Exhibit 10.1

CREDIT AGREEMENT

Dated as of March 24, 2009

among

HEALD REAL ESTATE, LLC,

as Borrower,

HEALD CAPITAL, LLC,

as Holdings,

and

BANK OF AMERICA, N.A.,

as Lender

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TABLE OF CONTENTS

 

         Page

ARTICLE I.

 

DEFINITIONS AND ACCOUNTING TERMS

   1   

1.01.

  Defined Terms    1   

1.02.

  Other Interpretive Provisions    20   

1.03.

  Accounting Terms    21   

1.04.

  Rounding    21   

1.05.

  Times of Day    21

ARTICLE II.

 

THE COMMITMENTS AND CREDIT EXTENSIONS

   21   

2.01.

  The Term Loan    21   

2.02.

  Borrowings, Conversions and Continuations of the Term Loan    21   

2.03.

  Prepayments    22   

2.04.

  Repayment of Term Loan    23   

2.05.

  Interest    23   

2.06.

  Fees    24   

2.07.

  Computation of Interest and Fees    24   

2.08.

  Evidence of Debt    24   

2.09.

  Payments Generally    24

ARTICLE III.

 

TAXES, YIELD PROTECTION AND ILLEGALITY

   25   

3.01.

  Taxes    25   

3.02.

  Illegality    27   

3.03.

  Inability to Determine Rates    27   

3.04.

  Increased Costs    27   

3.05.

  Compensation for Losses    29   

3.06.

  Mitigation Obligations    29   

3.07.

  Survival    29

ARTICLE IV.

 

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

   29   

4.01.

  Conditions of Initial Credit Extension    29   

4.02.

  Conditions to all Credit Extensions    34

ARTICLE V.

 

REPRESENTATIONS AND WARRANTIES

   34   

5.01.

  Existence, Qualification and Power    34   

5.02.

  Authorization; No Contravention    35   

5.03.

  Governmental Authorization; Other Consents    35   

5.04.

  Binding Effect    35   

5.05.

  Financial Statements; No Material Adverse Effect    35   

5.06.

  Litigation    36   

5.07.

  No Default    36   

5.08.

  Ownership of Property; Liens; Investments    36   

5.09.

  Environmental Compliance    37   

5.10.

  Insurance    38   

5.11.

  Taxes    38   

5.12.

  ERISA Compliance    38   

5.13.

  Subsidiaries; Equity Interests; Loan Parties    39   

5.14.

  Margin Regulations; Investment Company Act    39   

5.15.

  Disclosure    39   

5.16.

  Compliance with Laws    40

 

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TABLE OF CONTENTS

(continued)

 

             Page  

5.17.

  Intellectual Property; Licenses, Etc.    40  

5.18.

  Solvency    40  

5.19.

  Casualty, Etc.    40  

5.20.

  Collateral Documents    40

ARTICLE VI.

 

AFFIRMATIVE COVENANTS

   40  

6.01.

  Financial Statements    40  

6.02.

  Certificates; Other Information    42  

6.03.

  Notices    42  

6.04.

  Payment of Obligations    43  

6.05.

  Preservation of Existence, Etc.    43  

6.06.

  Maintenance of Properties    43  

6.07.

  Maintenance of Insurance    43  

6.08.

  Compliance with Laws    44  

6.09.

  Books and Records    44  

6.10.

  Inspection Rights    44  

6.11.

  Use of Proceeds    44  

6.12.

  Compliance with Environmental Laws    44  

6.13.

  Preparation of Environmental Reports    45  

6.14.

  Further Assurances    45  

6.15.

  Compliance with Terms of Leaseholds    45  

6.16.

  Interest Rate Hedging    45  

6.17.

  Depository Bank    45  

6.18.

  Additional Matters    46

ARTICLE VII.

 

NEGATIVE COVENANTS

   46  

7.01.

  Liens    46  

7.02.

  Indebtedness    48  

7.03.

  Investments    50  

7.04.

  Fundamental Changes    51  

7.05.

  Dispositions    51  

7.06.

  Restricted Payments    52  

7.07.

  Change in Nature of Business    53  

7.08.

  Transactions with Affiliates    53  

7.09.

  Burdensome Agreements    53  

7.10.

  Use of Proceeds    53  

7.11.

  Financial Covenants    53  

7.12.

  Amendments of Organization Documents    54  

7.13.

  Accounting Changes    54  

7.14.

  Prepayments, Etc. of Indebtedness    54  

7.15.

  Amendment, Etc. of Related Documents and Indebtedness    54  

7.16.

  Holding Company    55

ARTICLE VIII.

 

EVENTS OF DEFAULT AND REMEDIES

   55  

8.01.

  Events of Default    55  

8.02.

  Remedies upon Event of Default    57  

8.03.

  Application of Funds    58

 

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TABLE OF CONTENTS

(continued)

 

             Page

ARTICLE IX.

 

MISCELLANEOUS

   58  

9.01.

  Amendments, Etc.    58  

9.02.

  Notices; Effectiveness; Electronic Communications    58  

9.03.

  No Waiver; Cumulative Remedies; Enforcement    59  

9.04.

  Expenses; Indemnity; Damage Waiver    59  

9.05.

  Payments Set Aside    61  

9.06.

  Successors and Assigns    61  

9.07.

  Treatment of Certain Information; Confidentiality    62  

9.08.

  Right of Setoff    63  

9.09.

  Interest Rate Limitation    63  

9.10.

  Counterparts; Integration; Effectiveness    63  

9.11.

  Survival of Representations and Warranties    63  

9.12.

  Severability    64  

9.13.

  Governing Law; Jurisdiction; Etc.    64  

9.14.

  Waiver of Jury Trial    65  

9.15.

  California Judicial Reference    65  

9.16.

  No Advisory or Fiduciary Responsibility    65  

9.17.

  Electronic Execution of Assignments and Certain Other Documents    65  

9.18.

  USA PATRIOT Act    66  

9.19.

  Time of the Essence    66

 

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SCHEDULES     

5.03

   Governmental Authorization; Other Consents  

5.08(c)

   Owned Real Properties  

5.08(d)(i)

   Real Property Lease Agreements  

5.08(d)(ii)

   Other Real Property Leases (Lessees)  

5.08(d)(iii)

   Other Real Property Leases (Lessors)  

5.13

   Subsidiaries and Other Equity Investments; Loan Parties  

5.17

   Intellectual Property Matters  

7.01(b)

   Existing Liens  

7.02

   Existing Indebtedness  

7.03

   Existing Investments  

9.02

   Lender’s Office, Certain Addresses for Notices EXHIBITS      Form of     

A

   Committed Loan Notice  

B

   Compliance Certificate  

C

   Guaranty  

D

   Term Note  

E-1

   Security Agreement  

E-2

   Mortgage  

F

   [Intentionally omitted]  

G-1

   Legal Opinion of Counsel to Loan Parties  

G-2

   Legal Opinion of California Counsel  

G-3

   Legal Opinion of Regulatory Counsel  

H

   Disbursement and Fee Statement

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CREDIT AGREEMENT

This CREDIT AGREEMENT (“Agreement”) is entered into as of March 24, 2009, among
HEALD REAL ESTATE, LLC, a Delaware limited liability company, as the borrower
(the “Borrower”), HEALD CAPITAL, LLC, a Delaware limited liability company
(“Holdings”), and BANK OF AMERICA, N.A. (the “Lender” or “Bank of America”).

PRELIMINARY STATEMENTS:

WHEREAS, the Borrower received certain mortgage loans from Allstate Life
Insurance Company, an Illinois corporation (“Allstate”) in the original
aggregate principal amount of $35,000,000 (collectively, the “Existing Loans”),
evidenced by (a) that certain Note Secured by Deed of Trust, dated August 14,
2007, in the face amount of $27,270,000, and (b) that certain Note Secured by
Deed of Trust (LIBOR), dated August 14, 2007, in the face amount of $7,730,000
(collectively, the “Existing Notes”), each of which was made by the Borrower in
favor of Allstate and secured by, among other things, certain deeds of trust
executed by the Borrower in favor of Allstate (collectively, the “Existing
Mortgages”) covering the Borrower’s Owned Real Properties (hereinafter defined).

WHEREAS, the Borrower has requested that the Lender provide a term loan facility
to the Borrower in order to refinance the Existing Loans, and the Lender has
indicated its willingness to lend for such a purpose on the terms and subject to
the conditions set forth herein.

WHEREAS, in order to facilitate the refinancing of the Existing Loans, the
Borrower’s wholly-owned Subsidiary, Ascent-Heald, LLC, a Delaware limited
liability company and successor-in-interest to Ascent-Heald, Inc. (“AHI”), has
entered into that certain Loan Purchase Agreement, dated as of February 6, 2009,
with Allstate (as amended or otherwise modified through the date hereof, the
“Loan Purchase Agreement”), pursuant to which Allstate will sell to AHI the
Existing Loans and assign to AHI the Existing Notes, the Existing Mortgages and
such other documents and instruments evidencing, securing or pertaining to the
Existing Loans (collectively, the “Existing Loan Documents”) for the Purchase
Price (as defined in the Loan Purchase Agreement).

WHEREAS, concurrently with the closing of this Agreement on the Closing Date,
(a) the Borrower will direct the Lender to remit the proceeds of the term loan
facility to AHI to enable it to purchase the Existing Loans and to assume the
Existing Loan Documents, (b) AHI shall then merge with and into the Borrower
pursuant to a Merger Agreement, dated as of the date hereof (the “Merger
Agreement”), under which the Borrower will be the surviving corporation (the
“Merger”), and (c) AHI and the Borrower shall then terminate the Existing Loans
and the Existing Loan Documents and cause the Allstate liens securing the
Existing Loans to be released.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

1.01. Defined Terms. As used in this Agreement, the following terms shall have
the meanings set forth below:

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified. For purposes of the Loan
Documents, the Lender shall not be deemed to be an “Affiliate” of any Loan
Party.

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“Agreement” has the meaning specified in the introductory paragraph hereto.

“AHI” has the meaning specified in the Preliminary Statements.

“Allstate” has the meaning specified in the Preliminary Statements.

“Allstate Assignment Documents” means each of the closing documents set forth in
Section 5 of the Loan Purchase Agreement, including, without limitation, the
“Note Endorsement”, the “Assignments of Mortgage” and the “Assignment of
Mortgage Loan Documents”, as such terms are defined or referenced in the Loan
Purchase Agreement.

“Allstate Escrow Agreement” means the “Escrow Agreement” as such term is defined
in the Loan Purchase Agreement.

“Applicable Rate” means 3.00% per annum for Base Rate Loans and 3.00% per annum
for Eurodollar Rate Loans (except as set forth in Section 2.05(a)).

“Attributable Indebtedness” means, on any date, in respect of any Capitalized
Lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP.

“Audited Financial Statements” means the audited consolidated balance sheet of
Holdings and its Subsidiaries for the fiscal year ended December 31, 2007, and
the related consolidated statements of income or operations, shareholders’
equity and cash flows for such fiscal year of Holdings and its Subsidiaries,
including the notes thereto.

“Bank of America” has the meaning specified in the introductory paragraph
hereto.

“Bankruptcy Order” shall mean that certain Order Approving Compromise entered by
the United States Bankruptcy Court of the Northern District of California, San
Francisco Division, on January 15, 2009 with respect to Case No. 08-30199 DM,
approving the Settlement Agreement.

“Base Rate” means for any day a fluctuating rate per annum equal to the higher
of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in
effect for such day as publicly announced from time to time by Bank of America
as its “prime rate.” The “prime rate” is a rate set by Bank of America based
upon various factors including Bank of America’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at
the opening of business on the day specified in the public announcement of such
change.

“Base Rate Loan” means all or any portion of the Term Loan that bears interest
based on the Base Rate.

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Breakup Fee” means a fully earned nonrefundable fee of $150,000 payable to the
Lender prior to the Closing Date, notwithstanding any failure by the Borrower to
close the transactions contemplated by this Agreement on the Closing Date
(including the Term Loan facility) for any reason.

 

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“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state of California, and, if such day relates to any Eurodollar
Rate Loan, means any such day on which dealings in Dollar deposits are conducted
by and between banks in the London interbank eurodollar market.

“Capitalized Leases” means all leases that have been or should be, in accordance
with GAAP, recorded as capital lease obligations on the balance sheet.

“Cash Equivalents” means any of the following types of Investments, to the
extent owned by Holdings or any of its Subsidiaries free and clear of all Liens
(other than Liens created under the Collateral Documents and other Liens
permitted hereunder):

(a) readily marketable obligations issued or directly and fully guaranteed or
insured by the United States or any agency or instrumentality thereof having
maturities of not more than 360 days from the date of acquisition thereof;
provided that the full faith and credit of the United States is pledged in
support thereof;

(b) time deposits with, or insured certificates of deposit or bankers’
acceptances of, any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States, any state thereof or the District of
Columbia or is the principal banking subsidiary of a bank holding company
organized under the laws of the United States of America, any state thereof or
the District of Columbia, and is a member of the Federal Reserve System,
(ii) issues (or the parent of which issues) commercial paper rated as described
in clause (c) of this definition and (iii) has combined capital and surplus of
at least $1,000,000,000, in each case with maturities of not more than 180 days
from the date of acquisition thereof;

(c) commercial paper issued by any Person organized under the laws of any state
of the United States and rated at least “Prime-1” (or the then equivalent grade)
by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case
with maturities of not more than 180 days from the date of acquisition thereof;
and

(d) Investments, classified in accordance with GAAP as current assets of
Holdings or any of its Subsidiaries, in money market investment programs
registered under the Investment Company Act of 1940, which are administered by
financial institutions that have the highest rating obtainable from either
Moody’s or S&P, and the portfolios at least 90% of which are limited solely to
Investments of the character, quality and maturity described in clauses (a),
(b) and (c) of this definition.

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.

“CERCLIS” means the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the U.S. Environmental Protection
Agency.

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.

“Change of Control” means an event or series of events by which: (a) Holdings
shall cease to directly own and control legally and beneficially all of the
voting Equity Interests and no less than 70% of all Equity Interests in Heald
Education, (b) Holdings shall cease to directly own and control legally and
beneficially all of the Equity Interests in the Borrower; or (c) Heald Education
shall cease to directly own and control legally and beneficially all of the
Equity Interests in Heald College.

 

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“Closing Date” means the date hereof.

“CMLTD” means, at any date of determination, the current maturity of long term
debt for the next twelve months determined in accordance with GAAP.

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated
thereunder as in effect from time to time.

“Collateral” means a collective reference to all real and personal property with
respect to which Liens in favor of the Lender, for the benefit of the Secured
Parties, are purported to be granted pursuant to and in accordance with the
terms of the Collateral Documents.

“Collateral Documents” means, collectively, the Security Agreement, the
Mortgages, each of the mortgages, collateral assignments, security agreements,
control agreements, intellectual property security agreements, pledge
agreements, consents to pledge agreements, stock powers, assignments separate
from certificates, or other similar agreements and instruments delivered to the
Lender in connection with this Agreement, and each of the other agreements,
instruments or documents that creates or purports to create a Lien in favor of
the Lender for the benefit of the Secured Parties.

“Collateral Information Certificate” has the meaning specified in
Section 4.01(a)(xiii).

“Committed Loan Notice” means a notice of (a) the Term Borrowing, (b) a
conversion of all or a portion of the Term Loan from one Type to the other, or
(c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which,
if in writing, shall be substantially in the form of Exhibit A.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit B.

“Consolidated EBITDA” means, as of any date of determination, an amount equal to
Consolidated Net Income of Holdings in accordance with GAAP for the most
recently completed Measurement Period plus (a) the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Interest
Expense, (ii) tax expense, (iii) depreciation expense, (iv) amortization
expense, (v) non-recurring non-cash expenses, (vi) any and all litigation and
other costs and expenses related to the litigation between the Borrower and/or
its Affiliates, on the one hand, and PEF, on the other hand; (vii) any and all
costs and expenses in connection with (A) the contemplated investment by Summit
Partners and/or its Affiliates in Holdings and/or Heald Investment,
(B) consummation of the Term Loan on the Closing Date and (C) purchase of the
Existing Loans at a discount, and (viii) non-cash stock-based compensation
expense.

“Consolidated EBITDAR” means, as of any date of determination, Consolidated
EBITDA plus consolidated rent expense in accordance with GAAP for the most
recently completed Measurement Period.

“Consolidated Fixed Charge Coverage Ratio” means, as of any date of
determination for Holdings and its Subsidiaries on a consolidated basis, without
duplication, the ratio of (a) Consolidated EBITDAR minus the following:
(i) unfinanced maintenance capital expenditure for the most recently completed
Measurement Period, (ii) tax expense for the most recently completed Measurement
Period, and (iii) dividends paid during the last twelve month for taxes (but
excluding any and all dividends relating to

 

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the one-time taxes arising from “Cancellation of Debt Income” on the purchase of
the Existing Loans at a discount, provided that such amount does not exceed
$3,600,000 in the aggregate) to (b) Consolidated Fixed Charges; provided,
however, that in calculating such ratio for the fiscal quarter measurement dates
of March 31, 2009 and June 30, 2009 only, 50% of the unrestricted and
unencumbered cash and Cash Equivalent balance as of March 31, 2009 and as of
June 30, 2009 shall be added to EBITDAR for the four fiscal quarters ending
March 31, 2009 and EBITDAR for the four fiscal quarters ending June 30, 2009,
respectively; and provided further, however, that only for the purpose of
determining the amount of the CMLTD for the fiscal quarter measurement dates of:
(w) March 31, 2011, (x) June 30, 2011, (y) September 30, 2011, and
(z) December 31, 2011, the CMLTD for the Term Loan only (and not any other
Indebtedness except for the maturity payment under Note A due on August 12,
2012) shall be determined by dividing (1) the Term Loan Commitment on the
Closing Date by (2) fifteen.

“Consolidated Fixed Charges” means, as of any date of determination, the sum of
(a) CMLTD (but excluding any prepayment of up to $1,000,000 of principal under
Note A, relating to the Bankruptcy Order, as permitted by Section 7.02(n)),
(b) current maturity of all obligations under Capitalized Leases for the next
twelve months, (c) Consolidated Interest Expense, (d) consolidated rent expense
for such Measurement Period in accordance with GAAP, (e) dividends or
distributions (including loans made as, or in lieu of, dividends or
distributions, including those permitted under Section 7.03(n)) paid during the
past twelve months for anything other than dividends or distributions for taxes,
provided, however, that during the fiscal year 2009 only, up to $1,091,000 shall
be excluded from such dividends or distributions which are currently reserved
for dividends or distributions on preferred units, and (f) any prepayment,
redemption, purchase, defeasance or other satisfaction, in any manner, of any
Indebtedness prior to the scheduled maturity thereof for such Measurement
Period, other than (i) Subordinated Debt (including Note A), or (ii) the
permitted Indebtedness described in Section 7.02(n).

“Consolidated Funded Indebtedness” means, as of any date of determination, for
Holdings and its Subsidiaries on a consolidated basis, the sum of the
outstanding principal amount of all obligations, whether current or long term,
for borrowed money (including Obligations hereunder) and all obligations
evidenced by bonds (other than non-cash secured surety or performance bonds),
debentures, notes, loan agreements or other similar instruments. Consolidated
Funded Indebtedness shall include such indebtedness described in the immediately
preceding sentence of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which
Holdings or a Subsidiary is a general partner or joint venturer, unless such
indebtedness is expressly made non-recourse to such Person.

“Consolidated Interest Expense” means, for any Measurement Period, the sum of
all consolidated “interest expense” as defined by GAAP.

