiary or that require the Company or any Subsidiary to indemnify any Person (other than indemnities contained within agreements entered into in the ordinary course of business);

(e) Contracts providing for the extension of credit by the Company or any Subsidiary, other than in the ordinary course of business consistent with past practice to vendors and employees;

 

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(f) Contracts limiting the ability of the Company or the Subsidiaries to compete, including as to manner or place;

(g) Contracts that are commission, sales representative, or sales agent agreements;

(h) Contracts that are collective bargaining agreements or other agreements with any labor union, employees’ association or other employee representative of a group of employees;

(i) Contracts that are for the employment, severance or retention of any manager, director, officer, employee, agent, consultant or advisor providing for annual compensation or payments in excess of $100,000 or any other Contract with any manager, director, officer, employee, agent, consultant or advisor, which provides for payments in excess of $50,000 in the event that the Company or a Subsidiary terminates such Contract;

(j) Contracts that are for capital expenditures in an amount exceeding $50,000 in any individual case or $250,000 in the aggregate;

(k) Contracts not otherwise set forth on Schedule 4.13 or Schedule 4.14 , that are in the nature of a profit sharing, bonus, profits interest, stock option, stock purchase, pension, deferred compensation or retirement, severance, hospitalization, insurance or other plan or contract providing material employment-related benefits to any present or former manager, director, officer, employee, agent, stockholder, member, consultant or advisor or such Persons’ dependents, beneficiaries or heirs;

(l) Leases;

(m) Contracts granting any Person an Encumbrance on all or any part of the assets of the Company or any Subsidiary, other than Encumbrances which will be released at the Closing or other Permitted Encumbrances;

(n) Powers of attorney;

(o) Contracts providing for the license (i) from any Person other than the Company or any of the Subsidiaries to the Company or any of the Subsidiaries of any Intellectual Property, other than “shrinkwrap” or “clickwrap” or other commercially available off-the-shelf software licenses with a cost of less than $50,000 per license, or (ii) from the Company or any of the Subsidiaries to any Person other than the Company or any of the Subsidiaries of any Owned Intellectual Property (except for non-exclusive licenses to students, faculty, customers, suppliers, service providers or consultants in the ordinary course of business consistent with past practice); and

(p) Contracts that are joint venture, partnership or other similar agreement (however named) involving a sharing of profits, losses, costs or liabilities.

True, correct and complete copies of all Material Contracts, together with all amendments, waivers, or other changes thereto, have been made available to the Buyer. Each Material

 

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Contract is a valid and binding obligation of the Company or one of the Subsidiaries (as applicable), enforceable against it in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally. As of the date of this Agreement, except as set forth on Schedule 4.10 , there are no defaults by the Company or any of the Subsidiaries under any Material Contract or, insofar as the Company has any Knowledge, by any other party thereto, nor is the Company or any Subsidiary in receipt of any written claims of default, or insofar as the Company has any Knowledge any oral claims of default, under any Material Contract. No event has occurred which, through the passage of time or the giving of notice, or both, would constitute a default by the Company or any of the Subsidiaries under any Material Contract or, insofar as the Company has any Knowledge, by the other party thereto or would cause the acceleration of any obligation under any Material Contract, the loss of any rights under any Material Contract, or the creation of any Encumbrance (other than a Permitted Encumbrance) upon any asset of the Company or any Subsidiary.

Section 4.11 Litigation; Compliance with Laws .

(a) Except as set forth on Schedule 4.11(a) , there is no Action at law or in equity before any Governmental Entity or Educational Agency pending or, insofar as the Company has any Knowledge, threatened, against the Company or any Subsidiary or affecting any of their respective properties or assets. Neither the Company nor any Subsidiary is a party to nor is bound by any currently effective order, judgment, injunction, or decree, or has entered into any settlement agreement with respect to any Action since its respective date of formation. Neither the Company nor any Subsidiary currently intends to initiate any Action.

(b) Except as set forth on Schedule 4.11(b) , neither the Company nor the Subsidiaries is in violation of any Law to which any of them, or any of their respective businesses, properties or operations, is subject. Except as set forth on Schedule 4.11(b) , no written, or, insofar as the Company has any Knowledge, oral notice has been received by the Company or any Subsidiary from any Governmental Entity alleging a violation of any such Law.

Section 4.12 Taxes .

(a) The Company and each Subsidiary has timely filed all federal and all other Tax Returns required to have been filed by it. All Tax Returns filed by the Company or any Subsidiary are true, correct and complete. The Company and each Subsidiary has timely paid all Taxes that have become due and payable (whether or not shown on a Tax Return). The unpaid Taxes of the Company and each Subsidiary for Tax periods through the date of the most recent balance sheets included in the Financial Statements do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on such balance sheets. All Taxes of the Company and the Subsidiaries attributable to the period from and after the date of the most recent balance sheets included in the Financial Statements and continuing through the Closing Date are attributable to the conduct by the Company and the Subsidiaries of their operations in the ordinary course of business.

 

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(b) No written claim for assessment or collection of Taxes has been received by the Company or any Subsidiary that has not been fully resolved. There is no presently pending audit examination, request for information, refund claim, litigation, proceeding, proposed adjustment or matter in controversy with respect to any Taxes of or with respect to the Company or any Subsidiary. The Company has no Knowledge that any such action or proceeding has been threatened. No written claim has been received from a jurisdiction in which Tax Returns have not been filed by the Company or any Subsidiary to the effect that the Company or any Subsidiary is or may be subject to taxation by such jurisdiction.

(c) Neither the Company nor any Subsidiary has engaged in a transaction that constitutes a “reportable transaction” as such term is defined in Treasury Regulation Section 1.6011-4(b)(1).

(d) Neither the Company nor any Subsidiary is subject to any extension of, or has filed any waiver with respect to, any statute of limitations applicable to the assessment or collection of any Tax.

(e) The Company and each Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, member, stockholder or other Persons.

(f) There are no Tax liens on any assets of the Company or any Subsidiary other than for Taxes not yet due and payable.

(g) Each of the Company and Heald Education, LLC is a “partnership,” and each of Heald Real Estate, LLC and Heald College, LLC is a disregarded entity, for U.S. federal income Tax purposes. Each of the aforementioned entities has been so classified since its inception, and none of the aforementioned entities has taken any actions or filed any elections inconsistent with such classification.

(h) Neither the Company nor any Subsidiary will have any liability following the Closing under any Tax sharing, Tax allocation or Tax indemnification agreement entered into prior to the Closing. Neither the Company nor any Subsidiary has any liability for the Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract or otherwise.

(i) Neither the Company nor any Subsidiary is a party to nor bound by any closing or other agreement with any Governmental Entity with respect to Taxes.

(j) Neither the Company nor any Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date, (B) “closing agreement” as described in Section&