Exhibit 10.1

LETTER OF CREDIT FACILITY AGREEMENT

dated as of November 30, 2011

among

EDUCATION MANAGEMENT LLC,

EDUCATION MANAGEMENT HOLDINGS LLC,

THE GRANTOR SUBSIDIARIES PARTY HERETO,

VARIOUS LENDERS,

and

BANK OF AMERICA, N.A.,

as Administrative Agent, Collateral Agent and Issuing Bank

 

 

$150,000,000 LETTER OF CREDIT FACILITY

 

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Sole Arranger and Bookrunner

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

         Page   SECTION 1. DEFINITIONS AND INTERPRETATION      1   

1.1.

 

Definitions

     1   

1.2.

 

Accounting Terms

     16   

1.3.

 

Interpretation, etc.

     17    SECTION 2. LETTERS OF CREDIT      17   

2.1.

 

[Reserved]

     17   

2.2.

 

[Reserved]

     17   

2.3.

 

[Reserved]

     17   

2.4.

 

Issuance of Letters of Credit and Purchase of Participations Therein

     17   

2.5.

 

Pro Rata Shares; Availability of Funds

     22   

2.6.

 

Use of Credit Extension

     23   

2.7.

 

Evidence of Debt; Register; Lenders’ Books and Records

     23   

2.8.

 

Interest

     23   

2.9.

 

[Reserved]

     24   

2.10.

 

Default Interest

     24   

2.11.

 

Fees

     24   

2.12.

 

Grant of Security Interest; Cash Collateral Accounts

     25   

2.13.

 

Commitment Reductions

     26   

2.14.

 

[Reserved]

     27   

2.15.

 

[Reserved]

     27   

2.16.

 

General Provisions Regarding Payments

     27   

2.17.

 

Ratable Sharing

     27   

2.18.

 

[Reserved]

     28   

2.19.

 

Increased Costs; Capital Adequacy

     28   

2.20.

 

Taxes; Withholding, etc.

     29   

2.21.

 

Obligation to Mitigate

     31   

2.22.

 

Defaulting Lenders

     32   

2.23.

 

Removal or Replacement of a Lender

     33    SECTION 3. CONDITIONS PRECEDENT      33   

3.1.

 

Closing Date

     33   

3.2.

 

Conditions to Each Credit Extension

     34    SECTION 4. REPRESENTATIONS AND WARRANTIES      35   

4.1.

 

Existence, Qualification and Power; Compliance with Laws

     35   

4.2.

 

Authorization; No Contravention

     36   

4.3.

 

Governmental Authorization; Other Consents

     36   

4.4.

 

Binding Effect

     36   

4.5.

 

Financial Statements; No Material Adverse Effect

     36   

4.6.

 

Litigation

     37   

4.7.

 

No Default

     37   

4.8.

 

[Reserved]

     37   

 

-i-

--------------------------------------------------------------------------------

         Page  

4.9.

 

Environmental Compliance

     37   

4.10.

 

Taxes

     38   

4.11.

 

[Reserved]

     38   

4.12.

 

[Reserved]

     38   

4.13.

 

Margin Regulations; Investment Company Act

     38   

4.14.

 

Disclosure

     38   

4.15.

 

[Reserved]

     38   

4.16.

 

Solvency

     39   

4.17.

 

[Reserved]

     39   

4.18.

 

Governmental Authority and Licensing; Education Agency Approvals; Compliance
with Educational Laws

     39   

4.19.

 

Collateral

     40   

4.20.

 

Patriot Act

     40    SECTION 5. AFFIRMATIVE COVENANTS      40   

5.1.

 

Financial Statements

     40   

5.2.

 

Certificates; Other Information

     42   

5.3.

 

Notices

     43   

5.4.

 

Payment of Obligations

     43   

5.5.

 

Preservation of Existence, etc.

     43   

5.6.

 

Maintenance of Properties

     44   

5.7.

 

[Reserved]

     44   

5.8.

 

Compliance with Laws

     44   

5.9.

 

Books and Records

     44   

5.10.

 

Inspection Rights

     44   

5.11.

 

[Reserved]

     45   

5.12.

 

[Reserved]

     45   

5.13.

 

[Reserved]

     45   

5.14.

 

Further Assurances and Information Regarding Collateral

     45    SECTION 6. NEGATIVE COVENANTS      45   

6.1.

 

Liens

     45   

6.2.

 

No Further Negative Pledges

     46   

6.3.

 

Fundamental Changes

     46   

6.4.

 

Change in Nature of Business

     46   

6.5.

 

Amendment of Organization Documents

     46   

6.6.

 

Holding Company

     47    SECTION 7. GUARANTY      47   

7.1.

 

Guaranty of the Obligations

     47   

7.2.

 

[Reserved]

     47   

7.3.

 

Payment by Guarantor

     47   

7.4.

 

Liability of Guarantor Absolute

     47   

7.5.

 

Waivers by Guarantor

     49   

7.6.

 

Guarantor’s Rights of Subrogation, Contribution, etc.

     49   

7.7.

 

Subordination of Other Obligations

     50   

7.8.

 

Continuing Guaranty

     50   

 

-ii-

--------------------------------------------------------------------------------

         Page  

7.9.

 

Authority of Guarantor or Borrower

     50   

7.10.

 

Financial Condition of Borrower

     50   

7.11.

 

Bankruptcy, etc.

     50   

7.12.

 

Discharge of Guaranty upon Sale of Guarantor

     51    SECTION 8. EVENTS OF DEFAULT AND REMEDIES      51   

8.1.

 

Events of Default

     51   

8.2.

 

Remedies Upon Event of Default

     53   

8.3.

 

Application of Funds

     53    SECTION 9. AGENTS      54   

9.1.

 

Appointment of Agents

     54   

9.2.

 

Powers and Duties

     54   

9.3.

 

General Immunity

     55   

9.4.

 

Agents Entitled to Act as Lender

     56   

9.5.

 

Lenders’ Representations, Warranties and Acknowledgment

     56   

9.6.

 

Right to Indemnity

     56   

9.7.

 

Successor Administrative Agent, Collateral Agent and Issuing Bank

     57   

9.8.

 

Collateral Documents and Guaranty

     58   

9.9.

 

Withholding Taxes

     58    SECTION 10. MISCELLANEOUS      59   

10.1.

 

Notices

     59   

10.2.