“Consolidated Leverage Ratio” means, as of any date of determination, the ratio
of (a) Consolidated Total Indebtedness as of such date to (b) Consolidated
EBITDA of Holdings and its Subsidiaries on a consolidated basis for the most
recently completed Measurement Period; provided, however, that in calculating
such ratio for the fiscal quarter measurement dates of March 31, 2009 and
June 30, 2009 only, Consolidated Total Indebtedness shall be reduced by 50% of
the unencumbered and unrestricted cash and Cash Equivalent balance as of
March 31, 2009 and June 30, 2009, respectively.

“Consolidated Net Income” means, as of date of determination, the net income (or
loss) of Holdings and its Subsidiaries on a consolidated basis in accordance
with GAAP for the most recently completed Measurement Period; provided, however,
that Consolidated Net Income shall exclude gains on the purchase of the Existing
Loans.

 

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“Consolidated Net Worth” means, as of any date of determination, for Holdings
and its Subsidiaries on a consolidated basis, Shareholders’ Equity of Holdings
and its Subsidiaries on that date; provided, however, that for purposes of
calculating “Consolidated Net Worth”, no effect shall be given to any non-cash
accounting adjustments which negatively impact such calculation, provided that
such non-cash accounting adjustments are unrelated to the on-going business of
Heald College or the value of the Borrower’s Owned Real Property.

“Consolidated Tangible Net Worth” means, as of any date of determination, for
Holdings and its Subsidiaries on a consolidated basis, Shareholders’ Equity of
Holdings and its Subsidiaries on that date minus the Intangible Assets of
Holdings and its Subsidiaries on that date; provided, however, that purposes of
calculating “Consolidated Tangible Net Worth”, no effect shall be given to any
non-cash accounting adjustments which negatively impact such calculation,
provided that such non-cash accounting adjustments are unrelated to the on-going
business of Heald College or the value of the Borrower’s Owned Real Property.

“Consolidated Total Indebtedness” means, as of any date of determination, for
Holdings and its Subsidiaries on a consolidated basis, without duplication, the
sum of (a) Consolidated Funded Indebtedness, (b) all obligations under
Capitalized Leases, and (c) the non-cash secured portion of any standby letters
of credit issued.

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Credit Extension” means the Term Borrowing and/or other extension of credit
hereunder if any.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

“Default” means any event or condition that constitutes an Event of Default or
that, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

“Default Rate” means an interest rate which is four percentage (4.00%) points
over and above the then applicable interest rate.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

“DOE” means the United States Department of Education or any successor agency
thereto.

“DOE Letter of Credit” means that certain Irrevocable Standby Letter of Credit
No. 3089649, dated August 27, 2007, issued by Bank of America in favor of the
DOE for the benefit of Heald College, including any renewals or replacements
thereof.

 

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“Dollar” and “$” mean lawful money of the United States.

“Environmental Laws” means any and all federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any other Loan Party or any of their
respective Subsidiaries directly or indirectly resulting from or based upon
(a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials,
(c) exposure to any Hazardous Materials, (d) the release or threatened release
of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

“Equity Contribution Documents” means (a) that certain Preferred Unit Purchase
Agreement, dated as of the date hereof, by and among Heald Capital, LLC, a
Delaware limited liability company, Bradley C. Palmer, and the other Persons
listed on the Schedule of Purchasers attached thereto, and (b) that certain
Preferred Unit Securityholders’ Agreement, dated as of the date hereof, by and
among Heald Capital, Heald Investment, Bradley C. Palmer, Orpheus Holdings LLC,
the Summit Sub Debt Investors identified therein and party thereto.

“Equity Interests” means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person, all of the securities convertible into or exchangeable for shares
of capital stock of (or other ownership or profit interests in) such Person or
warrants, rights or options for the purchase or acquisition from such Person of
such shares (or such other interests), and all of the other ownership or profit
interests in such Person (including partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.

“Equity Issuance” means any issuance by Holdings of its Equity Interests.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a

 

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termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) an event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

“Escrow Agreement” means that certain escrow instruction letter, dated as of the
date hereof, from the Lender to, and acknowledged by, First American Title
Insurance Company.

“Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate (“BBA LIBOR”), as published by Reuters (or other commercially available
source providing quotations of BBA LIBOR as designated by the Lender from time
to time) at approximately 11:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period, for Dollar deposits (for delivery on
the first day of such Interest Period) with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the
“Eurodollar Rate” for such Interest Period shall be the rate per annum
determined by the Lender to be the rate at which deposits in Dollars for
delivery on the first day of such Interest Period in same day funds in the
approximate amount of the Eurodollar Rate Loan being made, continued or
converted by Bank of America and with a term equivalent to such Interest Period
would be offered by Bank of America’s London Branch to major banks in the London
interbank eurodollar market at their request at approximately 11:00 a.m. (London
time) two Business Days prior to the commencement of such Interest Period.

“Eurodollar Rate Loan” means all or any portion of the Term Loan that bears
interest at a rate based on the Eurodollar Rate.

“Event of Default” has the meaning specified in Section 8.01.

“Excluded Taxes” means, with respect to the Lender or any other recipient of any
payment to be made by or on account of any obligation of the Borrower hereunder,
(a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the Laws of
which such recipient is organized or in which its principal office is located
or, in the case of the Lender, in which its applicable Lending Office is
located, (b) any branch profits taxes imposed by the United States or any
similar tax imposed by any other jurisdiction in which the Borrower is located,
and (c) any backup withholding tax that is required by the Code to be withheld
from amounts payable to a Lender that has failed to comply with clause (A) of
Section 3.01(e)(ii) and (d) in the case of a Foreign Lender, any United States
withholding tax that (i) is required to be imposed on amounts payable to such
Foreign Lender pursuant to the Laws in force at the time such Foreign Lender
becomes a party hereto (or designates a new Lending Office) or (ii) is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with clause (B) of Section 3.01(e)(ii),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new Lending Office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 3.01(c).

“Existing Loan Documents” has the meaning specified in the Preliminary
Statements.

“Existing Loans” has the meaning specified in the Preliminary Statements.

“Existing Mortgages” has the meaning specified in the Preliminary Statements.

 

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“Existing Notes” has the meaning specified in the Preliminary Statements.

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of
America on such day on such transactions as determined by the Lender.

“FFIRREA” means the Federal Financial Institutions Reform, Recovery and
Enforcement Act of 1989.

“Fifth Third Account” means that certain deposit account number 7234892458 at
Fifth Third Bank (Chicago) held by Holding as disclosed on the Collateral
Information Certificate on the Closing Date.

“Foreign Lender” means any Lender that is organized under the Laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, consistently applied
and as in effect from time to time.

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, any (a) any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation payable or performable by
another Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or other obligation of the payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of
income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or other
obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien), but, if such
Indebtedness or other obligation has not been so assumed, only to

 

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the extent of the value of such assets. Subject to the immediately preceding
sentence, the amount of any Guarantee shall be deemed to be an amount equal to
the stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith. The term “Guarantee” as a
verb has a corresponding meaning.

“Guarantors” means, collectively, Holdings, Heald Education, AHI and each other
Person that shall have executed and delivered a guaranty of any of the
Obligations.

“Guaranty” means, collectively, the Guaranty made by the Guarantors thereto in
favor of the Secured Parties, substantially in the form of Exhibit C, together
with each other guaranty of any of the Obligations.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Heald College” means Heald College, LLC, a California limited liability
company.

“Heald Education” means Heald Education, LLC, a Delaware limited liability
company.

“Heald Investment” means Heald Investment, LLC, a Delaware limited liability
company.

“Holdings” has the meaning specified in the introductory paragraph hereto.

“Indebtedness” means, as to any Person at a particular time, without
duplication, all of the following, whether or not included as indebtedness or
liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes, loan agreements or other
similar instruments;

(b) the maximum amount of all direct or contingent obligations of such Person
arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable in the ordinary course
of business and not past due for more than 90 days after the date on which such
trade account was created);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse (but, if such indebtedness has not been assumed or is limited in
recourse, only to the extent o the value of such property);

(f) all Attributable Indebtedness in respect of Capitalized Leases of such
Person;

 

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(g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person or
any other Person or any warrant, right or option to acquire such Equity
Interest, valued, in the case of a redeemable preferred interest, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, which, in each case, are due, owing, performed or to be performed, as
the case may be, prior to the Maturity Date (excluding redemption rights upon
change of control or sale of Holdings; and provided that, for the avoidance of
doubt, Tax Distributions and distributions on the preferred units issued in
connection with the $3,000,000 contribution received by Holdings in order to
enable the Borrower to establish the Pledge Cash Account (referred to in
Section 4.01(f) hereof) shall not be considered “Indebtedness” hereunder).

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitees” has the meaning specified in Section 9.04(b).

“Information” has the meaning specified in Section 9.07.

“Intangible Assets” means assets that are considered to be intangible assets
under GAAP, including customer lists, goodwill, computer software, copyrights,
trade names, trademarks, patents, franchises, licenses, unamortized deferred
charges, unamortized debt discount and capitalized research and development
costs.

“Interest Payment Date” means, (a) as to any Eurodollar Rate Loan or any Base
Rate Loan, the last Business Day of each month and the Maturity Date; and (b) as
to the portion of the Term Loan which accrues interest at the Pledged Cash
Account Rate, the day on which interest is, or would otherwise be, paid by the
Lender on the Pledged Cash Account under Section 2.05(b) and the Maturity Date.

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing
on the date such Eurodollar Rate Loan is disbursed or converted to or continued
as a Eurodollar Rate Loan and ending on the date one, two, three or six months
thereafter, as selected by the Borrower in its Committed Loan Notice; provided
that:

(a) any Interest Period that would otherwise end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless such Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day;

(b) any Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period; and

(c) no Interest Period shall extend beyond the Maturity Date.

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests of another Person, (b) a loan, advance or
capital contribution to, or in, another

 

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Person, or (c) the purchase or other acquisition (in one transaction or a series
of transactions) of assets of another Person that constitute a business unit or
all or a substantial part of the business of, such Person. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment.

“Investor Rights Agreement” means that certain Investor Rights Agreement, made
as of the date hereof, by and among Heald Investment, Holdings, and the Persons
listed on the Schedule of Investors attached thereto.

“Involuntary Disposition” means any loss of, damage to or destruction of, any
condemnation or other taking for public use of, any property of any Loan Party
or any Subsidiary, in each case, on an involuntary basis and not otherwise
caused by the action or inaction of any Loan Party or Subsidiary.

“IP Rights” has the meaning specified in Section 5.17.

“IRS” means the United States Internal Revenue Service.

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

“Lender” has the meaning specified in the introductory paragraph hereto.

“Lending Office” means the office or offices of the Lender described as such in
Schedule 9.02, or such other office or offices as the Lender may from time to
time notify the Borrower.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement in the nature of
a security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).

“Loan Documents” means, collectively, this Agreement, any Note, the Guaranty,
the Collateral Documents and each other document or instrument now or hereafter
executed and delivered by a Loan Party to the Lender in connection with,
pursuant to or relating to this Agreement.

“Loan Parties” means, collectively, the Borrower and each Guarantor.

“Loan Purchase Agreement” has the meaning specified in the Preliminary
Statements.

“Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent) or financial condition of Holdings and its Subsidiaries, taken as
a whole; (b) a material impairment of the rights and remedies of the Lender
under the Loan Documents, or of the ability of the Loan Parties to perform their
obligations under the Loan Documents; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Loan Parties of
the Loan Documents.

 

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“Maturity Date” means March 24, 2012; provided, however, that, in each case, if
such date is not a Business Day, the Maturity Date shall be the next preceding
Business Day.

“Measurement Period” means, at any date of determination, the most recently
completed four fiscal quarters of Holdings.

“Merger” has the meaning specified in the Preliminary Statements.

“Merger Agreement” has the meaning specified in the Preliminary Statements.

“Minimum Interest Rate” means a per annum rate equal to 4.00%

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Mortgages” has the meaning specified in Section 4.01(a)(iv).

“Mortgage Policies” has the meaning specified in Section 4.01(a)(iv)(B).

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, as clarified by Department of Labor Regulation 29
C.F.R. §4001.2, to which the Borrower or any ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

“Note” means a promissory note made by the Borrower in favor of the Lender
evidencing the Term Loan made by the Lender, including the Term Note.

“Note A” means that certain promissory note no. A-1, dated as of August 14,
2007, in the principal amount of $6,100,000, executed and delivered by Holdings
in favor of PEF.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to all or any portion of the Term Loan or a Secured Hedge
Agreement, in each case whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the
commencement by or against any Loan Party or any Subsidiary of any proceeding
under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding.

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

“Other Taxes” means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

 

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“Owned Real Properties” has the meaning specified in Section 5.08(c).

“PBGC” means the Pension Benefit Guaranty Corporation.

“PEF” means Pacific Education Foundation, a California nonprofit public benefit
corporation formerly known as Heald College.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes
or has an obligation to contribute, or in the case of a multiple employer or
other plan described in Section 4064(a) of ERISA, has made contributions at any
time during the immediately preceding five plan years.

“Permitted Acquisition” means the purchase or other acquisition of all of the
Equity Interests in, or all or substantially all of the property of, any Person
that, upon the consummation thereof, will be wholly-owned directly by Holdings
or one or more of its wholly-owned Subsidiaries existing on the Closing Date;
provided that, with respect to each purchase or other acquisition made:

(a) Holdings shall have given the Lender at least 15 days prior written notice
of such purchase or acquisition;

(b) the lines of business of the Person to be (or the property of which is to
be) so purchased or otherwise acquired shall be substantially the same lines of
business as one or more of the principal businesses of the Borrower or Heald
College in the ordinary course as of the Closing Date;

(c) such purchase or other acquisition shall not include or result in any
contingent liabilities that could reasonably be expected to be material to the
business, financial condition or operations of Holdings and its Subsidiaries,
taken as a whole (as determined in good faith by the board of directors (or the
persons performing similar functions) of Holdings or such Subsidiary if the
board of directors is otherwise approving such transaction and, in each other
case, by a Responsible Officer);

(d) such purchase or other acquisition consideration shall come only from
Holdings as the original source and shall only come in the form of cash received
by Holdings through an Equity Issuance or through Subordinated Debt incurred by
Holdings, or through noncash consideration, or through a combination of the
foregoing, all of which may be distributed by Holdings to a Loan Party or Heald
College in order to effect such purchase or other acquisition;

(e) the total cash and noncash consideration (excluding all Equity Interests
issued or transferred to the sellers thereof, but including all indemnities,
earnouts and other contingent payment obligations to (but only to the extent
reported as a liability under GAAP), and the aggregate amounts paid or to be
paid under noncompete, consulting and other affiliated agreements with, the
sellers thereof, all write-downs of property and reserves for liabilities with
respect thereto and all assumptions of debt, liabilities and other obligations
in connection therewith, except any Subordinated Debt) paid by or on behalf of
Holdings for any such purchase or other acquisition, when aggregated with the
total cash and noncash consideration paid by or on behalf of Holdings for all
other purchases and other acquisitions made by Holdings pursuant to the
“Permitted Acquisition” definition, shall not exceed 10% of Holdings’
consolidated total assets reported on Holdings’ consolidated balance sheet as of
the most recent fiscal year provided to the Lender;

 

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(f) (A) immediately before and immediately after giving pro forma effect to any
such purchase or other acquisition on a Pro Forma Basis, no Default shall have
occurred and be continuing and (B) the Borrower shall have delivered to the
Lender a Pro Forma Compliance Certificate demonstrating that, upon giving effect
to such Acquisition, the Loan Parties would be in compliance with the financial
covenants set forth in Section 7.11 on a Pro Forma Basis;

(g) the following additional requirements shall also apply (provided, however,
that such additional requirements shall not be applied to Heald College if the
application thereof would make Heald College a Loan Party or otherwise cause
Heald College to execute and deliver Collateral Documents encumbering its
property (other than a pledge of Equity Interests in a Subsidiary), in each
case, by virtue of this clause (g)): (i) in the case of the a newly-formed or
acquired Subsidiary in connection with such purchase or acquisition, within 10
days after such purchase or acquisition, cause such Subsidiary to duly execute
and deliver to the Lender a guaranty, in form and substance reasonably
satisfactory to the Lender, guaranteeing the Loan Parties’ obligations under the
Loan Documents and otherwise make such Subsidiary a Loan Party under the Loan
Documents; (ii) within 10 days after such purchase or acquisition furnish to the
Lender a description of the real and personal properties assets so acquired, in
detail reasonably satisfactory to the Lender; (iii) within 15 days after such
purchase or acquisition, cause such newly-formed or acquired Subsidiary in
connection with such purchase or acquisition (and each direct and indirect
parent of such Subsidiary, if it has not already done so) or other Loan Party
owner of the newly acquired assets, as the case may be, to duly execute and
deliver to the Lender Collateral Documents as specified by and in form and
substance reasonably satisfactory to the Lender (and otherwise comply with
Section 6.14 hereof); (iv) within 30 days after such purchase or acquisition,
cause such newly-formed or acquired Subsidiary in connection with such purchase
or acquisition (and each direct and indirect parent of such Subsidiary, if it
has not already done so) or other Loan Party owner of the newly acquired assets
to take whatever action (including the recording of mortgages, the filing of
Uniform Commercial Code financing statements, the giving of notices and the
endorsement of notices on title documents) may be reasonably necessary or
advisable in the opinion of the Lender to vest in the Lender valid and
subsisting Liens on the properties purported to be subject to the Collateral
Documents delivered under the preceding clause (iii) herein; (v) within 60 days
after such purchase or acquisition, deliver to the Lender, upon the reasonable
request of the Lender, a signed copy of a favorable opinion, addressed to the
Lender and the other Secured Parties, of counsel for the Loan Parties reasonably
acceptable to the Lender as to the matters contained in this clause (g) and as
to such other matters as the Lender may reasonably request, and (vi) as promptly
as practicable after such purchase or acquisition, deliver, upon the reasonable
request of the Lender, to the Lender with respect to each parcel of real
property owned or held by the entity that is the subject of such formation or
acquisition title reports, surveys and engineering, soils and other reports, and
environmental assessment reports, each in scope, form and substance reasonably
satisfactory to the Lender, provided, however, that to the extent that any Loan
Party or any of its Subsidiaries shall have otherwise received any of the
foregoing items with respect to such real property, such items shall, promptly
after the receipt thereof, be delivered to the Lender; and

(h) the Borrower shall have delivered to the Lender, on the closing date of any
such purchase or other acquisition is to be consummated, a certificate of a
Responsible Officer, in form and substance reasonably satisfactory to the
Lender, certifying that all of the requirements set forth in this definition of
“Permitted Acquisitions” have been satisfied.

“Permitted Encumbrances” means Liens on real property permitted under
Section 7.01 of this Agreement.

 

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“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Phase I Reports” means, collectively, each of the final “Phase I Environmental
Site Assessment Reports”, relating to the Borrower’s Owned Real Property, issued
either June 15, 2007 or June 18, 2007, as applicable, by LandAmerica Assessment
Corporation, and delivered by the Borrower to the Lender prior to the Closing
Date.

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

“Pledged Cash Account Interest Determination Date” means the date of
establishment of the Pledged Cash Account and the date of the commencement of
each Pledged Cash Account Interest Period.

“Pledged Cash Account Interest Period” means the period commencing initially on
the date of establishment of the Pledged Cash Account and thereafter on the date
immediately following the end of any such initial 3 month period or subsequent 3
month period, and ending on the last Business Day of the month ending
approximately 3 months thereafter.

“Pledged Cash Account” means that segregated cash collateral account held by
Borrower and maintained with the Lender in a principal amount not less than
$3,000,000, in which the Lender will have a first priority perfected security
interest (including in any certificate(s) of deposit issued by the Borrower to
the Lender in connection therewith), and shall include all rights of blockage
and setoff in favor of the Lender.

“Pledged Cash Account Rate” mean, for any Pledged Cash Account Interest
Determination Date, the Lender’s prevailing commercial rate in effect for a 3
month time deposit on such date.

“Pro Forma Basis” means, with respect to any transaction, that for purposes of
calculating the financial covenants set forth in Section 7.11, such transaction
shall be deemed to have occurred as of the first day of the relevant measurement
period.

“Pro Forma Compliance Certificate” means a certificate of a Responsible Officer
of the Borrower containing reasonably detailed calculations of the financial
covenants set forth in Section 7.11 on a Pro Forma Basis after giving effect to
the applicable transaction.

“Real Property Lease Agreements” has the meaning specified in
Section 4.01(a)(iv)(D).

“Related Documents” means the Allstate Assignment Documents, the Allstate Escrow
Agreement, the Equity Contribution Documents, the Existing Loan Documents, the
Loan Purchase Agreement, the Merger Agreement, and the Real Property Lease
Agreements.

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees and advisors
of such Person and of such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

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“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer, assistant treasurer, controller, chairman of the
board or managing member of a Loan Party. Any document delivered hereunder that
is signed by a Responsible Officer of a Loan Party shall be conclusively
presumed to have been authorized by all necessary corporate, limited liability
company, partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Person or any of its Subsidiaries, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, defeasance,
acquisition, cancellation or termination of any such capital stock or other
Equity Interest, or on account of any return of capital to any Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.

“SBLC Agreement” means that certain Loan Agreement, dated as of August 27, 2007,
between Heald College and Bank of America, as amended, restated, supplement or
otherwise modified from time to time, pursuant to which the DOE Letter of Credit
was issued.

“SBLC Loan Documents” means the SBLC Agreement and the other “Loan Documents”,
as such term is defined in the SBLC Agreement.

“Scheduled Term Loan Payment” has the meaning specified in Section 2.04.

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

“Secured Hedge Agreement” means any interest rate Swap Contract required or
permitted hereunder that is entered into by and between any Loan Party, on the
one hand, and any of the Lender, its subsidiaries and/or Affiliates, on the
other hand.

“Secured Parties” means, collectively, the Lender and the other Persons the
Obligations owing to which are or are purported to be secured by the Collateral
under the terms of the Collateral Documents.

“Security Agreement” has the meaning specified in Section 4.01(a)(iii).

“Settlement Agreement” means that certain Settlement Agreement entered into as
of December 31, 2008, by and between PEF, on the one hand, and Holdings, Heald
Education and Heald College, on the other hand.

“Shareholders’ Equity” means, as of any date of determination, consolidated
shareholders’ equity of Holdings and its Subsidiaries as of that date determined
in accordance with GAAP.

“Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,

 

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incur debts or liabilities beyond such Person’s ability to generally pay such
debts and liabilities as they mature, (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person’s property would constitute unreasonably small capital, and
(e) such Person is able to generally pay its debts and liabilities, contingent
obligations and other commitments as they mature in the ordinary course of
business. The amount of contingent liabilities at any time shall be computed as
the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.

“Subordinated Debt” means any Indebtedness that is subordinated on terms and
conditions, and that is subject to other terms and conditions, satisfactory in
form and substance to the Lender in the Lender’s sole and absolute discretion.

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
Holdings.

“Summit Partners” means Summit Partners, L.P., a Delaware limited partnership.

“Summit Purchase Documents” means that certain Securities Purchase Agreement,
dated as of the date hereof, by and among Heald Investment, Bradley C. Palmer
and certain of his Affiliates, and Orpheus Holdings LLC, a Delaware limited
liability company, as sellers, and Summit Partners and/or its Affiliates, as the
purchasers, together with the “Transaction Documents” as defined in such
Securities Purchase Agreement, each as amended or otherwise modified through the
date hereof.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

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“Tax Distributions” means any dividend or distribution paid to any direct or
indirect holder of membership interests of Heald Education or Holdings, as
applicable, to the extent that such funds are distributed to provide cash or
other assets to such holder in order to pay such holder’s (or to the extent that
the holder is a pass-through entity, the members of such holder) federal, state
and local income tax liabilities for such year (determined based upon such
holder having the highest combined federal, state and local income tax rate
applicable to any direct or indirect member of Heald Education or Holdings, as
applicable, residing in the United States, as determined by the board of Heald
Education or Holdings, as applicable, in good faith) that is attributable to
such holder as a result of the amount of income and gain (net of allowable
deductions, losses and credits allocated by Heald Education or Holdings, as
applicable to such holder) of Heald Education or Holdings, as applicable, that
is allocable to such holder. Such distributions shall include distributions
based on estimates of income or gain to enable the holder (or to the extent that
the holder is a pass-through entity, the members of such holder) to make
estimated tax payments associated with such income or gain and shall ignore the
effect of any basis adjustment under Section 754 of the Internal Revenue Code of
1986, as amended.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Term Borrowing” means the borrowing of the Term Loan by the Borrower on the
Closing Date.

“Term Loan” means the term loan advance made by the Lender as specified in
Section 2.01.

“Term Loan Commitment” means an aggregate amount equal to $24,100,000
outstanding at any time.

“Term Note” has the meaning specified in Section 4.01(a)(ii).

“Threshold Amount” means $1,000,000.

“Title IV Programs” means federal student financial assistance programs
authorized by Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et
seq.), as amended, or any amendments or successor status thereto.

“Transactions” means, collectively, (a) the consummation of the Merger, (b) the
entering into by the Loan Parties and their applicable Subsidiaries of the Loan
Documents and the Related Documents to which they are or are intended to be a
party, (c) the consummation of the transaction contemplated by and under the
Loan Documents on the Closing Date, (d) the refinancing of certain outstanding
Indebtedness of the Borrower and its Subsidiaries and the termination of all
commitments with respect thereto, and (e) the payment of the fees and expenses
incurred in connection with the consummation of the foregoing.

“Type” means, with respect to all or any portion of the Term Loan, its character
as a Base Rate Loan or a Eurodollar Rate Loan.

“UCC” means the Uniform Commercial Code as in effect in the State of California;
provided that, if perfection or the effect of perfection or non-perfection or
the priority of any security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
California, “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.

 

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“Unaggregated Material Adverse Effect” means (i) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
liabilities (actual or contingent) or financial condition of any of the Loan
Parties or Heald College, or of Holdings and its Subsidiaries taken as a whole;
(ii) a material impairment of the rights and remedies of the Lender under any
Loan Document, or of the ability of any Loan Party to perform its obligations
under any Loan Document to which it is a party; or (iii) a material adverse
effect upon the legality, validity, binding effect or enforceability against any
Loan Party of any Loan Document to which it is a party.

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

“United States” and “U.S.” mean the United States of America.

“Upfront Fee” means a fully earned nonrefundable fee payable to the Lender on
the Closing Date equal to (a) 2.00% of (i) the Term Loan Commitment minus
(ii) principal amount of cash in the Pledged Cash Account on the Closing Date,
less (b) that portion of the Breakup Fee paid to the Lender prior to the Closing
Date.

“WASC” means Western Association of Schools and Colleges, Accrediting Commission
for Community and Junior Colleges.

1.02. Other Interpretive Provisions. With reference to this Agreement and each
other Loan Document, unless otherwise specified herein or in such other Loan
Document:

(a) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document (including any Organization Document) shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Preliminary Statements,
Exhibits and Schedules to, the Loan Document in which such references appear,
(v) any reference to any law shall include all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time,
and (vi) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means “to and
including.”

 

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(c) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this
Agreement or any other Loan Document.

1.03. Accounting Terms. (a) Generally. All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed herein.

(b) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and the Lender or the Borrower shall so request, the Borrower and the
Lender shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP; provided
that, until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (ii) the
Borrower shall provide to the Lender financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting forth
a reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP.

(c) Calculations. Notwithstanding the above, the parties hereto acknowledge and
agree that all calculations of the financial covenants in Section 7.11 shall be
made on a Pro Forma Basis with respect to any Permitted Acquisition occurring
during the applicable period.

1.04. Rounding. Any financial ratios required to be maintained by the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the result
up or down to the nearest number (with a rounding-up if there is no nearest
number).

1.05. Times of Day. Unless otherwise specified, all references herein to times
of day shall be references to California time (daylight or standard, as
applicable).

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

2.01. The Term Loan. Subject to the terms and conditions set forth herein, the
Lender agrees to make a single Term Loan to the Borrower on the Closing Date in
an amount not to exceed the Term Loan Commitment. The Term Loan may be comprised
of Base Rate Loans or Eurodollar Rate Loans, as further provided herein.

2.02. Borrowings, Conversions and Continuations of the Term Loan. (a) The Term
Borrowing, each conversion of all or any portion of the Term Loan from one Type
to the other, and each continuation of Eurodollar Rate Loans shall be made upon
the Borrower’s irrevocable notice to the Lender, which may be given by
telephone. Each such notice must be received by the Lender not later than 11:00
a.m. (i) three Business Days prior to the requested date of the Term Borrowing
of, conversion to or continuation of Eurodollar Rate Loans or of any conversion
of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of
the Term Borrowing of Base Rate Loans. Each telephonic notice by the Borrower
pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the
Lender of a written Committed Loan Notice, appropriately completed and signed by
a Responsible Officer of the Borrower. The Term Borrowing of, conversion to or
continuation of Eurodollar Rate Loans shall be in a principal amount of $500,000
or a whole multiple of $100,000 in excess thereof. The Term Borrowing of or
conversion to Base Rate Loans shall be in a

 

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principal amount of $500,000 or a whole multiple of $100,000 in excess thereof
or, if applicable, such other amount which constitutes the remaining outstanding
amount of the Term Loan. Each Committed Loan Notice (whether telephonic or
written) shall specify (i) that the Borrower is requesting a Term Borrowing, a
conversion of all or any portion of the Term Loan from one Type to the other, or
a continuation of Eurodollar Rate Loans, (ii) the requested date of the Term
Borrowing, conversion or continuation, as the case may be (which shall be a
Business Day), (iii) the principal amount of the Term Loan to be borrowed,
converted or continued, (iv) the Type of the Term Loan to be borrowed or to
which existing the Term Loan is to be converted, and (v) if applicable, the
duration of the Interest Period with respect thereto. If the Borrower fails to
specify a Type of Term Loan in a Committed Loan Notice or if the Borrower fails
to give a timely notice requesting a conversion or continuation, then the
applicable Term Loan shall be made as, or converted to, Base Rate Loans. Any
such automatic conversion to Base Rate Loans shall be effective as of the last
day of the Interest Period then in effect with respect to the applicable
Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to,
or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but
fails to specify an Interest Period, it will be deemed to have specified an
Interest Period of one month.

(b) Following receipt of a Committed Loan Notice for the initial Credit
Extension, and upon satisfaction of the applicable conditions set forth in
Sections 4.01 and 4.02, the Lender shall make funds available to the Borrower
either by (i) crediting the account of the Borrower on the books of the Lender
with the amount of such funds or (ii) wire transfer of such funds, in each case
in accordance with instructions provided to (and reasonably acceptable to) the
Lender by the Borrower.

(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued
or converted only on the last day of an Interest Period for such Eurodollar Rate
Loan. During the existence of a Default, no portion of the Term Loan may be
requested as, converted to or continued as Eurodollar Rate Loans without the
consent of the Lender.

(d) The Lender shall promptly notify the Borrower of the interest rate
applicable to any Interest Period for Eurodollar Rate Loans upon determination
of such interest rate (and in no event shall the interest rate be less than the
Minimum Interest Rate except as provided in Section 2.05(a)). At any time that
Base Rate Loans are outstanding, the Lender shall notify the Borrower of any
change in the Lender’s prime rate used in determining the Base Rate promptly
following the public announcement of such change.

(e) After giving effect to the Term Borrowing, all conversions of the Term Loan
from one Type to the other, and all continuations of the Term Loan as the same
Type, there shall not be more than six Interest Periods in effect in respect of
the Term Loan.

2.03. Prepayments. (a) Optional. Subject to the last sentence of this
Section 2.03(a), the Borrower may, upon notice to the Lender, at any time or
from time to time voluntarily prepay the Term Loan in whole or in part without
premium or penalty; provided that (A) such notice must be received by the Lender
not later than 11:00 a.m. (1) three Business Days prior to any date of
prepayment of Eurodollar Rate Loans and (2) on the date of prepayment of Base
Rate Loans; (B) any prepayment of Eurodollar Rate Loans shall be in a principal
amount of $100,000 or a whole multiple of $100,000 in excess thereof; and
(C) any prepayment of Base Rate Loans shall be in a principal amount of $100,000
or a whole multiple of $100,000 in excess thereof or, in each case, if less, the
entire principal amount thereof then outstanding. Each such notice shall specify
the date and amount of such prepayment and the Type(s) of the Term Loan to be
prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s)
of such loans. If such notice is given by the Borrower, the Borrower shall make
such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan
shall be accompanied by all accrued interest on the

 

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amount prepaid, together with any additional amounts required pursuant to
Section 3.05. Each prepayment of the outstanding Term Loan pursuant to this
Section 2.03(a) or Section 9.06 shall be applied to the principal repayment
installments thereof 50% in the order of maturity and 50% in inverse order of
maturity. Notwithstanding anything to the contrary contained herein, the
Borrower shall not be permitted to prepay any portion of the Term Loan pursuant
to this Section 2.03(a) during the period from the Closing Date through the date
ten Business Days thereafter.

(b) Mandatory. (i) The Borrower shall make a prepayment on the outstanding Term
Loan at any time cash is released from the cash collateral which currently
secures the DOE Letter of Credit under the SBLC Agreement in an amount equal to
such amount of cash released; provided, however, that after December 31, 2009,
such prepayment requirement shall only apply at such time as the Borrower or any
other Loan Party is not in compliance with any financial covenant set forth
above in Section 7.11. Any prepayment of the outstanding Term Loan pursuant to
this Section 2.03(b) shall be applied proportionally to all Term Loan balances
in inverse order of maturity.

2.04. Repayment of Term Loan. The Borrower shall repay the outstanding principal
amount of the Term Loan in thirty-six (36) equal monthly installments each in
the amount of $91,195.00, which amounts shall be reduced as a result of the
application of any prepayments in accordance with Section 2.03(a) (the
“Scheduled Term Loan Payment”). Each Scheduled Term Loan Payment shall be
payable on the last day of each month, commencing with the month in which the
Closing Date occurs. Borrower’s final Scheduled Term Loan Payment, due on the
Maturity Date, shall include all outstanding principal and accrued and unpaid
interest under the Term Loan.

2.05. Interest. (a) Subject to the provisions of Sections 2.05(c), (i) each
Eurodollar Rate Loan shall bear interest on the outstanding principal amount
thereof for each Interest Period at a rate per annum equal to the Eurodollar
Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the
Applicable Rate; provided, however, that, notwithstanding the foregoing, at no
time shall the interest on the outstanding principal amount of the Term Loan,
whether a Eurodollar Rate Loan or a Base Rate Loan, be less than the Minimum
Interest Rate; and provided further, however, that as long as the Pledged Cash
Account remains in effect (including the effectiveness of the Lender’s first
priority perfected security interest therein), then $3,000,000 of the
outstanding balance of the Term Loan shall accrue interest at the Pledged Cash
Account Rate (which, for the avoidance of doubt, will be equal to the interest
earned on the Pledged Cash Account as set forth Section 2.05(b)), or if the then
outstanding principal amount of the Term Loan is less than $3,000,000, the total
outstanding principal amount, in each case, without reference to the Minimum
Interest Rate (but, in any case, for the avoidance of doubt, shall remain
subject to the Default Rate).

(b) The Pledged Cash Account shall be for the initial Pledged Cash Account
Interest Period, and shall automatically renew for subsequent Pledged Cash
Account Interest Periods thereafter. Provided that the Pledged Cash Account
remains in place and is effective, and no Event of Default has occurred and is
continuing, then once monthly, on the last Business Day of each month, the
Lender shall remit to the Borrower the accrued interest on the Pledged Cash
Account or, at the Borrower’s option, such accrued interest may be deposited
into the Borrower’s deposit account specified in Section 2.09.

(c) (i) If any amount of principal or interest of the Term Loan is not paid when
due, whether at stated maturity, by acceleration or otherwise, such amount shall
thereafter bear interest at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

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(ii) If any amount (other than principal of the Term Loan) payable by the
Borrower under any Loan Document is not paid when due, whether at stated
maturity, by acceleration or otherwise, then upon notification by the Lender
such amount shall thereafter bear interest at a fluctuating interest rate per
annum at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.

(iii) Upon notification by the Lender, while any Event of Default exists, the
Borrower shall pay interest on the principal amount of all outstanding
Obligations hereunder at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.

(iv) Accrued and unpaid interest on past due amounts (including interest on past
due interest) shall be due and payable upon demand.

(d) Interest on the Term Loan shall be due and payable in arrears on each
Interest Payment Date applicable thereto and at such other times as may be
specified herein. Interest hereunder shall be due and payable in accordance with
the terms hereof before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Law.

2.06. Fees. The Borrower shall pay to the Lender such fees as shall have been
separately agreed upon in writing in the amounts and at the times so specified.
Such fees shall be fully earned when paid and shall not be refundable for any
reason whatsoever.

2.07. Computation of Interest and Fees. All computations of interest for Base
Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed. All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more fees or interest, as applicable, being paid than if computed on
the basis of a 365-day year). Interest shall not accrue for the day on which any
portion of the Term Loan is paid. Each determination by the Lender of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

2.08. Evidence of Debt. The Credit Extensions made by the Lender shall be
evidenced by one or more accounts or records maintained by the Lender in the
ordinary course of business. The accounts or records maintained by the Lender
shall be conclusive absent manifest error of the amount of the Credit Extensions
made by the Lender to the Borrower and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Obligations. Upon the request of the Lender, the
Borrower shall promptly execute and deliver to the Lender a Note, which shall
evidence the Lender’s Term Loan in addition to such accounts or records. The
Lender may attach schedules to the Note and endorse thereon the date, Type,
amount and maturity of the Term Loan and payments with respect thereto.

2.09. Payments Generally. All payments to be made by the Borrower shall be made
without condition or deduction for any counterclaim, defense, recoupment or
setoff. The Borrower agrees that on the date any payment of principal and/or
interest is due and owing to the Lender hereunder or under any of the Loan
Documents, the Lender will debit such amount from deposit account number
1499627131 owned by the Borrower, or such other of the Borrower’s accounts with
the Lender as designated in writing by the Borrower to the Lender. The Borrower
will maintain sufficient immediately available funds in the deposit account to
cover each debit. If there are insufficient immediately available funds in the
deposit account on the date the Lender enters any such debit authorized by this
Agreement, the Lender may reverse the debit. For payments not made by direct
debit, payments will be made by the Borrower to the Lender at the Lender’s
office set forth in Schedule 9.02 in Dollars and in immediately available funds
not later

 

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than 2:00 p.m. on the date specified herein. All payments received by the Lender
after 2:00 p.m. shall be deemed received on the next succeeding Business Day and
any applicable interest or fee shall continue to accrue. If any payment to be
made by the Borrower shall come due on a day other than a Business Day, payment
shall be made on the next following Business Day, and such extension of time
shall be reflected on computing interest or fees, as the case may be.