 

Expenses

     60   

10.3.

 

Indemnity

     60   

10.4.

 

Set-Off

     61   

10.5.

 

Amendments and Waivers

     61   

10.6.

 

Successors and Assigns; Participations

     62   

10.7.

 

Independence of Covenants

     65   

10.8.

 

Survival of Representations, Warranties and Agreements

     65   

10.9.

 

No Waiver; Remedies Cumulative

     65   

10.10.

 

Marshalling; Payments Set Aside

     65   

10.11.

 

Severability

     66   

10.12.

 

Obligations Several; Independent Nature of Lenders’ Rights

     66   

10.13.

 

Headings

     66   

10.14.

 

APPLICABLE LAW

     66   

10.15.

 

CONSENT TO JURISDICTION

     66   

10.16.

 

WAIVER OF JURY TRIAL

     67   

10.17.

 

Confidentiality

     67   

10.18.

 

Usury Savings Clause

     68   

10.19.

 

Counterparts

     68   

10.20.

 

Effectiveness

     68   

10.21.

 

Patriot Act

     68   

10.22.

 

Electronic Execution of Assignments

     68   

 

-iii-

--------------------------------------------------------------------------------

APPENDICES:    A    Commitments    B    Notice Addresses SCHEDULES:    4.1   
Jurisdictions of Organization    4.9    Environmental Matters    4.10    Taxes
   4.18    Education Approvals EXHIBITS:    A-1    Opinion of Simpson Thacher &
Bartlett LLP    A-2    Opinion of General Counsel    A-3    Opinion of Powers
Pyles Sutter & Verville PC    A-4    Opinion of Simpson Thacher & Bartlett LLP
(Grantor Subsidiaries)    A-5    Opinion of General Counsel (Grantor
Subsidiaries)    B    Assignment Agreement    C    Certificate re Non-Bank
Status    D    Closing Date Certificate    E    Cash Collateral Transfer Request
   F    Grantor Subsidiary Joinder

 

-iv-

--------------------------------------------------------------------------------

LETTER OF CREDIT FACILITY AGREEMENT

This LETTER OF CREDIT FACILITY AGREEMENT (“Agreement”), dated as of November 30,
2011, is entered into by and among EDUCATION MANAGEMENT LLC, a Delaware limited
liability company (“Company” or “Borrower”), EDUCATION MANAGEMENT HOLDINGS LLC,
a Delaware limited liability company (“Holdings” or “Guarantor”), the Grantor
Subsidiaries, the Lenders party hereto from time to time, and BANK OF AMERICA,
N.A., as Administrative Agent (together with its permitted successors in such
capacity, “Administrative Agent”), as Collateral Agent (together with its
permitted successors in such capacity, “Collateral Agent”) and as Issuing Bank.

RECITALS:

WHEREAS, capitalized terms used in these Recitals shall have the respective
meanings set forth for such terms in Section 1.1 hereof;

WHEREAS, Borrower has requested that Issuing Bank issue Letters of Credit in an
aggregate face amount at any time outstanding not to exceed $150,000,000 to the
DOE;

WHEREAS, Borrower will deposit cash in a Borrower Cash Collateral Account and,
at Borrower’s request, Collateral Agent will transfer Cash Collateral from the
Borrower Cash Collateral Account (other than any Certificate of Deposit)
directly to one or more Subsidiary Cash Collateral Accounts;

WHEREAS, as a condition to any Credit Extension, Collateral Agent, for the
benefit of the Secured Parties, must have a perfected exclusive security
interest in Cash Collateral held in Subsidiary Cash Collateral Accounts equal to
105% of the total undrawn amount of all Letters of Credit to secure the
Obligations; and

WHEREAS, the Cash Collateral shall not be subject to withdrawal from any Cash
Collateral Account for any purpose whatsoever (other than by Administrative
Agent to reimburse Issuing Bank for drawings under a Letter of Credit in
accordance with Section 2.4(d), to pay interest and fees payable hereunder or to
satisfy other Obligations in accordance with Section 8.3(b), or by Bank of
America as deposit bank to pay its customary fees and charges in respect of the
Cash Collateral Accounts as required pursuant to the Control Agreements) and
shall not otherwise be available to Holdings or any Subsidiary, except (i) that
Cash Collateral shall be transferred from the Borrower Cash Collateral Account
to Subsidiary Cash Collateral Accounts or (ii) upon the payment in full of all
Obligations, termination of all Commitments and the termination or expiration of
all Letters of Credit.

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

SECTION 1. DEFINITIONS AND INTERPRETATION

1.1. Definitions. The following terms used herein, including in the preamble,
recitals, exhibits and schedules hereto, shall have the following meanings:

“Accrediting Body” means any entity or organization that is recognized as an
institutional accrediting agency by the DOE which engages in granting or
withholding Accreditation or similar approval for private post-secondary
schools, in accordance with standards relating to the performance, operation,
financial condition and/or educational quality of such schools.

--------------------------------------------------------------------------------

“Accreditation” means the status of public recognition granted by any
Accrediting Body to an educational institution or location thereof that meets
the Accrediting Body’s standards and requirements.

“Administrative Agent” as defined in the preamble hereto.

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”), as applied to any Person, means the possession, directly or
indirectly, of the power (i) to vote 10% or more of the Securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities or by contract or otherwise.

“Agent” means each of Administrative Agent, Arranger and Collateral Agent.

“Aggregate Amounts Due” as defined in Section 2.17.

“Agreement” as defined in the preamble hereto.

“Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated in its
capacity as sole arranger and bookrunner.

“Assignment Agreement” means an Assignment and Assumption Agreement
substantially in the form of Exhibit B, with such amendments or modifications as
may be approved by Administrative Agent.

“Assignment Effective Date” as defined in Section 10.6(b).

“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.

“Bank of America” means Bank of America, N.A.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now and hereafter in effect, or any successor statute.

“Base Rate” means, for any day, a rate per annum equal to the highest of (i) the
Prime Rate in effect on such day, (ii) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1% and (iii) the Adjusted Eurodollar Rate (as
defined in the Existing Credit Agreement as in effect on the date hereof) for an
interest period of one month plus 1.00%. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
on the effective day of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.

“Beneficiary” means each Secured Party.

“Board of Governors” means the Board of Governors of the Federal Reserve System
of the United States, or any successor thereto.