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

3.01. Taxes. (a) Payments Free of Taxes; Obligation to Withhold; Payments on
Account of Taxes. (i) Any and all payments by or on account of any obligation of
the Borrower hereunder or under any other Loan Document shall to the extent
permitted by applicable Laws be made free and clear of and without reduction or
withholding for any Taxes. If, however, applicable Laws require the Borrower to
withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance
with such Laws as determined by the Borrower upon the basis of the information
and documentation to be delivered pursuant to subsection (e) below.

(ii) If the Borrower shall be required by applicable Law to withhold or deduct
any Taxes, including both United States Federal backup withholding and
withholding taxes, from any payment, then (A) the Borrower shall withhold or
make such deductions as are determined by the Borrower to be required based upon
the information and documentation it has received pursuant to subsection
(e) below, (B) the Borrower shall timely pay the full amount withheld or
deducted to the relevant Governmental Authority in accordance with applicable
Law, and (C) to the extent that the withholding or deduction is made on account
of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be
increased as necessary so that after any required withholding or the making of
all required deductions (including deductions applicable to additional sums
payable under this Section) the Lender receives an amount equal to the sum it
would have received had no such withholding or deduction been made.

(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
subsection (a) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable Law.

(c) Tax Indemnifications. Without limiting the provisions of subsection (a) or
(b) above, the Borrower shall, and does hereby, indemnify the Lender, and shall
make payment in respect thereof within 10 days after demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) withheld or deducted by the Borrower or paid by the Lender, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of any such payment or liability delivered to the
Borrower by the Lender shall be conclusive absent manifest error.

(d) Evidence of Payments. Upon request by the Borrower or the Lender, as the
case may be, after any payment of Taxes by the Borrower or the Lender to a
Governmental Authority as provided in this Section 3.01, the Borrower shall
deliver to the Lender or the Lender shall deliver to the Borrower, as the case
may be, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of any return required by
applicable Laws to report such payment or other evidence of such payment
reasonably satisfactory to the Borrower or the Lender, as the case may be.

 

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(e) Status of Lender; Tax Documentation. (i) Each Lender shall deliver to the
Borrower, at the time or times prescribed by applicable Laws or when reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable Laws or by the taxing authorities of any jurisdiction
and such other reasonably requested information as will permit the Borrower to
determine (A) whether or not payments made hereunder or under any other Loan
Document are subject to Taxes, (B) if applicable, the required rate of
withholding or deduction, and (C) the Lender’s entitlement to any available
exemption from, or reduction of, applicable Taxes in respect of all payments to
be made to the Lender by the Borrower pursuant to this Agreement or otherwise to
establish the Lender’s status for withholding tax purposes in the applicable
jurisdiction.

(ii) Without limiting the generality of the foregoing, if the Borrower is
resident for tax purposes in the United States,

(A) a Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to the Borrower executed originals
of Internal Revenue Service Form W-9 or such other documentation or information
prescribed by applicable Laws or reasonably requested by the Borrower as will
enable the Borrower to determine that the Lender is not subject to backup
withholding requirements; and

(B) each Foreign Lender that is entitled under the Code or any applicable treaty
to an exemption from or reduction of withholding tax with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower on or
prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the request of the Borrower,
but only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

(I) executed originals of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party,

(II) executed originals of Internal Revenue Service Form W-8ECI,

(III) executed originals of Internal Revenue Service Form W-8IMY and all
required supporting documentation,

(IV) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in Section 881(c)(3)(C) of the Code and
(y) executed originals of Internal Revenue Service Form W-8BEN, or

(V) executed originals of any other form prescribed by applicable Laws as a
basis for claiming exemption from or a reduction in United States federal
withholding tax together with such supplementary documentation as may be
prescribed by applicable Laws to permit the Borrower to determine the
withholding or deduction required to be made.

(iii) Each Lender shall promptly (A) notify the Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (B) take such steps as shall not be materially disadvantageous to
it, in the reasonable judgment of the Lender, and as may be reasonably necessary
(including the re-designation of its Lending Office) to avoid any requirement of
applicable Laws of any jurisdiction that the Borrower make any withholding or
deduction for taxes from amounts payable to the Lender.

 

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(f) Treatment of Certain Refunds. If the Lender determines, in its sole
discretion after reasonable inquiry, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to this
Section, it shall pay to the Borrower an amount equal to such refund (but only
to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise
to such refund), net of all out-of-pocket expenses incurred by the Lender, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided that the Borrower, upon the
request of the Lender, agrees to repay the amount paid over to the Borrower
(plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Lender in the event the Lender is required to
repay such refund to such Governmental Authority. This subsection shall not be
construed to require the Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to the Borrower or
any other Person.

3.02. Illegality. If the Lender determines that any Law has made it unlawful, or
that any Governmental Authority has asserted that it is unlawful, for the Lender
or its applicable Lending Office to make, maintain or fund Eurodollar Rate
Loans, or to determine or charge interest rates based upon the Eurodollar Rate,
or any Governmental Authority has imposed material restrictions on the authority
of such Lender to purchase or sell, or to take deposits of, Dollars in the
London interbank market, then, on notice thereof by the Lender to the Borrower,
any obligation of the Lender to make or continue Eurodollar Rate Loans or to
convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until the
Lender notifies the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the Borrower shall,
upon demand from the Lender, prepay or, if applicable, convert all Eurodollar
Rate Loans of the Lender to Base Rate Loans, either on the last day of the
Interest Period therefor, if the Lender may lawfully continue to maintain such
Eurodollar Rate Loans to such day, or immediately, if the Lender may not
lawfully continue to maintain such Eurodollar Rate Loans. Upon any such
prepayment or conversion, the Borrower shall also pay accrued interest on the
amount so prepaid or converted.

3.03. Inability to Determine Rates. If the Lender determine that for any reason
in connection with any request for a Eurodollar Rate Loan or a conversion to or
continuation thereof that (a) Dollar deposits are not being offered to banks in
the London interbank eurodollar market for the applicable amount and Interest
Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not
exist for determining the Eurodollar Rate for any requested Interest Period with
respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to the Lender of funding such loan,
the Lender will promptly so notify the Borrower. Thereafter, the obligation of
the Lender to make or maintain Eurodollar Rate Loans shall be suspended until
the Lender revokes such notice. Upon receipt of such notice, the Borrower may
revoke any pending request for a Borrowing of, conversion to or continuation of
Eurodollar Rate Loans or, failing that, will be deemed to have converted such
request into a request for a Committed Borrowing of Base Rate Loans in the
amount specified therein.

3.04. Increased Costs. (a) Increased Costs Generally. If any Change in Law
shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of, deposits with
or for the account of, or credit extended or participated in by, the Lender
(except any reserve requirement contemplated by Section 3.04(e));

 

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(ii) subject the Lender to any tax of any kind whatsoever with respect to this
Agreement, any participation in any Eurodollar Rate Loan made by it, or change
the basis of taxation of payments to the Lender in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of,
or any change in the rate of, any Excluded Tax payable by the Lender); or

(iii) impose on the Lender or the London interbank market any other condition,
cost or expense affecting this Agreement or Eurodollar Rate Loans made by the
Lender or participation therein;

and the result of any of the foregoing shall be to increase the cost to the
Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its
obligation to make any such loan), or to reduce the amount of any sum received
or receivable by the Lender hereunder (whether of principal, interest or any
other amount) then, upon request of the Lender, the Borrower will pay to the
Lender such additional amount or amounts as will compensate the Lender for such
additional costs incurred or reduction suffered.

(b) Capital Requirements. If the Lender determines that any Change in Law
affecting the Lender or any Lending Office or the Lender’s holding company (if
any) regarding capital requirements has or would have the effect of reducing the
rate of return on the Lender’s capital or on the capital of such Lender’s
holding company (if any) as a consequence of this Agreement, the Term Loan
Commitment or the Term Loan made by the Lender to a level below that which the
Lender or such Lender’s holding company could have achieved but for such Change
in Law (taking into consideration the Lender’s policies and the policies of such
Lender’s holding company with respect to capital adequacy), then from time to
time the Borrower will pay to the Lender such additional amount or amounts as
will compensate the Lender or such Lender’s holding company for any such
reduction suffered.

(c) Certificates for Reimbursement. A certificate of the Lender setting forth
the amount or amounts necessary to compensate the Lender or its holding company,
as the case may be, as specified in subsection (a) or (b) of this Section and
delivered to the Borrower shall be conclusive absent manifest error. The
Borrower shall pay the Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of the Lender to demand
compensation pursuant to the foregoing provisions of this Section shall not
constitute a waiver of the Lender’s right to demand such compensation, provided
that the Borrower shall not be required to compensate the Lender pursuant to the
foregoing provisions of this Section for any increased costs incurred or
reductions suffered more than nine (9) months prior to the date that the Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of the Lender’s intention to claim compensation therefor
(except that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the nine-month period referred to above shall be
extended to include the period of retroactive effect thereof).

(e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to the Lender, as
long as the Lender shall be required to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency funds or deposits
(currently known as “Eurocurrency liabilities”), additional interest on the
unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs
of such reserves allocated to such loan by the Lender (as determined by the
Lender in good faith, which determination shall be

 

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conclusive absent manifest error), which shall be due and payable on each date
on which interest is payable on such loan, provided the Borrower shall have
received at least 10 days’ prior notice of such additional interest from the
Lender. If the Lender fails to give notice 10 days prior to the relevant date
that interest is due, such additional interest shall be due and payable 10 days
from receipt of such notice.

3.05. Compensation for Losses. Upon written demand of the Lender from time to
time, the Borrower shall promptly compensate the Lender for and hold the Lender
harmless from any loss, cost or expense incurred by it as a result of:

(a) any continuation, conversion, payment or prepayment of all or any portion of
the Term Loan other than a Base Rate Loan on a day other than the last day of
the Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise); or

(b) any failure by the Borrower (for a reason other than the failure of the
Lender to make a Loan) to prepay, borrow, continue or convert all or any portion
of the Term Loan other than a Base Rate Loan on the date or in the amount
notified by the Borrower.

including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such loan or
from fees payable to terminate the deposits from which such funds were obtained;
provided, however, that so long as the Pledged Cash Account remains in effect,
then this Section 3.05 shall not apply to $3,000,000 of the outstanding balance
of the Term Loan. The Borrower shall also pay any customary administrative fees
charged by the Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lender under
this Section 3.05, the Lender shall be deemed to have funded each Eurodollar
Rate Loan made by it at the Eurodollar Rate for such loan by a matching deposit
or other borrowing in the London interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Eurodollar Rate Loan was
in fact so funded.

3.06. Mitigation Obligations. If the Lender requests compensation under
Section 3.04, or the Borrower is required to pay any additional amount to the
Lender or any Governmental Authority for the account of the Lender pursuant to
Section 3.01, or if the Lender gives a notice pursuant to Section 3.02, then the
Lender shall, as applicable, use reasonable efforts to designate a different
Lending Office for funding or booking its loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of the Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice pursuant
to Section 3.02, as applicable, and (ii) in each case, would not subject the
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to the Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by the Lender in connection with any such
designation or assignment.

3.07. Survival. All of the Borrower’s obligations under this Article III shall
survive termination of the Term Loan Commitment and repayment of all Obligations
hereunder.

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01. Conditions of Initial Credit Extension. The obligation of the Lender to
make its initial Credit Extension hereunder is subject to satisfaction of the
following conditions precedent:

(a) The Lender’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each
properly executed by a Responsible Officer of the signing Loan Party, each dated
the Closing Date (or, in the case of certificates of governmental officials, a
recent date before the Closing Date) and each in form and substance satisfactory
to the Lender in its sole discretion:

(i) executed counterparts of this Agreement and the Guaranty;

 

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(ii) a term note executed by the Borrower in favor of the Lender in the form of
Exhibit D (the “Term Note”);

(iii) a pledge and security agreement, in substantially the form of Exhibit E-1
(together with each other pledge and security agreement and pledge and security
agreement supplement delivered pursuant to Section 6.14 or 7.03(g), in each case
as amended, the “Security Agreement”), duly executed by each Loan Party,
together with:

(A) [intentionally omitted],

(B) proper Financing Statements in form appropriate for filing under the Uniform
Commercial Code of all jurisdictions that the Lender may deem necessary or
desirable in order to perfect the Liens created under the Security Agreement,
covering the Collateral described in the Security Agreement,

(C) completed requests for information, dated on or before the date of the
initial Credit Extension, listing all effective financing statements filed in
the jurisdictions referred to in clause (B) above that name any Loan Party as
debtor, together with copies of such other financing statements,

(D) evidence of the completion of all other actions, recordings and filings of
or with respect to the Security Agreement that the Lender may deem necessary or
desirable in order to perfect the Liens created thereby,

(E) control agreements for deposit accounts, securities accounts and commodities
accounts maintained by the Loan Parties (other than those maintained with the
Lender and except for the Fifth Third Account), as the Lender may reasonably
request, and duly executed by the appropriate parties,

(F) evidence that all other action that the Lender may deem necessary or
desirable in order to perfect the Liens created under the Security Agreement has
been taken (including receipt of duly executed payoff letters and UCC-3
termination statements);

(iv) the separate Deeds of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, in substantially the form of Exhibit E-2 (with
such changes as may be satisfactory to the Lender and its counsel to account for
local law matters) and covering the properties identified to be mortgaged on
Schedules 5.08(c) and (d)(i) (and each other mortgage delivered in connection
with the Loan Documents, in each case as amended, the “Mortgages”), duly
executed by the appropriate Loan Party, together with:

(A) evidence that counterparts of the Mortgages have been duly executed,
acknowledged and delivered and are in form suitable for filing or recording in
all filing or recording offices that the Lender may deem necessary or desirable
in

 

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order to create a valid first and subsisting Lien on the property described
therein in favor of the Lender for the benefit of the Secured Parties and that
all filing, documentary, stamp, intangible and recording taxes and fees have
been paid,

(B) separate, fully paid American Land Title Association Lender’s Extended
Coverage title insurance policies for each of the Borrower’s Owned Real
Properties (the “Mortgage Policies”), with endorsements and in amounts
acceptable to the Lender (which amounts shall not be less than the Term Loan
Commitment), issued, coinsured and reinsured by title insurers acceptable to the
Lender, insuring the Mortgages to be valid first and subsisting Liens on the
property described therein, free and clear of all defects (including, but not
limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only
Permitted Encumbrances and other Liens permitted under the Loan Documents, and
providing for such other affirmative insurance (including endorsements for
future advances under the Loan Documents, for mechanics’ and materialmen’s Liens
and for zoning of the applicable property) and such coinsurance and direct
access reinsurance as the Lender may deem necessary or desirable,

(C) the Lender’s evaluation and acceptance in its reasonable discretion of the
environmental condition of the Borrower’s Owned Real Properties based on (1) the
Borrower’s completion of an environmental questionnaire provided by the Lender,
and (2) a “no change” letter from the professional firm performing the surveys
on the Borrower’s Owned Real Properties,

(D) certified copies of each of the existing lease agreements for the Borrower’s
Owned Real Properties (collectively, the “Real Property Lease Agreements”),

(E) [intentionally omitted],

(F) agreements of subordination, nondisturbance and attornment for each of the
Borrower’s Owned Real Properties by and among the Lender and each existing
landlord and tenant at such properties,

(G) [intentionally omitted],

(H) evidence that all taxes currently due on the Borrower’s Owned Real Property
have been paid,

(I) rent roll for all of the Borrower’s Owned Real Properties, certified by a
Responsible Officer of the Borrower,

(J) evidence of the insurance required by the terms of the Mortgages,

(K) the Lender has determined that there have been no material changes to the
valuation amounts or underlying facts set forth in the previously provided
FFIRREA appraisals of each of the properties described in the Mortgages.

(L) evidence that all other action that the Lender may deem necessary or
desirable in order to create valid first and subsisting Liens on the property
described in the Mortgages (subject to Permitted Encumbrances) has been taken

 

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(M) confirmation from the Lender that the condition and nature of the Collateral
consisting of the Borrower’s Owned Real Properties are acceptable;

(v) [intentionally omitted];

(vi) such certificates of resolutions or other comparable action, incumbency
certificates and/or other certificates of Responsible Officers of each Loan
Party as the Lender may reasonably require evidencing the identity, authority
and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party;

(vii) such documents and certifications as the Lender may reasonably require to
evidence that each Loan Party is duly organized or formed, and that each of the
Borrower and the other Loan Parties are validly existing, in good standing and
qualified to engage in business in each jurisdiction where their respective
ownership, lease or operation of properties or the conduct of business requires
such qualification, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect;

(viii) a favorable opinion of Finn Dixon & Herling LLP, counsel to the Loan
Parties, addressed to the Lender, as to the matters set forth in Exhibit G-1 and
such other matters concerning the Loan Parties and the Loan Documents as the
Lender may reasonably request;

(ix) a favorable opinion of Sherry Meyerhoff Hanson & Crance LLP, local counsel
to the Loan Parties in California, addressed to the Lender, as to the matters
set forth in Exhibit G-2 and such other matters concerning the Loan Parties and
the Loan Documents as the Lender may reasonably request;

(x) a favorable opinion of Drinker Biddle & Reath LLP, regulatory counsel to the
Loan Parties and Heald College regarding DOE regulatory matters, addressed to
the Lender, as to the matters set forth in Exhibit G-3 and such other matters
concerning the Loan Parties and Heald College and the Loan Documents as the
Lender may reasonably request;

(xi) a certificate of a Responsible Officer of each Loan Party either
(A) attaching copies of all consents, licenses and approvals required in
connection with the consummation by such Loan Party of the Transactions and the
execution, delivery and performance by such Loan Party and the validity against
such Loan Party of the Loan Documents to which it is a party, and such consents,
licenses and approvals shall be in full force and effect, or (B) stating that no
such consents, licenses or approvals are so required;

(xii) a certificate signed by a Responsible Officer of the Borrower, the other
Loan Parties and Heald College certifying (A) that the conditions specified in
Sections 4.02(a) and (b) have been satisfied, and (B) that there has been no
event or circumstance since the date of the most recent financial statements
delivered to the Lender that has had or could be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect;

(xiii) an information certificate regarding the Collateral of each Loan Party
signed by a Responsible Officer of each Loan Party (the “Collateral Information
Certificate”);

(xiv) certificates attesting to the Solvency of the Loan Parties, taken as a
whole, before and after giving effect to the Transactions, from Holdings’ chief
financial officer;

 

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(xv) evidence that all insurance required to be maintained pursuant to the Loan
Documents has been obtained and is in effect, together with the certificates of
insurance, naming the Lender, as an additional insured or loss payee, as the
case may be, under all insurance policies maintained with respect to the assets
and properties of the Loan Parties that constitutes Collateral;

(xvi) certified copies of each of the material Related Documents and Summit
Purchase Documents, duly executed by the parties thereto, together with all
agreements, instruments and other documents delivered in connection therewith as
the Lender shall request;

(xvii) evidence that the sale of the Existing Loans to AHI pursuant to the Loan
Purchase Agreement is ready upon the making of the initial Credit Extension by
the Lender;

(xviii) evidence that all actions of the Merger are ready to be taken promptly
upon consummation of the Credit Extension contemplated hereby and the
acquisition of the Existing Loans by AHI;

(xix) the Lender is satisfied with the arrangements of the (A) the refinancing,
payoff and termination of the Existing Loans, and (B) the termination of all
related liens and encumbrances on assets of Loan Parties and their affiliates
securing such Existing Loans;

(xx) evidence that the Existing Loan Documents have been, or concurrently with
the Closing Date are being, terminated and all Liens securing obligations under
the Existing Credit Agreement have been, or concurrently with the Closing Date
are being, released; and

(xxi) such other assurances, certificates, documents, consents or opinions as
the Lender reasonably may require.

(b) All fees required to be paid to the Lender, including, without limitation,
the Upfront Fee, the Breakup Fee, and fees associated with the appraisals of the
Borrower’s Owned Real Property, on or before the Closing Date shall have been
paid.

(c) Unless waived by the Lender, the Borrower shall have paid all fees, charges
and disbursements of counsel to the Lender (directly to such counsel if
requested by the Lender) to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude a final settling of accounts between
the Borrower and the Lender).

(d) The Escrow Agreement.

(e) The Disbursement and Fee Statement in substantially the form of Exhibit H.

(f) The Merger Agreement and the certificate of merger shall be in form and
substance acceptable to the Lender, and the certificate of merger shall be ready
for filing with, and acceptance by, the Delaware Secretary of State’s Office.

(f) Evidence that Bradley C. Palmer (and possibly other members of Holdings or
Heald Investment) have invested at least $3,000,000 into Holdings in return for
non-convertible preferred Equity Interests in such Person, which will not be
paid any principal until after all of the Obligations have been paid in full
(other than contingent indemnification obligations for which no claim has been
asserted), and Holdings shall have transferred such $3,000,000 contribution to
the Borrower to enable it to establish the Pledged Cash Account.

 

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(g) the Borrower shall have established the Pledged Cash Account.

(h) Summit Partners’ investment in Holdings and Heald Investment shall have been
consummated before, or concurrently with, the funding of the Term Loan on the
Closing Date.

(i) A completed IRS Form W-9 for each of the Borrower and AHI.

(j) Written confirmation by the Borrower of a notice regarding insurance
requirements under California law provided to the Borrower by the Lender.

4.02. Conditions to all Credit Extensions. The obligation of the Lender to honor
any Committed Loan Notice (other than a Committed Loan Notice requesting only a
conversion of all or a portion of the Term Loan to the other Type, or a
continuation of Eurodollar Rate Loans) is subject to the following conditions
precedent:

(a) The representations and warranties of the Borrower, each other Loan Party
and Heald College contained in Article V or any other Loan Document, or which
are contained in any document furnished at any time under or in connection
herewith or therewith, shall be true and correct on and as of the date of such
Credit Extension, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct as of such earlier date, and except that for purposes of this
Section 4.02, the representations and warranties contained in Sections 5.05(a)
and (b) shall be deemed to refer to the most recent statements furnished
pursuant to Sections 6.01(a) and (b), respectively.

(b) No Default shall exist, or would result from such proposed Credit Extension
or from the application of the proceeds thereof.

(c) The Lender shall have received a Committed Loan Notice in accordance with
the requirements hereof.

Each Committed Loan Notice (other than a Committed Loan Notice requesting only a
conversion of all or a portion of Term Loan to the other Type or a continuation
of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a
representation and warranty that the conditions specified in Sections 4.02(a)
and (b) have been satisfied on and as of the date of the applicable Credit
Extension.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

Each of Holdings and the Borrower represents and warrants to the Lender that:

5.01. Existence, Qualification and Power. Each Loan Party and each of its
Subsidiaries (a) is duly organized or formed, validly existing and, as
applicable, in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority and all
requisite governmental licenses, authorizations, consents, permits and approvals
to (i) own or lease its assets to the extent that failure to do so could not
reasonably be expected to have an Unaggregated Material Adverse Effect,
(ii) carry on its business, including, without limitation all material
accreditations, as applicable (including, without limitation, in the case of
Heald College, WASC accreditation), as well as all eligibility (provisional or
otherwise) to participate in Title IV Programs to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect, and
(iii) execute, deliver and

 

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perform its obligations under the Loan Documents and Related Documents (other
than the Existing Loan Documents) to which it is a party and consummate the
Transaction, and (c) is duly qualified and is licensed and, as applicable, in
good standing under the Laws of each jurisdiction where (i) its ownership, lease
or operation of properties requires such qualification or license to the extent
that failure to do so could not reasonably be expected to have an Unaggregated
Material Adverse Effect, or (ii) the conduct of its business requires such
qualification or license to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

5.02. Authorization; No Contravention. The execution, delivery and performance
by each Loan Party of each Loan Document and Related Document (other than the
Existing Loan Documents) to which such Person is or is to be a party have been
duly authorized by all necessary corporate or other organizational action, and
do not and will not (a) contravene the terms of any of such Person’s
Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, or require any payment to
be made under (i) any Contractual Obligation (other than the Loan Documents) to
which such Person is a party or affecting such Person or the properties of such
Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree
of any Governmental Authority or any arbitral award to which such Person or its
property is subject; or (c) violate any Law.

5.03. Governmental Authorization; Other Consents. Except as set forth on
Schedule 5.03, no approval, consent, exemption, authorization, or other action
by, or notice to, or filing with, any Governmental Authority or any other Person
is necessary or required in connection with (a) the execution, delivery or
performance by, or enforcement against, any Loan Party of this Agreement or any
other Loan Document or Related Document, or for the consummation of the
Transactions, (b) the grant by any Loan Party of the Liens granted by it
pursuant to the Collateral Documents, (c) the perfection or maintenance of the
Liens created under the Collateral Documents (including the first priority
nature thereof) or (d) the exercise by the Lender of its rights under the Loan
Documents or the remedies in respect of the Collateral pursuant to the
Collateral Documents, in each case, other than (i) those that have already been
obtained and are in full force and effect, and (ii) filings to perfect, or
otherwise cause to subsist, the Liens created by the Collateral Documents. All
applicable waiting periods in connection with the Transactions have expired
without any action having been taken by any Governmental Authority restraining,
preventing or imposing materially adverse conditions upon the Transactions or
the rights of the Loan Parties or their Subsidiaries freely to transfer or
otherwise dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by any of them. Promptly after the making of the Credit
Extension by the Lender, the Merger shall has been consummated in accordance
with the Merger Agreement and applicable Law.

5.04. Binding Effect. This Agreement has been, and each other Loan Document,
when delivered hereunder, will have been, duly executed and delivered by each
Loan Party that is party thereto. This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms, except as such enforceability may limited
by (a) applicable Debtor Relief Laws and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

5.05. Financial Statements; No Material Adverse Effect. (a) The Audited
Financial Statements (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; (ii) fairly present in all material respects the financial
condition of Holdings and its Subsidiaries as of the date thereof and their
results of operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; and (iii) show all material indebtedness and other
liabilities, direct or contingent, of Holdings and its Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments and
Indebtedness.

 

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(b) The unaudited consolidated and consolidating balance sheets of Holdings and
its Subsidiaries dated September 30, 2008, and the related consolidated and
consolidating statements of income or operations, shareholders’ equity and cash
flows for the fiscal quarter ended on that date (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly present in all material
respects the financial condition of Holdings and its Subsidiaries as of the date
thereof and their results of operations for the period covered thereby, subject,
in the case of clauses (i) and (ii), to the absence of footnotes and to year-end
audit adjustments.

(c) Since the date of the Audited Financial Statements, there has been no event
or circumstance, either individually or in the aggregate, that has had or could
reasonably be expected to have a Material Adverse Effect.

(d) The consolidated and consolidating pro forma balance sheets of Holdings and
its Subsidiaries as at December 31, 2008, and the related consolidated and
consolidating pro forma statements of income and cash flows of Holdings and its
Subsidiaries for the twelve months then ended, certified by the chief financial
officer or treasurer of Holdings, copies of which have been furnished to the
Lender, fairly present the consolidated and consolidating pro forma financial
condition of Holdings and its Subsidiaries as at such date and the consolidated
and consolidating pro forma results of operations of Holdings and its
Subsidiaries for the period ended on such date, in each case giving effect to
the Transactions.

(e) The consolidated and consolidating forecasted balance sheets, statements of
income and cash flows of Holdings and its Subsidiaries delivered pursuant to
Section 4.01 or Section 6.01(d) were prepared in good faith on the basis of the
assumptions stated therein, which assumptions were fair in light of the
conditions existing at the time of delivery of such forecasts, and represented,
at the time of delivery, Holdings’ good faith estimate of future financial
condition and performance of Holdings and its Subsidiaries; provided that no
assurance can be given that such forecasts will be attained and actual results
may differ materially from such forecasts.

5.06. Litigation. There are no actions, suits, proceedings, claims or disputes
pending or, to the knowledge of the Borrower after due and diligent
investigation, threatened or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, by or against the Borrower or any of its
Subsidiaries or against any of their properties or revenues that (a) as of the
Closing Date purport to affect or pertain to this Agreement, any other Loan
Document, any Related Document or the consummation of the Transactions, or
(b) either individually or in the aggregate, if determined adversely, could
reasonably be expected to have a Material Adverse Effect.

5.07. No Default. Neither any Loan Party nor any Subsidiary thereof is in
default under or with respect to, or a party to, any Contractual Obligation that
could, either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. No Default has occurred and is continuing or would
result from the consummation of the transactions contemplated by this Agreement
or any other Loan Document.

5.08. Ownership of Property; Liens; Investments. (a) Each Loan Party and each of
its Subsidiaries has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as could not,
individually or in the aggregate, reasonably be expected to have an Unaggregated
Material Adverse Effect.

 

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(b) The property of each Loan Party and each of its Subsidiaries is subject to
no Liens, other than Liens permitted by Section 7.01.

(c) Schedule 5.08(c) sets forth a complete and accurate list of all real
property owned by each Loan Party, including the Borrower (collectively, the
“Owned Real Properties”), showing as of the date hereof the street address,
county or other relevant jurisdiction, state and record owner thereof. Each Loan
Party has good, marketable and insurable fee simple title to the real property
owned by such Loan Party, free and clear of all Liens, other than Liens created
or permitted by the Loan Documents.

(d) (i) Schedule 5.08(d)(i) sets forth, and generally describes, the Real
Property Lease Agreements. Each such lease is the legal, valid and binding
obligation of the lessor and lessee thereof, enforceable in accordance with its
terms, except as such enforceability may be limited by (A) applicable Debtor
Relief Laws and (B) the application of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).

(ii) Schedule 5.08(d)(ii) sets forth a complete and accurate list of all leases
of real property (other than the Real Property Lease Agreements) under which any
Loan Party or any Subsidiary of a Loan Party is the lessee, showing as of the
date hereof the street address, county or other relevant jurisdiction, state,
lessor, lessee, expiration date and annual rental cost thereof. Each such lease
is the legal, valid and binding obligation of the lessee and, to the knowledge
of Borrower, lessor thereof, enforceable in accordance with its terms in all
material respects, except as such enforceability may be limited by
(A) applicable Debtor Relief Laws and (B) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

(iii) Schedule 5.08(d)(iii) sets forth a complete and accurate list of all
leases of real property (other than the Real Property Lease Agreements) under
which any Loan Party or any Subsidiary of a Loan Party is the lessor, showing as
of the date hereof the street address, county or other relevant jurisdiction,
state, lessor, lessee, expiration date and annual rental cost thereof. Each such
lease is the legal, valid and binding obligation of the lessor, and to the
knowledge of the Borrower, lessee thereof, enforceable in accordance with its
terms in all material respects, except as such enforceability may be limited by
(A) applicable Debtor Relief Laws and (B) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

5.09. Environmental Compliance. (a) The Loan Parties and their respective
Subsidiaries conduct in the ordinary course of business a review of the effect
of existing Environmental Laws and claims alleging potential liability or
responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof the Borrower has
reasonably concluded that such Environmental Laws and claims could not,
individually or in the aggregate, reasonably be expected to have an Unaggregated
Material Adverse Effect.

(b) Except as may be disclosed in the Phase I Reports, none of the properties
currently or formerly owned or operated by any Loan Party or any of its
Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or
any analogous state or local list or is adjacent to any such property; there are
no and never have been any underground or above-ground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being or have been treated, stored or disposed on any property
currently owned or operated by any Loan Party or any of its Subsidiaries or, to
the best of the knowledge of the Loan Parties, on any property formerly owned or
operated by any Loan Party or any of its Subsidiaries, in each case, which could
reasonably be expected to have an Unaggregated Material Adverse Effect.

 

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(c) Except as may be disclosed in the Phase I Reports, there is no asbestos or
asbestos-containing material on any property currently owned or operated by any
Loan Party or any of its Subsidiaries which could reasonably be expected to have
an Unaggregated Material Adverse Effect.

(d) Hazardous Materials have not been released, discharged or disposed of on any
property currently or formerly owned or operated by any Loan Party or any of its
Subsidiaries which could not reasonably be expected to have an Unaggregated
Material Adverse Effect.

(e) Neither any Loan Party nor any of its Subsidiaries is undertaking, and has
not completed, either individually or together with other potentially
responsible parties, any investigation or assessment or remedial or response
action relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at any site, location or operation, either voluntarily or
pursuant to the order of any Governmental Authority or the requirements of any
Environmental Law (except as may be disclosed in the Phase I Reports), which, in
each case, could reasonably be expected to result in a material liability; and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or formerly owned or operated by
any Loan Party or any of its Subsidiaries have been disposed of in a manner not
reasonably expected to result in material liability to any Loan Party or any of
its Subsidiaries.

5.10. Insurance. The properties of the Borrower and its Subsidiaries are insured
with financially sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Borrower or the applicable Subsidiary
operates.

5.11. Taxes. The Borrower and its Subsidiaries have filed all federal, state and
other material tax returns and reports required to be filed, and have paid
(before delinquency) all federal, state and other material taxes, assessments,
fees and other governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings diligently conducted
and for which adequate reserves have been provided in accordance with GAAP.
There is no proposed tax assessment against the Borrower or any Subsidiary that
would, if made, have a Material Adverse Effect. Neither any Loan Party nor any
Subsidiary thereof is party to any tax sharing agreement.

5.12. ERISA Compliance. (a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other applicable federal
or state Laws. Each Plan that is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with
respect thereto and, to the best knowledge of the Borrower, nothing has occurred
which would prevent, or cause the loss of, such qualification. The Borrower and
each ERISA Affiliate have made all required contributions to each Plan subject
to Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.

(b) There are no pending or, to the best knowledge of the Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that could reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Borrower, there has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan that has resulted or could reasonably be expected to result in a
Material Adverse Effect.

 

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(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower
nor any ERISA Affiliate has engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.

5.13. Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no
Loan Party has any Subsidiaries other than those specifically disclosed in Part
(a) of Schedule 5.13, and all of the outstanding Equity Interests in such
Subsidiaries owned by the Loan Parties have been validly issued, are fully paid
and non-assessable and the Loan Parties own the Equity Interests in such
Subsidiaries in the amounts specified on Part (a) of Schedule 5.13 free and
clear of all Liens except those created under the Collateral Documents and other
Liens permitted pursuant to the terms of the Loan Documents. As of the Closing
Date, no Loan Party has any equity investments in any other corporation or
entity other than those specifically disclosed in Part (b) of Schedule 5.13. All
of the outstanding Equity Interests in the Borrower have been validly issued,
are fully paid and non-assessable and are owned by Holdings in the amounts
specified on Part (c) of Schedule 5.13 free and clear of all Liens except those
created under the Collateral Documents and other Liens permitted pursuant to the
terms of the Loan Documents. Set forth on Part (d) of Schedule 5.13 is a
complete and accurate list of all Loan Parties, showing as of the Closing Date
(as to each Loan Party) the jurisdiction of its incorporation or formation, the
address of its principal place of business and its U.S. taxpayer identification
number or, in the case of any non-U.S. Loan Party that does not have a U.S.
taxpayer identification number, its unique identification number issued to it by
the jurisdiction of its incorporation or formation. The copy of the charter of
each Loan Party and each amendment thereto provided pursuant to
Section 4.01(a)(vii) is as of the Closing Date a true and correct copy of each
such document, each of which as of the Closing Date is valid and in full force
and effect.

5.14. Margin Regulations; Investment Company Act. (a) The Borrower is not
engaged and will not engage, principally or as one of its important activities,
in the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of
purchasing or carrying margin stock.

(b) None of the Borrower, Holdings or any Subsidiary is or is required to be
registered as an “investment company” under the Investment Company Act of 1940.

5.15. Disclosure. No report, financial statement, certificate or other
information furnished (whether in writing or orally) by or on behalf of any Loan
Party or any Subsidiary to the Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered hereunder
or under any other Loan Document (in each case as modified or supplemented by
other information so furnished) contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, taken
as a whole, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time and no assurance can be
given that projected results will be obtained and actual results may differ
materially from projected results.

 

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5.16. Compliance with Laws. Each Loan Party and each Subsidiary thereof is in
compliance in all material respects with the requirements of all Laws and all
orders, writs, injunctions and decrees applicable to it or to its properties,
including without limitation, those of the DOE, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or
(b) without limiting the representations and warranties made in Section 5.09,
the failure to comply therewith, either individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

5.17. Intellectual Property; Licenses, Etc. Each Loan Party and each of its
Subsidiaries own, or possess the right to use, all of the trademarks, service
marks, trade names, copyrights, patents, patent rights, franchises, licenses and
other intellectual property rights (collectively, “IP Rights”) that are
reasonably necessary for the operation of their respective businesses, without
material conflict with the rights of any other Person, and Schedule 5.17 sets
forth as of the Closing Date a complete and accurate list of all such IP Rights
owned or used by each Loan Party and each of its Subsidiaries. To the best
knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by any Loan Party or any of its Subsidiaries
infringes in any material respect upon any rights held by any other Person. No
claim or litigation regarding any of the foregoing is pending or, to the best
knowledge of the Borrower, threatened, which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

5.18. Solvency. The Loan Parties on a consolidated basis are Solvent.

5.19. Casualty, Etc. Neither the businesses nor the properties of any Loan Party
or any of its Subsidiaries are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that, either individually or in the aggregate, could
reasonably be expected to have (a) a Material Adverse Effect with respect to
such businesses, or (b) an Unaggregated Material Adverse Effect with respect to
such properties.

5.20. Collateral Documents. The provisions of the Collateral Documents are
effective to create in favor of the Lender for the benefit of the Secured
Parties a legal, valid and enforceable first priority Lien (subject to Liens
permitted by Section 7.01) on all right, title and interest of the respective
Loan Parties in the Collateral described therein. Except for filings completed
prior to the Closing Date and as contemplated hereby and by the Collateral
Documents, no filing or other action will be necessary to perfect or protect
such Liens.

ARTICLE VI.