“Borrower” as defined in the preamble hereto.

 

-2-

--------------------------------------------------------------------------------

“Borrower Cash Collateral Accounts” means (a) Certificates of Deposit issued by
Bank of America or (b) any other deposit accounts held at Bank of America and,
in each case, either (at the option of the Collateral Agent) (i) for which
Borrower is the deposit bank’s customer and which account is subject to a
Borrower Control Agreement or (ii) which account is otherwise blocked pursuant
to Bank of America’s procedures.

“Borrower Collateral” as defined in Section 2.12.

“Borrower Control Agreement” means a deposit account control agreement among
Borrower, Collateral Agent and Bank of America, as deposit bank, reasonably
acceptable to the parties thereto, substantially in the form of Bank of
America’s standard form of deposit account control agreement, pursuant to which
Borrower shall grant control (within the meaning of Section 9-104 of the UCC of
the State of New York) of the Borrower Cash Collateral Account to the Collateral
Agent.

“Business Day” means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are authorized or required by law or
other governmental action to close.

“Capitalized Leases” means all leases that have been or should be, in accordance
with GAAP, recorded as capitalized leases; provided that for all purposes
hereunder the amount of obligations under any Capitalized Lease shall be the
amount thereof accounted for as a liability in accordance with GAAP as in effect
on the Closing Date.

“Cash Collateral” means deposits in the Cash Collateral Accounts.

“Cash Collateral Accounts” means, collectively, the Borrower Cash Collateral
Accounts and the Subsidiary Cash Collateral Accounts.

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

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

“Certificate of Deposit” means a time deposit account referred to as a
certificate of deposit.

“Certificate re Non-Bank Status” means a certificate substantially in the form
of Exhibit C.

“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, implementation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) all requests, rules, guidelines or directives promulgated by
the Bank for International settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States
regulatory authorities, in each case pursuant to Basel III, shall in each case
be deemed to be a “Change in Law”, regardless of the date enacted, adopted or
issued.

 

-3-

--------------------------------------------------------------------------------

“Change of Control” means, at any time, (a) the Sponsors shall cease to
beneficially own and control on a fully diluted basis at least 35% of the voting
interests in the Equity Interests of Holdings or any direct or indirect parent
of Holdings (each of Holdings and any such parent, a “Parent”); provided that,
if the Existing Credit Agreement is amended to also so provide, the circumstance
under this clause (a) shall not be a Change of Control unless any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
other than the Sponsors beneficially owns and controls on a fully diluted basis
at least 35% of the voting interests in the Equity Interests of such Parent;
(b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) other than the Sponsors (i) shall have acquired beneficial
ownership of 35% or more on a fully diluted basis of the voting interest in the
Equity Interests of such Parent, and the percentage of the voting interest in
the Equity Interests of such Parent acquired by such person or group exceeds, in
the aggregate, the percentage held by the Sponsors taken as a whole or
(ii) shall have obtained the power (whether or not exercised) to elect a
majority of the members of the board of directors (or similar governing body) of
such Parent; (c) the majority of the seats (other than vacant seats) on the
board of directors (or similar governing body) of any Parent shall cease to be
occupied by Persons who either (i) were members of the board of directors of
such Parent on the Closing Date or (ii) were nominated for election by the board
of directors of such Parent, a majority of whom were directors on the Closing
Date or whose election or nomination for election was previously approved by a
majority of such directors; (d) Holdings shall cease to beneficially own and
control 100% on a fully diluted basis of the voting interests in the Equity
Interests of Company; or (e) any “change of control” (or any comparable term) in
the Senior Notes Indenture or the Existing Credit Agreement.

“Closing Date” means the date of effectiveness of this Agreement, November 30,
2011.

“Closing Date Certificate” means a Closing Date Certificate substantially in the
form of Exhibit D.

“Cohort Default Rate” as defined in 34 C.F.R. § 668 Subpart M and N, including
Cohort Default Rates calculated for the periods specified in 34 C.F.R. § 668.183
and Cohort Default Rates calculated for the period specified in 34 C.F.R. §
668.202.

“Collateral” as defined in Section 2.12.

“Collateral Agent” as defined in the preamble hereto.

“Collateral Documents” means this Agreement and the Control Agreements (if any)
and all other instruments, documents and agreements delivered by any Credit
Party pursuant to this Agreement or any of the other Credit Documents in order
to grant to Collateral Agent, for the benefit of Secured Parties, a Lien on the
Collateral as security for the Obligations.

“Commitment” means the commitment of a Lender to make or otherwise fund and
acquire participations in Letters of Credit. The amount of each Lender’s
Commitment is set forth on Appendix A or in the applicable Assignment Agreement,
as applicable, subject to any adjustment or reduction pursuant to the terms and
conditions hereof.

“Commitment Period” means the period from the Closing Date to but excluding the
Maturity Date.

“Company” as defined in the preamble hereto.

 

-4-

--------------------------------------------------------------------------------

“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” as set forth in the definition of “Affiliate.”

“Control Agreements” means the Borrower Control Agreement and the Subsidiary
Control Agreements.

“Credit Date” means the date of a Credit Extension.

“Credit Documents” means this Agreement, the Fee Letter, the Collateral
Documents, any Grantor Subsidiary Joinder, any Letter of Credit Application, any
documents or certificates executed by Borrower in favor of Issuing Bank relating
to Letters of Credit, and all other documents, instruments or agreements
executed and delivered by a Credit Party for the benefit of any Agent, Issuing
Bank or any Lender in connection herewith.

“Credit Extension” means the issuance, amendment, modification, renewal or
extension of a Letter of Credit.

“Credit Party” means Borrower, Guarantor or a Grantor Subsidiary.

“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 specified therein, or
both, would be an Event of Default.

“Defaulting Lender” means any Lender that has (a) failed to fund any portion of
participations in any Letter of Credit within one (1) Business Day of the date
required to be funded by it hereunder, (b) notified Borrower, Administrative
Agent or any Issuing Bank in writing that it does not intend to comply with any
of its obligations to fund any portion of participations in any Letter of Credit
under this Agreement or has made a public statement to the effect that it does
not intend to comply with such funding obligations under this Agreement or under
any other agreement in which it commits to extend credit, (c) failed, within
five (5) Business Days after a request by Administrative Agent or any Issuing
Bank (with a copy to Company) to confirm that it will comply with the terms of
this Agreement relating to its obligations to fund prospective participations in
then outstanding Letters of Credit, (d) otherwise failed to pay over to
Administrative Agent, any Issuing Bank or any other Lender any other amount
required to be paid by it hereunder within one (1) Business Day of the date when
due, or (e) become or is insolvent or has a parent company that has become or is
insolvent or become the subject of a bankruptcy or insolvency proceeding, or has
had a receiver, conservator, trustee or custodian appointed for it, or has taken
any action in furtherance of, or has indicated its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or has indicated its consent to, approval of or
acquiescence in any such proceeding or appointment.

“Dispose” means the sale, transfer, license, lease or other disposition
(including any sale and leaseback transaction and any sale of Equity Interests)
of any property by any Person, including any

 

-5-

--------------------------------------------------------------------------------

sale, assignment, transfer or other disposal, with or without recourse, of any
notes or accounts receivable or any rights and claims associated therewith;
provided that “Dispose” shall not be deemed to include any issuance by Holdings
of any of its Equity Interests to another Person.

“Disqualified Equity Interests” means any Equity Interest which, by its terms
(or by the terms of any security or other Equity Interests into which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (a) matures or is mandatorily redeemable (other than solely for
Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise
(except as a result of a change of control or asset sale so long as any rights
of the holders thereof upon the occurrence of a change of control or asset sale
event shall be subject to the prior repayment in full of the Obligations that
are accrued and payable and the termination of the Commitments), (b) is
redeemable at the option of the holder thereof (other than solely for Qualified
Equity Interests), in whole or in part, (c) provides for the scheduled payments
of dividends in cash, or (d) is or becomes convertible into or exchangeable for
Indebtedness or any other Equity Interests that would constitute Disqualified
Equity Interests, in each case, prior to the date that is 180 days after the
Maturity Date.

“DOE” means the United States Department of Education and any successor agency
administering Title IV Programs.

“Dollars” and the sign “$” mean the lawful money of the United States of
America.

“Education Management” means Education Management Corporation, a Pennsylvania
corporation.

“Educational Agency” means any Person, whether governmental, government
chartered, private, or quasi-private, that engages in granting or withholding
Educational Approvals for, administers financial assistance to or for students
of, or otherwise regulates private postsecondary schools in accordance with
standards relating to performance, operation, financial condition or academic
standards of such schools, including the DOE, any State Educational Agency, any
guaranty agency, and any other Accrediting Body.

“Educational Approval” means any license, authorization, Accreditation, or DOE
Approval required to be issued by an Educational Agency in order for a School or
any location thereof to participate in Title IV.

“Educational Law” means any statute, law, regulation, rule, order, or binding
standard issued or administered by any Educational Agency.

“Eligible Assignee” means (i) any Lender, Issuing Bank, any Affiliate of any
Lender or Issuing Bank and any Related Fund (any two or more Related Funds being
treated as a single Eligible Assignee for all purposes hereof), and (ii) any
commercial bank, insurance company, investment or mutual fund or other entity
that is an “accredited investor” (as defined in Regulation D under the
Securities Act) and which extends credit or buys loans.

“Environmental Claim” means any investigation, notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any Governmental Authority or any other
Person, arising (i) pursuant to or in connection with any actual or alleged
violation of any Environmental Law; (ii) in connection with any Hazardous
Material or any actual or alleged Hazardous Materials Activity; or (iii) in
connection with any actual or alleged damage, injury, threat or harm to health,
safety, natural resources or the environment.

 

-6-

--------------------------------------------------------------------------------

“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, the protection of the environment, natural
resources, or, to the extent relating to exposure to Hazardous Materials, human
health or to 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 Permit” means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

“Equity Interests” means, with respect to any Person, all of the shares,
interests, rights, participations or other equivalents (however designated) of
capital stock of (or other ownership or profit interests or units in) such
Person and all of the warrants, options or other rights for the purchase,
acquisition or exchange from such Person of any of the foregoing (including
through convertible securities).

“Event of Default” means each of the conditions or events set forth in
Section 8.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and any successor statute.

“Existing Credit Agreement” means the Second Amended and Restated Credit and
Guaranty Agreement, as amended and restated as of December 7, 2010, by and among
the Company, as borrower, BNP Paribas, as administrative and collateral agent,
and the other parties thereto (as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time or refinanced or replaced).

“Exposure” means, with respect to any Lender as of any date of determination,
(i) prior to the termination of the Commitments, that Lender’s Commitment; and
(ii) after the termination of the Commitments, the aggregate amount of all
participations by that Lender in any outstanding Letters of Credit or any
unreimbursed drawing under any Letter of Credit.

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code as of the
date of this Agreement (or any amended version or successor provision that is
substantively comparable) and, in each case, any current or future regulations
or interpretations or other guidance issued in connection therewith.

“Federal Funds Effective Rate” means for any day, the rate per annum (expressed,
as a decimal, rounded upwards, if necessary, to a whole multiple of 1/100 of 1%)
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, (i) 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 (ii) 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 charged to Administrative Agent, in its capacity as a Lender, on
such day on such transactions as determined by Administrative Agent.

“Fee Letter” means the fee letter agreement dated of even date herewith, between
Borrower and Administrative Agent.

 

-7-

--------------------------------------------------------------------------------

“GAAP” means, subject to the limitations on the application thereof set forth in
Section 1.2, United States generally accepted accounting principles in effect as
of the date of determination thereof.

“GAGAS” means United States generally accepted government auditing standards in
effect as of the date of determination thereof.

“Gainful Employment Disclosure and Reporting Requirements” means the disclosure
and reporting requirements set forth at 34 C.F.R. § 668.6, effective on July 1,
2011.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, but excluding
any Educational Agency.

“Governmental Authorization” means any permit, license, authorization, plan,
directive, consent order or consent decree of or from any Governmental
Authority.

“Grantor Subsidiary” means a Subsidiary of Borrower that operates one or more
educational institutions or is a direct parent company for one or more
educational institutions and that executes and delivers to the Administrative
Agent a Grantor Subsidiary Joinder; provided that (i) no Subsidiary that is a
“Guarantor” under the Existing Credit Agreement shall be a Grantor Subsidiary
and (ii) each Grantor Subsidiary shall be a “Wholly Owned Subsidiary” or a
“Qualified Non-Wholly-Owned Subsidiary” under the Existing Credit Agreement.