AFFIRMATIVE COVENANTS

So long as the Lender shall have any Term Loan Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied (other than
contingent indemnification obligations for which no claim has been asserted),
each of Holdings and the Borrower shall, and shall cause each other Loan Party
to:

6.01. Financial Statements. Deliver to the Lender, in form and detail
satisfactory to the Lender:

(a) within 180 days after the end of each fiscal year of Holdings (commencing
with the fiscal year ended December 31, 2008), a consolidated and
company-prepared consolidating balance sheet of Holdings and its Subsidiaries as
at the end of such fiscal year, and the related consolidated and
company-prepared consolidating statements of income or operations, changes in
shareholders’ equity,

 

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and cash flows for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
prepared in accordance with GAAP in all material respects, such consolidated
statements to be audited and accompanied by a report and opinion of an
independent certified public accountant of nationally recognized standing or
otherwise reasonably acceptable to the Lender, which report and opinion shall be
prepared in accordance with generally accepted auditing standards and shall not
be subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit, and such consolidating
statements to be certified by the chief executive officer, chief financial
officer, treasurer, controller or chairman of the board of Holdings to the
effect that such statements are fairly stated in all material respects when
considered in relation to the consolidated financial statements of Holdings and
its Subsidiaries;

(b) within 45 days after the end of each of the first four fiscal quarters of
each fiscal year of Holdings (commencing with the fiscal quarter ended March 31,
2009), a company-prepared consolidated and consolidating balance sheet of
Holdings and its Subsidiaries as at the end of such fiscal quarter, and the
related consolidated and consolidating statements of income or operations,
changes in shareholders’ equity, and cash flows for such fiscal quarter and for
the portion of Holdings’ fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail, such consolidated statements to be certified by the
chief executive officer, chief financial officer, treasurer, controller or
chairman of the board of Holdings as fairly presenting the financial condition,
results of operations, shareholders’ equity and cash flows of Holdings and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes and such consolidating statements to be
certified by the chief executive officer, chief financial officer, treasurer,
controller or chairman of the board of Holdings to the effect that such
statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of Holdings and its
Subsidiaries;

(c) within 30 days after the end of each month of each fiscal year, other than
the last month of each fiscal quarter, of Holdings (commencing with the fiscal
month ended April 30, 2009), a company-prepared consolidated balance sheet of
Holdings and its Subsidiaries as of the end of such month, and the related
consolidated statements of income or operations, changes in shareholders’ equity
and cash flows for such month and for the portion of Holdings’ fiscal year than
ended setting forth in each case in comparative form for the corresponding month
of the previous fiscal year and the corresponding portion of the previous fiscal
year, all in reasonable detail and duly certified by the chief executive
officer, chief financial officer, treasurer, controller or chairman of the board
of Holdings to the effect that such statements are fairly stated in all material
respects when considered in relation to the consolidated financial statements of
Holdings and its Subsidiaries;

(d) at least 30 days after the fiscal year start of each fiscal year of
Holdings, an annual business plan and budget of Holdings and its Subsidiaries on
a consolidated basis, including forecasts prepared by management of the
Borrower, in form reasonably satisfactory to the Lender, of consolidated balance
sheets and statements of income or operations and cash flows of Holdings and its
Subsidiaries on a monthly basis for the immediately following fiscal year
(including the fiscal year in which the Maturity Date occurs), which shall
include a certification by the chief executive officer, chief financial officer,
treasurer, controller or chairman of the board of Holdings and the Borrower as
to the matters set forth in Section 5.05(e) for such materials so delivered; and

(e) within 30 days after the end of each month of each fiscal year of Holdings
(commencing with the fiscal month ended March 31, 2009), student enrollment data
for Heald College.

 

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6.02. Certificates; Other Information. Deliver to the Lender, in form and detail
satisfactory to the Lender:

(a) [intentionally omitted];

(b) concurrently with the delivery of the financial statements referred to in
Sections 6.01(a), (b) and (c) a duly completed Compliance Certificate signed by
the chief executive officer, chief financial officer, treasurer, controller or
chairman of the board of Holdings and the Borrower, which shall also include
(i) a certification by such Person that no Default or Event of Default has
occurred, and (ii) in the case of a monthly Compliance Certificate, a
calculation of the financial covenants set forth in Section 7.11(d);

(c) [intentionally omitted];

(d) promptly after any request by the Lender, copies of any detailed audit
reports, management letters or recommendations submitted to the board of
directors (or the audit committee of the board of directors) of any Loan Party
by independent accountants in connection with the accounts or books of any Loan
Party or any of its Subsidiaries, or any audit of any of them;

(e) as soon as available, but in any event within 30 days after the annual
renewal thereof, a report summarizing the insurance coverage (specifying type,
amount and carrier, and attaching thereto certificates of insurance evidencing
the same) in effect for each Loan Party and its Subsidiaries and containing such
additional information as the Lender may reasonably specify;

(f) promptly, and in any event within five Business Days after receipt thereof
by any Loan Party or any Subsidiary thereof, copies of each notice,
correspondence and report received from the SEC or DOE (or comparable agency in
any applicable non-U.S. jurisdiction) or other Governmental Authority concerning
any current or possible audit, investigation, inspection or other material
inquiry by such agency of any Loan Party or any Subsidiary thereof;

(g) not later than five Business Days after receipt thereof by any Loan Party or
any Subsidiary thereof, copies of all material notices, material requests and
other documents (including amendments, waivers and other modifications) so
received under or pursuant to any Related Document, and, from time to time upon
request by the Lender, such information and reports regarding the Related
Documents as the Lender may reasonably request;

(h) promptly after the assertion or occurrence thereof, notice of any action or
proceeding against or of any noncompliance by any Loan Party or any of its
Subsidiaries with any Environmental Law or Environmental Permit that could
(i) reasonably be expected to have a Material Adverse Effect or (ii) reasonably
be expected to cause any property described in the Mortgages to be subject to
any restrictions on ownership, occupancy, use or transferability under any
Environmental Law; and

(i) promptly, such additional information regarding the business, financial,
legal or corporate affairs of any Loan Party or any Subsidiary thereof, or
compliance with the terms of the Loan Documents, as the Lender may from time to
time reasonably request.

6.03. Notices. Promptly notify the Lender:

(a) of the occurrence of any Default;

 

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(b) of any matter that has resulted or could reasonably be expected to result in
a Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Borrower or any Subsidiary;
(ii) any dispute, litigation, investigation, proceeding or suspension between
the Borrower or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Borrower or any Subsidiary, including pursuant to any applicable
Environmental Laws;

(c) of the occurrence of any ERISA Event; and

(d) of any material change in accounting policies or financial reporting
practices by any Loan Party or any Subsidiary thereof; and

(e) any cancellation or termination of, any default, wavier, approval or consent
under, or any amendment, modification or change to, the Real Property Lease
Agreements.

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of
a Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken and proposes
to take with respect thereto. Each notice pursuant to Section 6.03(a) shall
describe with particularity any and all provisions of this Agreement and any
other Loan Document that have been breached.

6.04. Payment of Obligations. Pay and discharge as the same shall become due and
payable, (a) all federal and material tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves in accordance with GAAP are being maintained by
the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would
by law become a Lien upon its property; and (c) all Indebtedness, as and when
due and payable, but subject to any subordination provisions and grace periods
contained in any instrument or agreement evidencing such Indebtedness.

6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization except in a transaction as may be permitted by
Sections 7.04 or 7.05; (b) to the extent applicable to a Loan Party’s business,
maintain all material accreditations, and, in any event, cause Heald College to
maintain all material accreditations (including, without limitation, WASC
accreditation), (c) take all reasonable action to maintain all other rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect; and (d) preserve
or renew all of its registered patents, trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.

6.06. Maintenance of Properties. (a) Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good working order and condition, ordinary wear and tear and casualty excepted;
(b) make all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) use the standard of care typical in the
industry in the operation and maintenance of its facilities.

6.07. Maintenance of Insurance. Maintain with financially sound and reputable
insurance companies not Affiliates of the Borrower, and acceptable to the Lender
in its sole discretion, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons, and
in each case, ensure that the Lender is

 

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listed as an additional insured or loss payee on such insurance, as applicable;
provided, to the extent that any insurance company with which insurance coverage
is maintained cease to be financially sound as determined by either Lender or
the Borrower, the Loan Parties shall have 45 days from the date thereof in which
to replace such insurance company with a financially sound and reputable
insurance company.

6.08. Compliance with Laws. Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property (including without limitation,
all DOE rules and regulations), except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted; or (b) without
limiting the covenants in Section 6.12, the failure to comply therewith could
not reasonably be expected to have a Material Adverse Effect.

6.09. Books and Records. (a) Maintain proper books of record and account, in
which full, true and correct entries in conformity with GAAP in all materially
respects consistently applied (except as noted in Holdings’ financial statements
or as approved by Holdings’ independent auditors) shall be made of all financial
transactions and matters involving the assets and business of the Borrower or
any of its Subsidiaries, as the case may be; and (b) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over the Borrower or
such Subsidiary, as the case may be.

6.10. Inspection Rights. Permit representatives and independent contractors of
the Lender to visit and inspect any of its properties (including the
Collateral), to examine its corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers, and, provided that the Borrower is given
the opportunity to be present, independent public accountants, all at the
expense of the Borrower and at such reasonable times during normal business
hours and as often as may be reasonably desired, upon reasonable advance notice
to the Borrower; provided, that except following the occurrence and continuation
of an Event of Default, the Borrower shall not be required to pay expenses for
more than one such visit and inspection by the Lender and/or its representative
or contractors per fiscal year; provided, further that when an Event of Default
exists the Lender (or any of their respective representatives or independent
contractors) may do any of the foregoing at the expense of the Borrower at any
time during normal business hours and without advance notice.

6.11. Use of Proceeds. Use the proceeds of the Term Loan to (a) refinance the
Borrower’s existing term loans with Allstate and (b) fund working capital and
other general corporate purposes, in each case, not in contravention of any Law
or of any Loan Document.

6.12. Compliance with Environmental Laws. Comply, and cause all lessees and
other Persons operating or occupying its properties to comply (but in the case
of lessees or other Persons not constituting Affiliates or Subsidiaries, use
best efforts to do so), in all material respects, with all applicable
Environmental Laws and Environmental Permits, except where the failure to comply
could not reasonably be expected to have an Unaggregated Material Adverse
Effect; obtain and renew all Environmental Permits necessary for its operations
and properties; except where the failure to obtain and renew could not
reasonably be expected to have an Unaggregated Material Adverse Effect; and
conduct any investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with, and to the
extent required by, requirements of all Environmental Laws, except where the
failure to take such action could not reasonably be expected to have an
Unaggregated Material Adverse Effect; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances in accordance
with GAAP.

 

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6.13. Preparation of Environmental Reports. At the request of the Lender from
time to time, provide to the Lender within 60 days after such request, at the
expense of the Borrower, an environmental site assessment report for any of its
properties described in such request, prepared by an environmental consulting
firm reasonably acceptable to the Lender, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance, removal or
remedial action in connection with any Hazardous Materials on such properties;
without limiting the generality of the foregoing, if the Lender determines at
any time that a material risk exists that any such report will not be provided
within the time referred to above, the Lender may retain an environmental
consulting firm to prepare such report at the expense of the Borrower, and the
Borrower hereby grants and agrees to cause any Subsidiary that owns any property
described in such request to grant at the time of such request to the Lender,
such firm and any agents or representatives thereof an irrevocable non-exclusive
license, subject to the rights of tenants, to enter onto their respective
properties to undertake such an assessment; provided, however, that if no Event
of Default has occurred and is continuing, Borrower shall only be required to
reimburse for the expense of one such environmental site assessment report per
property during the term of this Agreement.

6.14. Further Assurances. Promptly upon request by the Lender, (a) correct any
material defect or error that may be discovered in any Loan Document or in the
execution, acknowledgment, filing or recordation thereof, and (b) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-register
any and all such further acts, deeds, certificates, assurances and other
instruments as the Lender may reasonably require from time to time in order to
(i) carry out more effectively the purposes of the Loan Documents, (ii) to the
fullest extent permitted by applicable law, subject any Loan Party’s properties,
assets, rights or interests to the Liens now or hereafter intended to be covered
by any of the Collateral Documents, (iii) perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and any of the
Liens intended to be created thereunder and (iv) assure, convey, grant, assign,
transfer, preserve, protect and confirm more effectively unto the Secured
Parties the rights granted or now or hereafter intended to be granted to the
Secured Parties under any Loan Document or under any other instrument executed
in connection with any Loan Document to which any Loan Party or any of its
Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do
so.

6.15. Compliance with Terms of Leaseholds. Cause Heald College to make all
payments and otherwise perform all obligations in respect of all leases of real
property to which Heald College is a party, keep such leases in full force and
effect and not allow such leases to lapse or be terminated or any rights to
renew such leases to be forfeited or cancelled, notify the Lender of any default
by any party with respect to such leases and cooperate with the Lender in all
respects to cure any such default, and cause each of its Subsidiaries to do so.

6.16. Interest Rate Hedging. Within 30 days after the Closing Date, enter into,
and maintain at all times thereafter, fixed interest rate Swap Contract(s) with
Person(s) acceptable to the Lender in its sole discretion, which shall
(a) contain such terms as are customary and are satisfactory to the Lender in
its sole discretion, (b) cover a notional amount of not less than 50% of the
aggregate outstanding Term Loan amount, and (c) provide for such Person(s) to
make payments thereunder for a period of no less than through the Maturity Date.

6.17. Depository Bank. (a) Maintain, and cause each of the other Loan Parties to
maintain, all primary depository accounts with the Lender, except for the Fifth
Third Account (provided that the Fifth Third Account shall be so excluded as
long as the amount in such account does not exceed $790,000 and is not
replenished at any time); and (b) not allow the Fifth Third Account to be
replenished at any time and cause such account to be closed down promptly after
the amount in such account has been completely drawn down.

 

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6.18. Additional Matters. Deliver to the Lender:

(a) concurrent with funding of the Term Loan on the Closing Date (but in no
event later than one Business Day after the Closing Date), sufficient evidence
that Summit Partners’ acquisition of Equity Interests of, and investment in,
Holdings and Heald Investment, as contemplated on the date hereof, has been
consummated;

(b) promptly (but in no event later than two Business Days after the Closing
Date), certified, filed-stamped copy of the certificate of merger from the
Delaware Secretary of State’s Office promptly after the funding of the Term Loan
on the Closing Date, which agreement shall be in full force and effect; and

(c) within 15 days after the Closing Date, for the fiscal quarter ended
December 31, 2008, a company-prepared consolidated and consolidating balance
sheet of Holdings and its Subsidiaries as at the end of such fiscal quarter, and
the related consolidated and consolidating statements of income or operations,
changes in shareholders’ equity, and cash flows for such fiscal quarter and for
the portion of Holdings’ fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail, such consolidated statements to be certified by the
chief executive officer, chief financial officer, treasurer, controller or
chairman of the board of Holdings as fairly presenting the financial condition,
results of operations, shareholders’ equity and cash flows of Holdings and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes and such consolidating statements to be
certified by the chief executive officer, chief financial officer, treasurer,
controller or chairman of the board of Holdings to the effect that such
statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of Holdings and its
Subsidiaries.

ARTICLE VII.

NEGATIVE COVENANTS

So long as the Lender shall have any Term Loan Commitment hereunder, the Term
Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other
than contingent indemnification obligations for which no claim has been
asserted), Holdings and the Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly, and solely in the case of Section 7.16,
Holdings shall not:

7.01. Liens. Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than the following:

(a) Liens pursuant to any Loan Document or the SBLC Loan Documents;

(b) Liens existing on the date hereof and listed on Schedule 7.01(b) and any
renewals or extensions thereof, provided that (i) the property covered thereby
is not changed, (ii) the amount secured or benefited thereby is not increased
except as contemplated by Section 7.02(c), (iii) the direct or any contingent
obligor with respect thereto is not changed, and (iv) any renewal or extension
of the obligations secured or benefited thereby is permitted by Section 7.02(c);

(c) Liens for taxes, assessments or governmental charges not yet due and
delinquent or which are being contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP;

 

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(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
suppliers’, utilities’ or other like Liens arising in the ordinary course of
business provided that (i) such Liens secure only amounts not yet due and
payable or, if due and payable, are unfiled and no other action has been taken
to enforce the same or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves determined in
accordance with GAAP with respect thereto are maintained on the books of the
applicable Person or (ii) for which the aggregate amount of all obligations
secured by such Liens does not exceed $100,000;

(e) pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation or other similar type of governmental insurance or benefits, other
than any Lien imposed by Title IV of ERISA;

(f) deposits to secure the performance of bids, tenders, trade contracts and
leases (other than Indebtedness), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

(g) easements, rights-of-way, restrictions and other similar encumbrances,
including minor imperfections of title which an accurate survey would show,
affecting real property and which, in the aggregate, do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Loan Party
or its Subsidiary or its tenant and, as to the Owned Real Properties, the Real
Property Lease Agreements;

(h) Liens securing judgments for the payment of money (or appeal or other surety
bonds relating to such judgments) not constituting an Event of Default under
Section 8.01(h); and

(i) Liens of a collection bank on items in the course of collection arising
under Section 4-208 of the UCC or other normal and customary rights of setoff or
banker’s liens in favor of banks or other depository institutions arising in the
ordinary course of business;

(j) Liens of third party landlords and mortgagees of such landlords (i) arising
by statute or under any lease or related contractual obligation entered into in
the ordinary course of business, (ii) on fixtures and movable tangible property
located on the real property leased or subleased from such landlord and
(iii) for amounts not overdue by more than 45 days or that are being contested
in good faith by appropriate proceedings diligently conducted and for which
adequate reserves or other appropriate provisions are maintained on the books of
such Person in accordance with GAAP;

(k) the title and interest of a lessor or sublessor in and to personal property
leased or subleased, in each case extending only to such personal property;

(l) Liens on premium refunds and insurance proceeds granted in favor of
insurance companies (or their financing affiliates) solely in connection with
the financing of insurance premiums;

(m) licenses and sublicenses of intellectual property or leases or subleases of
real property, in each case, granted to third parties in the ordinary course of
business and not interfering in any material respect with the business of any
Loan Party or any Subsidiary;

(n) precautionary financing statements filed in connection with operating leases
permitted by this Agreement;

 

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(o) rights of set off arising from customer or subcontract agreements entered
into in the ordinary course of business providing for indemnification or similar
obligations, or from bonds, surety or other guarantees or letters of credit
securing performance by any Loan Party pursuant to such agreements so long as
(i) any such Lien attaches only to the specific bonded contract, accounts
receivable pursuant to such contract and the proceeds thereof, and assets used
in connection therewith, and (ii) all of such Liens do not exceed $1,000,000 in
the aggregate;

(p) Liens with respect to Indebtedness permitted pursuant to Section 7.02(n);

(q) [intentionally omitted];

(r) Liens deemed to exist in connection with Investments in repurchase
agreements permitted under Section 7.03;

(s) Liens securing Indebtedness permitted under Section 7.02(e); provided that
(i) such Liens do not at any time encumber any property other than the property
financed by such Indebtedness and the proceeds thereof, (ii) such Indebtedness
when incurred shall not exceed the purchase price of the asset(s) financed and
(iii) such Liens shall be created concurrently or within 90 days of the
acquisition of the related asset; and

(t) other Liens on assets, provided, that if such Liens secure Indebtedness,
such Indebtedness shall be in an aggregate amount not to exceed $100,000 at any
time outstanding, and if such Liens do not secure Indebtedness, such Liens shall
not attach to property with a fair market value in excess of $100,000 in the
aggregate, as reduced by the amount of Indebtedness secured by Liens permitted
under this clause (t).

7.02. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness,
except:

(a) Indebtedness under the Loan Documents and the SBLC Loan Documents;

(b) [intentionally omitted];

(c) Indebtedness outstanding on the date hereof and listed on Schedule 7.02
(which, for the avoidance of doubt, shall not include, the Existing Loans) and
any refinancings, refundings, renewals or extensions thereof; provided that the
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing and by an amount equal to any
existing commitments unutilized thereunder and, except as otherwise permitted by
this Section, the direct or any contingent obligor with respect thereto is not
changed, as a result of or in connection with such refinancing, refunding,
renewal or extension; and provided, still further, that the terms relating to
principal amount, amortization, maturity, collateral (if any) and subordination
(if any), and other material terms taken as a whole, of any such refinancing,
refunding, renewing or extending Indebtedness, and of any agreement entered into
and of any instrument issued in connection therewith, are no less favorable in
any material respect to the Loan Parties or the Lender than the terms of any
agreement or instrument governing the Indebtedness being refinanced, refunded,
renewed or extended and the interest rate applicable to any such refinancing,
refunding, renewing or extending Indebtedness does not exceed the then
applicable market interest rate;

(d) Guarantees of the Borrower or any Guarantor in respect of Indebtedness
otherwise permitted hereunder of the Borrower or any other Guarantor;

 

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(e) Indebtedness in respect of Capitalized Leases and purchase money obligations
for fixed or capital assets within the limitations set forth in Section 7.01(s);
provided, however, that the aggregate amount of all such Indebtedness at any one
time outstanding shall not exceed $3,500,000; and

(f) Intercompany indebtedness from Loan Party to another Loan Party or to Heald
College permitted by Section 7.03;

(g) Indebtedness in respect of netting services, overdraft protections and other
customary bank products in connection with deposit accounts, so long as (i) such
indebtedness is incurred in the ordinary course of business and is not
outstanding for more than 5 Business Days and (ii) the aggregate amount of such
Indebtedness owing to all Persons under this clause (g), other than the Lender,
does not exceed $100,000 at any time outstanding;

(h) Indebtedness incurred in favor of insurance companies (or their affiliates)
in connection with the financing of insurance premiums in an amount not to
exceed the premiums with respect to the applicable insurance policies;

(i) Subordinated Debt to repurchase Equity Interests of any Loan Party from
employees, officers and directors of such Loan Party, or their spouses,
ex-spouses, heirs, estates or family planning vehicles upon the termination of
employment, death or disability of such employee, officer or director, which
indebtedness shall not exceed $500,000 at any time;

(j) unsecured credit card indebtedness not to exceed $250,000 at any time
outstanding incurred by the Loan Parties or their Subsidiaries in the ordinary
course of business;

(k) any other unsecured Indebtedness of any Loan Parties or their Subsidiaries
in an aggregate principal amount not to exceed $500,000 at any one time then
outstanding; and

(l) obligations (contingent or otherwise) existing or arising under (i) any Swap
Contract, provided that (A) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly mitigating
risks associated with liabilities, commitments, investments, assets or property
held or reasonably anticipated by such Person, or changes in the value of
securities issued by such Person, and not for purposes of speculation or taking
a “market view;” and (B) such Swap Contract does not contain any provision
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, and (ii) any Secured Hedge
Agreement;

(m) Subordinated Debt incurred to finance Permitted Acquisitions;

(n) Indebtedness arising pursuant to the Bankruptcy Order in existence on the
date hereof (involving to Note A)] in an amount not to exceed $1,000,000 in the
aggregate; and

(o) Indebtedness assumed upon consummation of a Permitted Acquisition, provided
that (i) such Indebtedness is of the type described in Section 7.02(e) and
(ii) such Indebtedness is not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition.

 

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7.03. Investments. Make or hold any Investments, except:

(a) Investments held by Holdings and its Subsidiaries in the form of cash or
Cash Equivalents;

(b) Investments by Holdings and its Subsidiaries in their respective
Subsidiaries outstanding on the date hereof;

(c) Investments consisting of extensions of credit in the nature of accounts
receivable or notes receivable arising from the grant of trade credit in the
ordinary course of business, and Investments received in satisfaction or partial
satisfaction thereof from financially troubled account debtors to the extent
reasonably necessary in order to prevent or limit loss;

(d) Guarantees and other Indebtedness permitted under Section 7.02;

(e) loans, advances or investments by a Loan Party in or to another Loan Party
or Heald College;

(f) investments in Swap Contracts otherwise permitted by the terms hereof;

(g) Permitted Acquisitions (including deposits of earnest money in connection
therewith);

(h) Investments existing as of the Closing Date and set forth in Schedule 7.03;

(i) non-cash consideration received in connection with Dispositions permitted by
Section 7.05;

(j) Investments made with the proceeds of Equity Issuances;

(k) Investments in AHI for the repurchase of the Existing Loans pursuant to the
Loan Purchase Agreement;

(l) Investments permitted pursuant to Section 7.06(c);

(m) loans or advances to employees of a Loan Party or any of its Subsidiaries to
finance travel, entertainment and relocation expenses and other ordinary
business purposes in the ordinary course of business as presently conducted;
provided, however, that the aggregate outstanding principal amount of all loans
and advances permitted pursuant to this clause shall not exceed $500,000 at any
one time;

(n) any Loan Party and its Subsidiaries may make a loan that could otherwise be
made as a distribution or dividend permitted under Section 7.06 hereof (so long
as such distribution or dividend would be permitted to be made under
Section 7.06 at the time);

(o) loans made to directors, officers and employees in exchange for equity
interests of a Loan Party purchased by such directors, officers and employees,
so long as (i) no cash is remitted by any Loan Party or its Subsidiaries to any
such directors, officers or employees in connection with such loans and
(ii) such loans are merely book-entry items;

(p) any Investment by a Loan Party not otherwise permitted above; provided, that
the aggregate outstanding amount of all such Investments shall not exceed
$500,000 at any one time; and

(q) Investments permitted under the SBLC Loan Documents.

 

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7.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any Person, except that, so long as no
Default exists or would result therefrom:

(a) as permitted under the SBLC Loan Documents;

(b) provided that the surviving Person is the Borrower, the Borrower may merge
with any other Person (other than with Holdings or Heald Education) in
connection with a Permitted Acquisition;

(c) the Borrower and AHI may consummate the Merger; and

(d) Dispositions permitted under Section 7.05.

7.05. Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:

(a) Dispositions of obsolete or worn out personal property, or personal property
that is no longer used or useful in the conduct of the business of Holdings and
its Subsidiaries for fair market value whether now owned or hereafter acquired,
in the ordinary course of business;

(b) Dispositions of inventory and use of cash in the ordinary course of
business; and

(c) (i) Dispositions of Cash Equivalents, (ii) customary exchange or trade-in of
personal property assets and application of proceeds to or for replacement
personal property assets to be used, in each case, in the ordinary course of
business of the Loan Parties or their Subsidiaries, (iii) termination of leases,
or subleases surrender or sublease of real or personal property in the ordinary
course of business (except that such leases or subleases shall not include the
Real Property Lease Agreements) and not otherwise prohibited by the terms hereof
or interfering in any material respect with the business of any Loan Party or
any Subsidiary, (iv) issuance of Equity Interests and (v) transferring
non-exclusive licenses or sublicenses of intellectual property in the ordinary
course of its business, which does not interfere in any material respect with
the business of any Loan Party or any Subsidiary;

(d) the incurrence of Liens permitted by Section 7.01;

(e) any sale or transfer of any personal property (other than their own stock)
by any Loan Party to any other Loan Party;

(f) any distribution by any Loan Party of the proceeds of a permitted Restricted
Payment from any other Loan Party or Heald College;

(g) any Loan Party and its Subsidiaries may write-off or grant discounts or
forgiveness of accounts in the ordinary course of business which does not
interfere in any material respect with the business of any Loan Party or any
Subsidiary;

(h) any sale or issuance by Holdings of its Equity Interests;

(i) the existing leases of Borrower’s real property to Heald College pursuant to
the Real Property Leases;

(j) Dispositions permitted by Sections 7.04 or 7.06; and

 

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(k) Involuntary Dispositions of Collateral to the extent that such dispositions
do not result in uninsured losses in excess of $500,000 in the aggregate, and
Involuntary Dispositions of non-Collateral.

provided, however, that any Disposition pursuant to Sections 7.05(a), 7.05
(c)(i) and (c)(ii), and 7.05(i) shall be for fair market value.

7.06. Restricted Payments. Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
or issue or sell any Equity Interests or accept any capital contributions,
except that:

(a) issuance or sale of Equity Interests in Holdings or Heald Education, or
acceptance of capital contributions into Holdings or its Subsidiaries, in each
case, so long as the other provisions of the Loan Documents are complied with;

(b) the Loan Parties and their Subsidiaries may declare and make dividend
payments or other distributions (i) for the payment of taxes when due and owing
with respect to any Loan Party and to enable Heald Education and Holdings to
make Tax Distributions, (ii) for the payment of customary administrative
expenses of Holdings, Heald Education and Heald Investment in the ordinary
course of business not to exceed $1,000,000, annually, in the aggregate for all
such Persons, and (iii) for payment of dividends on preferred units (other than
the retirement thereof) in Holdings; provided, that with respect to clauses
(ii) and (iii) of this Section 7.06(b), such dividend payments or other
distributions in respect thereof may only be made so long as no Event of Default
shall have occurred and be continuing at the time of such dividend payments or
other distributions or would result therefrom;

(c) Heald College may make loans and advances (extended payment retail
installment contracts) to its students which amount, net of reserves, shall not
exceed at any time 25% of Holdings’ Consolidated Tangible Net Worth (for
clarification, the extended payment retail installment contract is a payment
plan that extends beyond the student’s graduation date);

(d) Holdings and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person; and

(e) So long as no Default exists or would result therefrom, the Loan Parties and
their Subsidiaries may make dividends directly or indirectly to Holdings in
order to make regularly scheduled payments of interest on an unaccelerated basis
under Note A as in effect on the date hereof (and for the avoidance of doubt
this clause (e) shall not include any prepayments of principal and/or interest,
other than prepayment of up to $1,000,000 of principal under Note A, relating to
the Bankruptcy Order, as permitted by Section 7.02(n));

(f) So long as no Default exists or would result therefrom, the Loan Parties and
their Subsidiaries may declare and make dividend payments or other distributions
for Holdings and/or Heald Investment to repurchase Equity Interests from
employees, officers and directors of any Loan Party or its Subsidiaries, or
their spouses, ex-spouses, heirs, estates of family planning vehicles upon the
termination of employment, death or disability of such employee, officer or
director, which dividends or distributions shall not exceed $500,000 in the
aggregate (excluding proceeds of Equity Issuances used for such purposes) prior
to the Maturity Date; and

(g) Holdings may purchase, redeem or otherwise acquire its common Equity
Interests with the proceeds received from the substantially concurrent issue of
new common Equity Interests.

 

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7.07. Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by the Borrower
and its Subsidiaries on the date hereof or any business substantially related or
incidental thereto.

7.08. Transactions with Affiliates. Enter into any transaction of any kind with
any Affiliate of the Borrower, whether or not in the ordinary course of
business, other than on fair and reasonable terms substantially as favorable to
the Borrower or such Subsidiary as would be obtainable by the Borrower or such
Subsidiary at the time in a comparable arm’s length transaction with a Person
other than an Affiliate. In no event shall the foregoing prohibit (a) the Real
Property Lease Agreements, (b) transactions between or among the Loan Parties
not involving any other Affiliate and not otherwise prohibited hereunder,
(c) any Restricted Payment permitted by Section 7.06, (d) loans and advances to
officers, directors, employees and agents permitted under Section 7.03,
(e) normal and reasonable fees and compensation paid to, and customary indemnity
and reimbursement provided on behalf of, officers, directors, employees and
agents of the Borrower, Holdings or any of its Subsidiaries in the ordinary
course of business, (f) customary employment agreements entered into by Holdings
or any of its Subsidiaries in the ordinary course of business, and (g) the
Investor Rights Agreement.

7.09. Burdensome Agreements. Enter into or permit to exist any Contractual
Obligation (other than this Agreement, any other Loan Document, any SBLC Loan
Document or the Investor Rights Agreement) that limits the ability (a) of any
Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to
otherwise transfer property to or invest in the Borrower or any Guarantor,
(b) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (c) of
the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens
on property of such Person; provided, however, that this Section 7.09 shall not
prohibit (i) any negative pledge incurred or provided in favor of any holder of
Indebtedness permitted under Section 7.02(e) solely to the extent any such
negative pledge relates to the property financed by or the subject of such
Indebtedness, (ii) any Lien permitted pursuant to Section 7.01 or any document
or instrument governing any Lien permitted pursuant to Section 7.01, provided
that any such restriction contained therein relates only to the asset or assets
subject to such Lien, (iii) customary restrictions imposed by corporate law,
(iv) customary restrictions and conditions contained in any agreement relating
to the sale of any property permitted under Section 7.05 pending the
consummation of such sale, or (v) customary provisions restricting assignments,
subletting or other transfers contained in leases, licenses or similar
agreements entered into in the ordinary course of business.

7.10. Use of Proceeds. Use the proceeds of any Credit Extension, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry margin stock (within the meaning of Regulation U of the FRB)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose.

7.11. Financial Covenants.

(a) Consolidated Net Worth. Permit Consolidated Net Worth as of the end of any
fiscal quarter of Holdings to be less than the sum of (i) $15,000,000, and
(ii) an amount equal to 65% of the Consolidated Net Income after tax dividends
earned in each full fiscal quarter ending after December 31, 2008 (with no
deduction for a net loss in any such fiscal quarter).

(b) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of
the end of any period of four fiscal quarters of Holdings to be greater than
2.50:1.00; provided, the Pledged Cash Account shall be treated as unrestricted
and unencumbered cash for purposes of determining compliance with this covenant.

 

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(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed
Charge Coverage Ratio as of the end of any fiscal quarter of Holdings to be less
than 1.50:1.00, except (i) in the case of the fiscal quarters ending
September 30, 2009 and December 31, 2009 only, permit the Consolidated Fixed
Charge Coverage Ratio to be less than 1.40:1.00; provided, the Pledged Cash
Account shall be treated as unrestricted and unencumbered cash for purposes of
determining compliance with this covenant.

(d) Liquidity. Permit Holdings’ (i) average unrestricted and unencumbered cash
balance at Bank of America be less than $6,200,000 on a trailing three-month
basis at each month-end, and (ii) minimum unrestricted and unencumbered cash
balance at Bank of America be less than $3,000,000 at any time, provided, that,
in each case, the Pledged Cash Account shall not be treated as unrestricted and
unencumbered cash for purposes of determining compliance with this covenant.

(e) Financial Responsibility Ratio. Permit, at the end of each fiscal year of
Heald College, Heald College’s financial responsibility ratio, as promulgated by
the DOE, to be less than 1.50:1.00.

(f) Student Default Rate. Permit at the end of each fiscal year of Heald
College, Heald College’s cohort student loan default rate to exceed (i) 20% on a
rolling three-year average basis in any fiscal year of Heald College, or
(ii) 25% in any single fiscal year of Heald College.

7.12. Amendments of Organization Documents. (a) Amend any of its Organization
Documents that would be in any manner adverse or less favorable to the Lender or
its interests, or (b) allow any of the Organization Documents of the Borrower,
Heald Education, AHI or Head College to be amended so that the membership
interests of such Persons are (i) treated as “securities” governed by the
Uniform Commercial Code or (ii) otherwise certificated.

7.13. Accounting Changes. Make any change in (a) accounting policies or
reporting practices, except as required by GAAP, without 10 days’ prior written
notice to Lender or (b) fiscal year.

7.14. Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease or
otherwise satisfy prior to the scheduled maturity thereof in any manner, or make
any payment in violation of any subordination terms of, (a) any Subordinated
Debt (including Note A, other than the $1,000,000 portion of Indebtedness under
Note A permitted by Section 7.02(n)), or (b) any other Indebtedness, except,
with respect to such other Indebtedness only, (i) when economically advantageous
to do so in the reasonable business judgment of such Loan Party or Subsidiary,
(ii) intercompany indebtedness from a Loan Party to another Loan Party or to
Heald College permitted by Section 7.03, (iii) prepayments of the Credit
Extensions in accordance with the terms of this Agreement, or (iv) regularly
scheduled or required repayments or redemptions of Indebtedness set forth in
Schedule 7.02 and refinancings and refundings of such Indebtedness in compliance
with Section 7.02(c),.

7.15. Amendment, Etc. of Related Documents and Indebtedness. (a) Cancel or
terminate any Related Document or consent to or accept any cancellation or
termination thereof if the effect of which would be, in any manner, adverse or
less favorable to the Lender or its interests (but in no event shall the Real
Property Lease Agreements be cancelled or terminated), (b) amend, modify or
change in any manner any term or condition of any Related Document or give any
consent, waiver or approval thereunder, in each case, if any such action would
be in any manner adverse or less favorable to the Lender or its interests
(including, without limitation, any such action that reduces the rental payments
made under the Real Property Lease Agreements or shortens the maturity date of
such agreements), (c) waive any default under or any breach of any term or
condition of any Related Document without the consent of the Lender, (d) take
any other action in connection with any Related Document that would impair the
value of the interest or rights of any Loan Party thereunder or that would
impair the rights or interests of the Lender or (e) amend, modify or change in
any manner

 

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adverse or less favorable to the Lender or its interests any term or condition
of any Indebtedness set forth in Schedule 7.02, except for any refinancing,
refunding, renewal or extension thereof permitted by Section 7.02(c); provided
that the Allstate Assignment Documents and the Existing Loan Documents may be
cancelled or terminated upon the consummation of the Merger.

7.16. Holding Company. In the case of Holdings and Heald Education, engage in
any business or activity other than (a) for Holdings, the ownership of all
outstanding Equity Interests in Heald Education and the Borrower, (b) for Heald
Education, the ownership of all outstanding Equity Interests in Heald College,
(c) maintaining its respective corporate existence, (c) participating in tax,
accounting and other administrative activities as the parent of one or more of
the consolidated group of companies, including the Loan Parties, (d) the
execution and delivery of the Loan Documents to which it is a party and the
performance of its obligations thereunder, (e) activities incidental to the
businesses or activities described in clauses (a) through (d) of this Section,
(f) activities expressly permitted pursuant to the Loan Documents, and (g) the
consummation of any Permitted Acquisition.