“Grantor Subsidiary Collateral” as defined in Section 2.12.

“Grantor Subsidiary Joinder” means a joinder to this Agreement in the form of
Exhibit F.

“Guarantee” means, as to any Person, without duplication, (a) any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other monetary 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 monetary obligation, (ii) to purchase or
lease property, securities or services for the purpose of assuring the obligee
in respect of such Indebtedness or monetary other obligation of the payment or
performance of such Indebtedness or other monetary 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 monetary obligation, or
(iv) entered into for the purpose of assuring in any other manner the obligee in
respect of such Indebtedness or other monetary 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 monetary obligation of any other Person, whether or not
such Indebtedness or monetary other obligation is assumed by such Person (or any
right, contingent or otherwise, of any holder of such Indebtedness to obtain any
such Lien); provided that the term “Guarantee” shall not include endorsements
for collection or deposit, in either case in the ordinary course of business, or
customary and reasonable indemnity obligations in effect on the Closing Date or
entered into in connection with any acquisition or

 

-8-

--------------------------------------------------------------------------------

disposition of assets permitted under this Agreement (other than such
obligations with respect to Indebtedness). 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.

“Guarantor” as defined in the preamble hereto.

“Guaranty” means the guaranty of Guarantor set forth in Section 7.

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or 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.

“Hazardous Materials Activity” means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action or
response action with respect to any of the foregoing.

“Highest Lawful Rate” means the maximum lawful interest rate, if any, that at
any time or from time to time may be contracted for, charged, or received under
the laws applicable to any Lender which are presently in effect or, to the
extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.

“Historical Financial Statements” means as of the Closing Date, (i) the audited
financial statements of Holdings and its Subsidiaries or Education Management
and its Subsidiaries, as applicable, for the immediately preceding three fiscal
years, consisting of a consolidated balance sheet and the related consolidated
statements of income, stockholders’ equity and cash flows for such fiscal years,
and (ii) the unaudited financial statements of Education Management and its
Subsidiaries as at the most recently ended fiscal quarter, consisting of a
consolidated balance sheet and the related consolidated statements of income,
stockholders’ equity and cash flows for the three-, six- or nine-month period,
as applicable, ending on such date, and, in the case of clauses (i) and (ii),
certified by the chief financial officer or treasurer of Company that they
fairly present, in all material respects, the financial condition of Holdings
and its Subsidiaries or Education Management and its Subsidiaries, as
applicable, as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments.

“Holdings” as defined in the preamble hereto.

“Increased-Cost Lenders” as defined in Section 2.23.

“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;

 

-9-

--------------------------------------------------------------------------------

(b) the maximum amount (after giving effect to any prior drawings or reductions
which may have been reimbursed) of all letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds, performance
bonds and similar instruments issued or created by or for the account of such
Person;

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

(d) all obligations of such Person to pay the deferred purchase price of
property or services (other than (i) trade accounts payable in the ordinary
course of business and (ii) any earn-out obligation until such obligation
becomes a liability on the balance sheet of such Person in accordance with
GAAP);

(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 and mortgage,
industrial revenue bond, industrial development bond and similar financings),
whether or not such indebtedness shall have been assumed by such Person or is
limited in recourse;

(f) all Attributable Indebtedness;

(g) all obligations of such Person in respect of Disqualified Equity Interests;
and

(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, except to the extent such Person’s
liability for such Indebtedness is otherwise limited. The amount of any net
obligation under any Swap Agreement on any date shall be deemed to be the Swap
Termination Value thereof as of such date. The amount of Indebtedness of any
Person for purposes of clause (e) shall be deemed to be equal to the lesser of
(i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market
value of the property encumbered thereby as determined by such Person in good
faith.

“Indemnified Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages (including natural resource damages), penalties,
claims (including Environmental Claims), actions, judgments, suits, costs
(including the costs of any investigation, study, sampling, testing, abatement,
cleanup, removal, remediation or other response action necessary to remove,
remediate, clean up or abate any Hazardous Materials Activity), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of (i) this Agreement or
the other Credit Documents or the transactions contemplated hereby or thereby
(including the Lenders’ agreement to make Credit Extensions or the use or
intended use of the proceeds thereof, or any enforcement of any of the Credit
Documents (including any sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Guaranty)); or (ii) any
Environmental Claim or any Hazardous Materials Activity relating

 

-10-

--------------------------------------------------------------------------------

to or arising from, directly or indirectly, any past or present activity,
operation, land ownership, or practice of Holdings or any of its Subsidiaries.

“Indemnitee” as defined in Section 10.3.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to
the date hereof and from time to time hereafter, and any successor statute.

“Issuing Bank” shall mean, as the context may require, any or each of (a) Bank
of America as Issuing Bank hereunder, together with its permitted successors and
assigns in such capacity, with respect to Letters of Credit issued by Bank of
America and (b) any other financial institution that has or may become an
Issuing Bank pursuant to Section 2.4(h), with respect to Letters of Credit
issued by such financial institution and its successors and assigns in such
capacity.

“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, but excluding any
Educational Law.

“Lender” means each financial institution with a Commitment on the Closing Date,
and any other Person that becomes a party hereto pursuant to an Assignment
Agreement.

“Letter of Credit” means a letter of credit issued hereunder.

“Letter of Credit Application” means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by the Issuing Bank.

“Letter of Credit Usage” means, as at any date of determination, the sum of
(i) the maximum aggregate amount which is, or at any time thereafter may become,
available for drawing under all Letters of Credit then outstanding, and (ii) the
aggregate amount of all drawings under Letters of Credit honored by an Issuing
Bank and not theretofore reimbursed by or on behalf of 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 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 Capitalized Lease having substantially the same economic
effect as any of the foregoing).

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect
from time to time.

“Material Adverse Effect” means (a) a material adverse effect on the business,
operations, assets, liabilities (actual or contingent) or financial condition of
Holdings and its Subsidiaries, taken as a whole, (b) a material adverse effect
on the ability of Borrower or the Credit Parties (taken as a whole) to perform
their respective payment obligations under any Credit Document to which Borrower
or any of the Credit Parties is a party or (c) a material adverse effect on the
rights and remedies of the Lenders under any Credit Document.

 

-11-

--------------------------------------------------------------------------------

“Maturity Date” means the second anniversary of the Closing Date; provided,
however, if the 2015 Revolving Commitments (as defined in the Existing Credit
Agreement as in effect on the date hereof) under the Existing Credit Agreement
are terminated prior to such second anniversary, the Maturity Date shall be the
date of such termination.

“Mitigating Arrangements” as defined in Section 2.4(h).

“Non-Consenting Lender” as defined in Section 2.23.

“Non-U.S. Lender” as defined in Section 2.20(e).

“NPL” means the National Priorities List under CERCLA.

“Obligations” means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Credit Party arising under any Credit Document or
otherwise with respect to any Letter of Credit, 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 Credit Party 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. Without limiting the generality of the foregoing, the
Obligations of the Credit Parties under the Credit Documents include (i) the
obligation (including guarantee obligations) to pay principal, interest, Letter
of Credit commissions, reimbursement obligations, charges, expenses, fees,
indemnities and other amounts payable by any Credit Party under any Credit
Document and (ii) the obligation of any Credit Party to reimburse any amount in
respect of any of the foregoing that any Lender, in its sole discretion, may
elect to pay or advance on behalf of such Credit Party.

“Obligee Guarantor” as defined in Section 7.7.

“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 present or future stamp, court or documentary Taxes and any
other intangible or mortgage recording or similar Taxes imposed by any
Governmental Authority, which arise from any payment made under any Credit
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Credit Document, excluding
any such Tax imposed as a result of an assignment by a Lender (“Assignment Tax”)
if the Lender has a present or former connection with the jurisdiction imposing
such Assignment Tax (other than a connection arising solely from having
executed, delivered, enforced, become a party to, performed its obligations,
received payments, received or perfected a security interest under, and/or
engaged in any other transaction pursuant to, any Credit Document).

“Parent” as defined in the definition of “Change of Control.”

“Participant Register” as defined in Section 10.6(g).

 

-12-

--------------------------------------------------------------------------------

“Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment.

“Person” means and includes natural persons, corporations, limited partnerships,
general partnerships, limited liability companies, limited liability
partnerships, joint stock companies, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations, whether or
not legal entities, and Governmental Authorities.

“Platform” as defined in Section 5.2.

“Prime Rate” means the rate of interest quoted in The Wall Street Journal, Money
Rates Section as the Prime Rate (currently defined as the base rate on corporate
loans posted by at least 75% of the nation’s thirty (30) largest banks), as in
effect from time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
Agent or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.

“Principal Office” means, for each of Administrative Agent and Issuing Bank,
such Person’s “Principal Office” as set forth on Appendix B, or such other
office or office of a third party or sub-agent, as appropriate, as such Person
may from time to time designate in writing to Company, Administrative Agent and
each Lender.

“Program Integrity Rules” means, those DOE regulations that became effective on
July 1, 2011, as published in final form in the Federal Register on October 29,
2010, including, without limitation, the new regulations relating to the
definition of a credit hour, clock to credit hour conversions, state
authorization, incentive compensation and misrepresentation.

“Projections” as defined in Section 5.1(c).

“Pro Rata Share” means with respect to all payments, computations and other
matters relating to the Commitment of any Lender or any Letters of Credit issued
or participations purchased therein by any Lender, the percentage obtained by
dividing (i) the Exposure of that Lender by (ii) the aggregate Exposure of all
Lenders.

“Public Lender” as defined in Section 5.2(g).

“Qualified Equity Interests” means any Equity Interests that are not
Disqualified Equity Interests.

“Register” as defined in Section 2.7(b).

“Regulation D” means Regulation D of the Board of Governors, as in effect from
time to time.

“Related Fund” means, with respect to any Lender that is an investment fund, any
other investment fund that invests in commercial loans and that is managed or
advised by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.

“Release” means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of any Hazardous Material into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers

 

-13-

--------------------------------------------------------------------------------

or other closed receptacles containing any Hazardous Material), including the
movement of any Hazardous Material through the air, soil, surface water or
groundwater.

“Replacement Lender” as defined in Section 2.23.

“Requisite Lenders” means one or more Lenders having or holding Exposure and
representing more than 50% of the sum of the aggregate Exposure of all Lenders;
provided that the Exposure of, and the portion of the aggregate Exposure held or
deemed held by, any Defaulting Lender shall be excluded for purposes of making a
determination of Requisite Lenders.

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

“School” means a postsecondary institution of higher education which has been
granted a unique identification number by the DOE, including any branch or
additional location (as those terms are defined by the DOE or any Accrediting
Body) of such postsecondary institution of higher education and which has
received its own Educational Approval, operated by Borrower or any of its
Subsidiaries.

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

“Secured Parties” means, collectively, Administrative Agent, the Lenders,
Issuing Bank, each co-agent or sub-agent appointed by Administrative Agent from
time to time pursuant to Section 9.3(c), 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.

“Securities” means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as “securities” or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Senior Notes” means $375,000,000 in aggregate principal amount of Company’s
8.75% senior unsecured notes due 2014.

“Senior Notes Indenture” means the Indenture for the Senior Notes, dated as of
June 1, 2006.

“Settlement Service” as defined in Section 10.6(d).

“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

 

-14-

--------------------------------------------------------------------------------

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,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (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 an unreasonably small capital. 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.

“Sponsors” means Goldman Sachs Capital Partners, Providence Equity Partners
Inc., Leeds Equity Partners, and their respective Affiliates, but not including,
however, any portfolio companies of any of the foregoing or any Affiliates that
are not managed by the Merchant Banking Division of Goldman, Sachs & Co.

“State Educational Agency” means any state educational licensing body that
provides a license or authorization necessary for any School to provide
postsecondary education in a state.

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof; provided, in determining the percentage of ownership interests of any
Person controlled by another Person, no ownership interest in the nature of a
“qualifying share” of the former Person shall be deemed to be outstanding.
Unless otherwise expressly provided, all references herein to a “Subsidiary”
shall mean a Subsidiary of Holdings.

“Subsidiary Cash Collateral Account” means (a) Certificates of Deposit issued by
Bank of America or (b) any other deposit account held at Bank of America and, in
each case, either (at the option of the Collateral Agent) (i) for which a
Grantor Subsidiary is the deposit bank’s customer and which account is subject
to a Subsidiary Control Agreement or (ii) which account is otherwise blocked
pursuant to Bank of America’s procedures.