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

8.01. Events of Default. Any of the following shall constitute an Event of
Default:

(a) Non-Payment. The Borrower or any other Loan Party fails to (i) pay when and
as required to be paid herein, any amount of principal of any Loan or deposit
any funds as part of the Pledged Cash Account, or (ii) pay within three Business
Days after the same becomes due, any interest on any Loan or any fee due
hereunder, or (iii) pay within five Business Days after the same becomes due,
any other amount payable hereunder or under any other Loan Document; or

(b) Specific Covenants. (i) The Borrower fails to perform or observe any term,
covenant or agreement contained in any of (A) Sections 6.01 or 6.02 and such
failure continues for three Business Days or (B) Sections 6.03, 6.05, 6.07,
6.10, 6.11, 6.13, 6.16, 6.17, 6.18 or Article VII, (ii) Heald College fails to
perform or observe any term any term, covenant or agreement contain in the SBLC
Loan Document, after giving effect to any cure period set forth therein,
(iii) any of the Guarantors fails to perform or observe any term, covenant or
agreement contained in the last sentence of section 14 of the Guaranty after
giving effect to all relevant cure periods under the Loan Documents; (iv) any
default occurs under Security Agreement as set forth in section 5 thereof, after
giving effect to any cure period set forth therein, or any “Event of Default”
occurs under any of the Mortgages (as such term is defined in such Mortgages),
or (v) any default occurs under the Real Property Lease Agreements as set forth
in section 7 thereof, after giving effect to any cure period set forth therein;
or

(c) Other Defaults. Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in Section 8.01(a) or (b) above) contained
in any Loan Document on its part to be performed or observed and such failure
continues for 30 days; or

(d) Representations and Warranties. Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrower, any
other Loan Party or Heald College herein, in any other Loan Document, or in any
document delivered in connection herewith or therewith shall be incorrect or
misleading in any material respect when made or deemed made; or

(e) Cross-Default. (i) Heald College fails to make any payment when due (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise
and after the expiration of any cure period) in respect of any Indebtedness
owing under any of the SBLC Loan Documents, (ii) any Loan Party or any
Subsidiary thereof (A) fails to make any payment when due (whether by

 

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scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and
Indebtedness under Swap Contracts, and in the case of Heald College, under the
SBLC Loan Documents) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than the Threshold
Amount, or (B) fails to observe or perform any other agreement or condition
relating to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit the holder
or holders of such Indebtedness or the beneficiary or beneficiaries of such
Guarantee (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required
and the expiration of any cure period, such Indebtedness to be demanded or to
become due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or
(ii) there occurs under any Swap Contract an “Early Termination Date” (as
defined in such Swap Contract) resulting from (A) any event of default under
such Swap Contract as to which a Loan Party or any Subsidiary thereof is the
Defaulting Party (as defined in such Swap Contract) or (B) any “Termination
Event” (as so defined) under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is an “Affected Party” (as so defined) and, in either event,
the Swap Termination Value owed by such Loan Party or such Subsidiary as a
result thereof is greater than the Threshold Amount; or

(f) Insolvency Proceedings, Etc. Any Loan Party or any Subsidiary thereof
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of its property; or any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer is appointed without the
application or consent of such Person and the appointment continues undischarged
or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law
relating to any such Person or to all or any material part of its property is
instituted without the consent of such Person and continues undismissed or
unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding; or

(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Subsidiary
thereof becomes unable or admits in writing its inability or fails generally to
pay its debts as they become due, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the property of any such Person and is not released, vacated or fully
bonded within 30 days after its issue or levy; or

(h) Judgments. There is entered against any Loan Party or any Subsidiary thereof
(i) one or more final judgments or orders for the payment of money in an
aggregate amount (as to all such judgments and orders) exceeding the Threshold
Amount (excluding amounts subject to insurance coverage for which a solvent
insurer has acknowledge its coverage thereof in writing), or (ii) any one or
more non-monetary final judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either
case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 30 consecutive days during which
a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

(i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold
Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due,

 

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after the expiration of any applicable grace period, any installment payment
with respect to its withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan that could reasonably be expected to result in a liability to
the Borrower in an aggregate amount in excess of the Threshold Amount; or

(j) Invalidity of Loan Documents. Any provision of any Loan Document, at any
time after its execution and delivery and for any reason other than as expressly
permitted hereunder or thereunder or satisfaction in full of all the
Obligations, ceases to be in full force and effect; or any Loan Party or any
other Person contests in any manner the validity or enforceability of any
provision of any Loan Document; or any Loan Party denies that it has any or
further liability or obligation under any provision of any Loan Document, or
purports to revoke, terminate or rescind any provision of any Loan Document; or

(k) Change of Control. There occurs any Change of Control; or

(l) Collateral Documents. Any Collateral Document after delivery thereof
pursuant to Section 4.01, 7.03(g) or 6.14 shall for any reason (other than
pursuant to the terms thereof) cease to create a valid and perfected first
priority Lien (subject to Liens permitted by Section 7.01) on (i) any real
property Collateral purported to be covered thereby, (ii) 100% of the issued and
outstanding Equity Interest of Borrower, Head Education, AHI, Heald College or
any other Subsidiary (except in the case of Heald Education only, 100% of the
voting Equity Interests, and 70% of the outstanding Equity Interests), or
(iii) any other personal property Collateral purported to be covered thereby
with a value in excess of $250,000, individually or in the aggregate (except for
the Fifth Third Account so long as the amount in such account does not exceed
$790,000 and such account is not replenished at any time).

(m) Material Adverse Change. There occurs any material adverse change in, or a
material adverse effect upon, the operations, business, properties, liabilities
(actual) or financial condition of Holdings and its Subsidiaries taken as a
whole, in each case, as reasonably determined by the Lender; or

(n) Loss of Certain Status. There occurs any loss of material accreditation of
Heald College (including, without limitation, its WASC accreditation) or Heald
College become ineligible for Title IV Programs.

8.02. Remedies upon Event of Default. If any Event of Default occurs and is
continuing, the Lender may take any or all of the following actions:

(a) declare the commitment to make any Credit Extension, if any, to be
terminated, whereupon such commitments and obligation shall be terminated;

(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower;

(c) exercise all rights and remedies available to it under the Loan Documents
and applicable Laws;

provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the
United States, the obligation of the Lender to make Credit Extensions, if any,
shall automatically terminate, the unpaid principal amount the Term Loan and
other Credit Extensions, if any, and all interest and other amounts as aforesaid
shall automatically become due and payable, in each case without further act of
the Lender.

 

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8.03. Application of Funds. After the exercise of remedies provided for in
Section 8.02 (or after the Term Loan and other Credit Extensions, if any, have
automatically become immediately due and payable as set forth in the proviso to
Section 8.02), any amounts received on account of the Obligations shall be
applied by the Lender in the following order:

First, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lender (including reasonable fees, charges and disbursements of counsel to the
Lender (including reasonable fees and time charges for attorneys who may be
employees of the Lender) arising under the Loan Documents and amounts payable
under Article III, ratably among them in proportion to the respective amounts
described in this clause First payable to them;

Second, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Term Loan and other Obligations arising under the Loan
Documents;

Last, the balance, if any, after all of the Obligations have been paid in full
(other than contingent indemnification obligations for which no claim has been
asserted), to the Borrower or as otherwise required by Law.

ARTICLE IX.

MISCELLANEOUS

9.01. Amendments, Etc. All amendments and/or waivers of any provision of this
Agreement or any other Loan Document, and any consent to any departure by the
Borrower or any other Loan Party therefrom, must be in writing and signed by the
Lender and Borrower or the other applicable Loan Party, as the case may be, and
each such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. This Agreement and the Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.

9.02. Notices; Effectiveness; Electronic Communications. (a) Notices Generally.
Except in the case of notices and other communications expressly permitted to be
given by telephone and where no writing is required (and except as provided in
subsection (d) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows, and all
notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows: if to
the Borrower, Holdings, any other Loan Party, any Subsidiary or the Lender, to
the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 9.02. Notices and other communications
sent by hand or overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices and other
communications sent by telecopier shall be deemed to have been given when sent
(except that, if not given during normal business hours for the recipient, shall
be deemed to have been given at the opening of business on the next business day
for the recipient). Notices delivered through electronic communications to the
extent provided in subsection (d) below, shall be effective as provided in such
subsection (d).

 

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(b) Change of Address, Etc. Each of Holdings, the Borrower or the Lender may
change its address, telecopier or telephone number for notices and other
communications hereunder by sending notice to the other parties hereto.

(c) Reliance by the Lender. The Lender shall be entitled to rely and act upon
any notices (including telephonic Committed Loan Notices) purportedly given by
or on behalf of the Borrower even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof. The Borrower shall indemnify
the Lender and the Related Parties from all losses, costs, expenses and
liabilities resulting from the reliance by such Person on each notice
purportedly given by or on behalf of the Borrower. All telephonic notices to and
other telephonic communications with the Lender may be recorded by the Lender,
and each of the parties hereto hereby consents to such recording.

(d) Electronic Communications. (i) Notices and other communications to the
Lender hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Lender, provided that the foregoing shall not apply to notices
to the Lender if the Lender has notified the Borrower that it is incapable of
receiving notices by electronic communication. The Lender or Borrower may, in
its discretion, agree to accept notices and other communications to it hereunder
by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

(ii) Unless the Lender other wise prescribes, (A) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (B) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (A) of notification that such notice or communication is
available and identifying the website address therefor.

9.03. No Waiver; Cumulative Remedies; Enforcement. No failure by the Lender to
exercise, and no delay by the Lender in exercising, any right, remedy, power or
privilege hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided, and provided under each other Loan
Document, are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.

9.04. Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the Lender and
its Affiliates (including the reasonable fees, charges and disbursements of
counsel for the Lender), in connection with the preparation, negotiation,
execution, delivery and administration of this Agreement, the other Loan
Documents and the Escrow Agreement or any amendments, modifications or waivers
of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket
expenses incurred by the Lender (including the reasonable fees, charges and
disbursements of any counsel for the Lender), in connection with the enforcement
or protection of its rights (A) in connection with this Agreement and the other
Loan Documents, including its rights under this Section, or (B) in connection
with Term Loan made hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
loan.

 

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(b) Indemnification by the Borrower. The Borrower shall indemnify the Lender and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses (including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee),
incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by the Borrower or any other Loan Party arising out of, in connection with,
or as a result of (i) the execution or delivery of this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby or thereby
(including, without limitation, the Escrow Agreement), the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby (including,
without limitation, the refinancing of the Existing Loans by the Lender), or, in
the administration of this Agreement and the other Loan Documents, (ii) the Term
Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
or operated by the Borrower or any of its Subsidiaries or Affiliates, or any
Environmental Liability related in any way to the Borrower or any of its
Subsidiaries or Affiliates, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by the
Borrower, any other Loan Party or any Subsidiary or any of the Borrower’s, such
Loan Party’s or such Subsidiary’s directors, shareholders or creditors, and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence, bad faith or willful misconduct of such
Indemnitee or any Related Party of such Indemnitee or (y) result from a claim
brought by the Borrower or any other Loan Party against an Indemnitee for breach
in bad faith of such Indemnitee’s or any Related Party’s obligations hereunder
or under any other Loan Document, if the Borrower or such Loan Party has
obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction.

(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, no party hereto shall assert, and each party hereto hereby
waives, any claim against any other party hereto (and any other Indemnitee), on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, the Term Loan or the use of the proceeds thereof. No
Indemnitee referred to in subsection (b) above shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed to such unintended recipients by such Indemnitee through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby other than for direct or actual damages resulting
from the gross negligence, bad faith or willful misconduct of such Indemnitee as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.

(d) Payments. All amounts due under this Section shall be payable not later than
ten Business Days after demand therefore, provided that the Borrower has
received a reasonably detailed written invoice of such charges.

(e) Survival. The agreements in this Section shall survive the termination of
the Term Loan Commitment and the repayment, satisfaction or discharge of all the
other Obligations.

 

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9.05. Payments Set Aside. To the extent that any payment by or on behalf of the
Borrower is made to the Lender, or the Lender exercises its right of setoff, and
such payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Lender) to be repaid
to a trustee, receiver or any other party, in connection with any proceeding
under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such setoff had not occurred.

9.06. Successors and Assigns. (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the Lender and the Lender may not assign or otherwise
transfer any of its rights or obligations hereunder except (i) the Lender may
assign such rights or obligations to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section, (ii) the Lender may sell
participations in such rights or obligations, and (iii) subject to Section 9.07,
the Lender may exchange information about the Borrower and/or Holdings and its
Subsidiaries (including, without limitation, any information regarding any
Hazardous Materials) with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.

(b) The Lender may at any time assign to one or more Eligible Assignees, all or
a portion of its rights and obligations under this Agreement (including all or a
portion of the Term Loan at the time owing to it) pursuant to documentation
acceptable to the Lender and the assignee. From and after the effective date
specified in such documentation, such Eligible Assignee shall be a party to this
Agreement and, to the extent of the interest assigned by the Lender, have the
rights and obligations of the Lender under this Agreement, and the Lender shall,
to the extent of the interest so assigned, be released from its obligations
under this Agreement (and, in the case of an assignment of all of the Lender’s
rights and obligations under this Agreement, shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05,
and 9.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment, and shall continue to have all of the rights
provided hereunder to the Lender in its capacity as holder of any remaining
portion of the Term Loan outstanding at the time of such assignment). Upon
request, the Borrower (at its reasonable expense) shall execute and deliver new
or replacement Notes to the Lender and the assignee, and shall execute and
deliver any other documents reasonably necessary or appropriate to give effect
to such assignment and to provide for the administration of this Agreement after
giving effect thereto. The Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under the Note, if any) to secure obligations of the Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment of security interest shall release the Lender
from any of its obligations hereunder or substitute any such pledgee or assignee
for the Lender as a party hereto.

(c) As used herein, the following terms have the following meanings:

“Approved Fund” means any Fund that is administered or managed by (a) the Lender
or (b) an Affiliate of the Lender.

“Eligible Assignee” means any of the following: (a) an Affiliate of the Lender;
(b) an Approved Fund; or (c) any other Person (other than a natural person), so
long as the following conditions have been met (with respect to such other
Person only): (i) the Borrower shall have been given 10 days in which it may
(A) elect to prepay the Term Loan in the amount which the Lender has proposed to
assign, together with all other Obligations then outstanding relating to such
prepayment (including, without limitation, all

 

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accrued interest thereon and any amounts owing pursuant to Article III) or
(B) arrange for the purchase, at par, by the Borrower or an Affiliate of the
Borrower of the entire portion of the Term Loan then outstanding, together with
all other Obligations then outstanding (including, without limitation, all
accrued interest and any amounts owing pursuant to Article III), so that all
such obligation shall have been paid to the Lender in full in cash, and all of
the Lender’s obligations under the Loan Documents will be terminated, and the
Borrower or such Affiliate, as the case may be, shall have failed to commit to
the Lender in writing (in form and substance satisfactory to the Lender) within
such 10 day period to so prepay or so purchase, as the case may be; (ii) the
amount of the Term Loan proposed to be assigned shall not be less than
$5,000,000, provided, that concurrent assignments to such other Person and its
Affiliates will be treated as a single assignment for purposes of determining
whether such minimum amount has been met; (iii) at the time of such assignment,
such other Person is (A) a commercial bank organized under the laws of the
United States of America or any state thereof, having combined capital and
surplus in excess of $250,000,000, or (B) a commercial bank organized under the
laws of any other country that is a member of the Organization of Economic
Cooperation and Development, or a political subdivision of any such country,
having combined capital and surplus in excess of $250,000,000, or (C) a finance
company, insurance company or other financial institution which in the ordinary
course of business extends credit of the type extended hereunder and that has
total assets in excess of $250,000,000, provided that, in any event, such other
Person shall not be a competitor of the Borrower which is directly engaged in
the same line of business as the Borrower as its primary business; and
(iv) provided, however, that the conditions specified in clauses (i) through
(iii), shall not be required if an Event of Default has occurred and is
continuing, or the Borrower waives such conditions. Provided, that
notwithstanding any of the foregoing, an “Eligible Assignee” shall not include
the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

9.07. Treatment of Certain Information; Confidentiality. The Lender agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
trustees, advisors and representatives (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it (including any self-regulatory authority, such as the National
Association of Insurance Commissioners), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or participant in, or any prospective assignee of or participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the Lender or
any of its Affiliates on a nonconfidential basis from a source other than the
Borrower.

For purposes of this Section, “Information” means all information received from
any Loan Party or any Subsidiary thereof relating to any Loan Party or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to the Lender on a nonconfidential basis prior to
disclosure by any Loan Party or any Subsidiary thereof, provided that, in the
case of

 

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information received from a Loan Party or any such Subsidiary after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

This provision shall survive the termination of this Agreement.

9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, the Lender and each of its respective Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
applicable law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency, at any time held and
other obligations (in whatever currency) at any time owing by the Lender or any
such Affiliate to or for the credit or the account of any Loan Party against any
and all of the Obligations of such Loan Party now or hereafter existing under
this Agreement or any other Loan Document to the Lender, irrespective of whether
or not the Lender shall have made any demand under this Agreement or any other
Loan Document and although such obligations of the Borrower may be contingent or
unmatured or are owed to a branch or office of the Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The
rights of the Lender and its respective Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) that
the Lender or its Affiliates may have. The Lender agrees to notify the Borrower
promptly after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and application.

9.09. Interest Rate Limitation. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”). If the Lender shall receive
interest in an amount that exceeds the Maximum Rate, the excess interest shall
be applied to the principal of the Term Loan or, if it exceeds such unpaid
principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Lender exceeds the Maximum Rate, the
Lender may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

9.10. Counterparts; Integration; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto in different counterparts),
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Lender and when the Lender shall have received counterparts
hereof that, when taken together, bear the signatures of each of the other
parties hereto. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or other electronic imaging means shall be effective as
delivery of a manually executed counterpart of this Agreement.

9.11. Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the Lender,
regardless of any investigation made by the Lender or on their behalf and
notwithstanding that the Lender may have had notice or knowledge of any Default
at the time of any Credit Extension, and shall continue in full force and effect
as long as any portion of the Term Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied.

 

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9.12. Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

9.13. Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA.

(a) SUBMISSION TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA SITTING IN SAN FRANCISCO
COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF
CALIFORNIA, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA
STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT
THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN
PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(b) WAIVER OF VENUE. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT
REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.

(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.02. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW

 

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9.14. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

9.15. California Judicial Reference. If any action or proceeding is filed in a
court of the State of California by or against any party hereto in connection
with any of the transactions contemplated by this Agreement or any other Loan
Document, (a) the court shall, and is hereby directed to, make a general
reference pursuant to California Code of Civil Procedure Section 638 to a
referee (who shall be a single active or retired judge) to hear and determine
all of the issues in such action or proceeding (whether of fact or of law) and
to report a statement of decision, provided that at the option of any party to
such proceeding, any such issues pertaining to a “provisional remedy” as defined
in California Code of Civil Procedure Section 1281.8 shall be heard and
determined by the court, and (b) without limiting the generality of
Section 9.04, the Borrower shall be solely responsible to pay all fees and
expenses of any referee appointed in such action or proceeding.

9.16. No Advisory or Fiduciary Responsibility. In connection with all aspects of
each transaction contemplated hereby (including in connection with any
amendment, waiver or other modification hereof or of any other Loan Document),
each of the Borrower and Holdings acknowledges and agrees, and acknowledges its
Affiliates’ understanding, that: (i) (A) the arranging and other services
regarding this Agreement provided by the Lender are arm’s-length commercial
transactions between the Borrower, Holdings and their respective Affiliates, on
the one hand, and the Lender, on the other hand, (B) each of the Borrower and
Holdings has consulted its own legal, accounting, regulatory and tax advisors to
the extent it has deemed appropriate, and (C) each of the Borrower and Holdings
is capable of evaluating, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby and by the other Loan
Documents; (ii) (A) the Lender is and has been acting solely as a principal and,
except as expressly agreed in writing by the relevant parties, has not been, is
not, and will not be acting as an advisor, agent or fiduciary for the Borrower,
Holdings or any of their respective Affiliates, or any other Person and (B) the
Lender does not have any obligation to the Borrower, Holdings or any of their
respective Affiliates with respect to the transactions contemplated hereby
except those obligations expressly set forth herein and in the other Loan
Documents; and (iii) the Lender and its Affiliates may be engaged in a broad
range of transactions that involve interests that differ from those of the
Borrower, Holdings and their respective Affiliates, and the Lender does not have
any obligation to disclose any of such interests to the Borrower, Holdings or
any of their respective Affiliates. To the fullest extent permitted by law, each
of the Borrower and Holdings hereby waives and releases any claims that it may
have against the Lender with respect to any breach or alleged breach of agency
or fiduciary duty in connection with any aspect of any transaction contemplated
hereby.

9.17. Electronic Execution of Assignments and Certain Other Documents. The words
“execution,” “signed,” “signature,” and words of like import in any amendment or
other modification hereof (including waivers and consents) shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as
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and as provided for in any applicable law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic
Signatures and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

9.18. USA PATRIOT Act. The Lender hereby notifies the Borrower that pursuant to
the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (as amended, the “Act”), it is required to obtain,
verify and record information that identifies each Loan Party, which information
includes the name and address of each Loan Party and other information that will
allow such Lender to identify each Loan Party in accordance with the Act. The
Borrower shall, promptly following a reasonable request by the Lender, provide
all documentation and other information that the Lender reasonably requests in
order to comply with its ongoing obligations under applicable “know your
customer” an anti-money laundering rules and regulations, including the Act.

9.19. Time of the Essence. Time is of the essence of the Loan Documents.

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

HEALD REAL ESTATE, LLC,

as Borrower

By:  

/s/ Nolan Miura

Name:   Nolan Miura Title:   President

HEALD CAPITAL, LLC,

as Holdings

By:  

/s/ Nolan Miura

Name:   Nolan Miura Title:   President

BANK OF AMERICA, N.A.,

as Lender

By:  

/s/ Bassam Wehbe

Name:   Bassam Wehbe Title:   Senior Vice President