“Subsidiary Control Agreement” means a deposit account control agreement among a
Grantor Subsidiary, Collateral Agent and Bank of America, as deposit bank,
reasonably acceptable to the parties thereto, substantially in the form of Bank
of America’s standard form of deposit account control agreement, pursuant to
which Borrower shall grant control (within the meaning of Section 9-104 of the
UCC of the State of New York) of the Subsidiary Cash Collateral Accounts to the
Collateral Agent.

“Successor Company” as defined in Section 6.3(d).

“Swap Agreement” 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

 

-15-

--------------------------------------------------------------------------------

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 Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements 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 Agreements, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Agreements (which may include a Lender or any
Affiliate of a Lender).

“Tax” means any present or future tax, levy, impost, duty, assessment, charge,
fee, deduction or withholding imposed by any Governmental Authority (including
any interest, additions to taxes and penalties with respect thereto); provided,
“Taxes on the overall net income” of a Person shall mean Taxes on all or part of
the net income or profits (or similar Taxes in lieu thereof) of that Person
(including branch profits Taxes within the meaning of Section 884(a) of the Code
or similar taxes) imposed by the jurisdiction in which that Person is organized
or in which that Person’s applicable principal office (and/or, in the case of a
Lender, its lending office) is located or in which that Person (and/or, in the
case of a Lender, its lending office) is deemed to be doing business or in which
that Person has any other present or former connection (other than being deemed
to be doing business or having a present or former connection solely as a result
of having executed, delivered, become a party to, performed its obligations
under, received or perfected a security interest under, received payments under
or enforced any Credit Document).

“Terminated Lender” as defined in Section 2.23.

“Title IV” means Chapter 28, Subchapter IV of the Higher Education Act of 1965,
as amended (20 U.S.C.A. §§ 1070 et seq.), and any amendments or successor
statutes thereto.

“Title IV Programs” means the federal student financial assistance programs
authorized by Title IV, including in particular those programs as listed in 34
C.F.R. § 668.1(c) or any successor regulation.

“Transactions” means the execution and delivery of the Credit Documents,
delivery of cash in the Cash Collateral Accounts, the grant of the security
interests in the Collateral, the issuance of Letters of Credit, the transfer of
Cash Collateral (other than any Certificate of Deposit) from the Borrower Cash
Collateral Account to Subsidiary Cash Collateral Accounts and payment of fees
and expenses in connection with the foregoing.

“Threshold Amount” means $50,000,000.

“UCC” means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

“U.S. Lender” as defined in Section 2.20(e).

1.2. Accounting Terms. Except as otherwise expressly provided herein, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with

 

-16-

--------------------------------------------------------------------------------

GAAP. Financial statements and other information required to be delivered by
Holdings to Lenders pursuant to Sections 5.1(a) and 5.1(b) shall be prepared in
accordance with GAAP as in effect at the time of such preparation, except as
otherwise specifically prescribed herein. If at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
any Credit Document, and either Company or the Requisite Lenders shall so
request, the Lenders, Administrative Agent and Company shall negotiate in good
faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP (subject to the approval of the Requisite
Lenders); provided that, until so amended, such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein.
Subject to the foregoing, calculations in connection with the definitions,
covenants and other provisions hereof shall utilize accounting principles and
policies in conformity with those used to prepare the Historical Financial
Statements.

1.3. Interpretation, etc. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference. References herein to any Section, Appendix, Schedule or Exhibit
shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may
be, hereof unless otherwise specifically provided. The use herein of the word
“include” or “including”, when following any general statement, term or matter,
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as “without limitation”
or “but not limited to” or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
fall within the broadest possible scope of such general statement, term or
matter. Unless the context requires otherwise, (a) 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 Credit Document), (b) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) 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 (d) 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.

SECTION 2. LETTERS OF CREDIT

2.1. [Reserved].

2.2. [Reserved].

2.3. [Reserved].

2.4. Issuance of Letters of Credit and Purchase of Participations Therein.

(a) Letters of Credit. During the Commitment Period, subject to the terms and
conditions hereof, Issuing Bank agrees to issue standby letters of credit for
the account of Borrower; provided that

(i) each Letter of Credit shall be denominated in Dollars;

(ii) the stated amount of each Letter of Credit shall not be less than $25,000
or such lesser amount as is acceptable to Issuing Bank;

 

-17-

--------------------------------------------------------------------------------

(iii) after giving effect to such issuance, in no event shall the Letter of
Credit Usage exceed the Commitments then in effect;

(iv) in no event shall any Letter of Credit have an expiration date later than
the earlier of (1) 5 Business Days prior to the Maturity Date and (2) unless
otherwise agreed by Issuing Bank, the date which is seventeen months from the
date of issuance of such Letter of Credit; and

(v) in no event shall any Letter of Credit be issued in favor of any Person
other than the DOE;

(vi) Issuing Bank shall not be under any obligation to issue any Letter of
Credit if

(A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain Issuing Bank from issuing such
Letter of Credit, or any Law applicable to Issuing Bank or any request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over Issuing Bank shall prohibit, or request that
Issuing Bank refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon Issuing Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for which
Issuing Bank is not otherwise compensated hereunder) not in effect on the
Closing Date, or shall impose upon Issuing Bank any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which Issuing Bank in
good faith deems material to it; or

(B) the issuance of such Letter of Credit would violate one or more policies of
the Issuing Bank applicable to letters of credit generally;

(vii) the Issuing Bank shall not amend any Letter of Credit if the Issuing Bank
would not be permitted at such time to issue such Letter of Credit in its
amended form under the terms hereof;

(viii) the Issuing Bank shall be under no obligation to amend any Letter of
Credit if (A) the Issuing Bank would have no obligation at such time to issue
such Letter of Credit in its amended form under the terms hereof, or (B) the
beneficiary of such Letter of Credit does not accept the proposed amendment to
such Letter of Credit; and

(ix) in no event shall any Letter of Credit, by its terms or the terms of any
document related thereto, provide for one or more automatic increases in the
stated amount thereof.

Each request by Borrower for the issuance or amendment of a Letter of Credit
shall be deemed to be representation by Borrower that the Credit Extension so
requested complies with this Section 2.4(a)(i)-(v). Subject to the foregoing,
Issuing Bank may agree that a Letter of Credit will automatically be extended
for one or more successive periods not to exceed seventeen months each (and in
any event not beyond the date which is five Business Days prior to the Maturity
Date), unless Issuing Bank elects not to extend for any such additional period;
provided, Issuing Bank shall not extend any such Letter of Credit if it has
received written notice that an Event of Default has occurred and is continuing
at the time Issuing Bank must elect to allow such extension.

(b) Notice of Issuance. Whenever Borrower desires the issuance of a Letter of
Credit, it shall deliver to Issuing Bank (with a copy to Administrative Agent) a
request in the form of a Letter of Credit Application appropriately completed
and signed by a Responsible Officer of Borrower no later

 

-18-

--------------------------------------------------------------------------------

than 11:00 a.m. (New York City time) at least two Business Days, or in each case
such shorter period as may be agreed in a particular instance by Issuing Bank
and Administrative Agent in their sole discretion in any particular instance, in
advance of the proposed date of issuance. In the case of a request for an
initial issuance of a Letter of Credit, such Letter of Credit Application shall
specify in form and detail satisfactory to Issuing Bank: (a) the proposed
issuance date of the requested Letter of Credit (which shall be a Business Day);
(b) the amount thereof; (c) the expiry date thereof; (d) the name and address of
the beneficiary thereof (which shall be the DOE); (e) the documents to be
presented by such beneficiary in case of any drawing thereunder; (f) the full
text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (g) such other matters as Issuing Bank may reasonably
require. In the case of a request for an amendment of any outstanding Letter of
Credit, such Letter of Credit Application shall specify in form and detail
satisfactory to Issuing Bank (a) the Letter of Credit to be amended; (b) the
proposed date of amendment thereof (which shall be a Business Day); (c) the
nature of the proposed amendment; and (d) such other matters as Issuing Bank may
reasonably require. Additionally, Borrower shall furnish to Issuing Bank and
Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment as Issuing Bank or
Administrative Agent may reasonably require. Promptly after receipt of any
Letter of Credit Application, Issuing Bank shall confirm with Administrative
Agent (by telephone or writing) that Administrative Agent has received a copy of
such Letter of Credit Application from Borrower and, if not, Issuing Bank will
provide Administrative Agent with a copy thereof. Unless Issuing Bank has
received a notice from Administrative Agent, at least one Business Day prior to
the requested date of issuance or amendment of the applicable Letter of Credit,
that one or more applicable conditions set forth in Section 3.2 shall not then
be satisfied or waived, then subject to the terms and conditions in this
Section 2.4, Issuing Bank shall, on the requested date, issue or amend the
Letter of Credit in accordance with Issuing Bank’s standard operating
procedures. Promptly after its delivery of any Letter of Credit or any amendment
to a Letter of Credit to an advising bank with respect thereto or to the
beneficiary thereof, Issuing Bank will also deliver to Borrower and
Administrative Agent a true and complete copy of such Letter of Credit or
amendment. Upon the issuance of any Letter of Credit or amendment to a Letter of
Credit, Administrative Agent shall promptly notify each Lender of such issuance
or amendment, which notice shall be accompanied by a copy of such Letter of
Credit or amendment to a Letter of Credit and the amount of such Lender’s
respective participation in such Letter of Credit pursuant to Section 2.4(e).

(c) Responsibility of Issuing Bank With Respect to Requests for Drawings and
Payments. In determining whether to honor any drawing under any Letter of Credit
by the beneficiary thereof, Issuing Bank shall be responsible only to examine
the documents delivered under such Letter of Credit with reasonable care so as
to ascertain whether they appear on their face to be in accordance with the
terms and conditions of such Letter of Credit. As between Borrower and Issuing
Bank, Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit issued by Issuing Bank, by the respective beneficiaries of
such Letters of Credit. In furtherance and not in limitation of the foregoing,
Issuing Bank shall not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with a Letter of Credit Application, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of any such Letter of Credit to comply fully with any conditions
required in order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuing Bank, including any Governmental

 

-19-

--------------------------------------------------------------------------------

Acts; none of the above shall affect or impair, or prevent the vesting of, any
of Issuing Bank’s rights or powers hereunder. Without limiting the foregoing and
in furtherance thereof, any action taken or omitted by Issuing Bank under or in
connection with the Letters of Credit or any documents and certificates
delivered thereunder, if taken or omitted in good faith, shall not give rise to
any liability on the part of Issuing Bank to Borrower. Notwithstanding anything
to the contrary contained in this Section 2.4(c), Borrower may have a claim
against Issuing Bank, and Issuing Bank may be liable to Borrower, to the extent,
but only to the extent, of any direct, as opposed to consequential, special or
punitive damages suffered by Borrower which are determined by a court of
competent jurisdiction in a final and non-appealable decision to result from
Issuing Bank’s willful misconduct or gross negligence.

(d) Reimbursement by Borrower of Amounts Drawn or Paid Under Letters of Credit.
In the event Issuing Bank has determined to honor a drawing under a Letter of
Credit, it shall promptly notify Borrower and Administrative Agent, and Borrower
shall reimburse Administrative Agent (for the account of Issuing Bank) on the
Business Day on which such drawing is honored (provided, that if such notice is
provided by Issuing Bank after 11:00 a.m. (New York City time) on the date of
such drawing, the Borrower shall reimburse Administrative Agent (for the account
of the Issuing Bank) on or before the Business Day immediately following the
date on which such drawing is honored) in an amount in Dollars and in same day
funds equal to the amount of such honored drawing. If any drawings under such
Letter of Credit are not reimbursed by Borrower as provided in the preceding
sentence, Administrative Agent will withdraw an amount equal to the drawing from
one or more Cash Collateral Accounts selected by it and reimburse Issuing Bank
for such amount. The Administrative Agent may also withdraw funds from one or
more Cash Collateral Accounts selected by it if any fee payable under
Section 2.11 is not paid when due. Borrower’s obligations with respect to the
payment required to be made pursuant to this clause (d) shall be fully satisfied
for all purposes hereunder and under other Credit Documents to the extent that
funds from any Cash Collateral Account are applied to such drawing, which
application shall be made by the Issuing Bank promptly following (and, in any
event, as applicable, on the same Business Day as or the next Business Day
following) any such withdrawal from any such Collateral Account described in the
preceding sentence; provided, that Borrower shall remain liable to the extent of
any deficiency.

(e) Lenders’ Purchase of Participations in Letters of Credit. Immediately upon
the issuance of each Letter of Credit, each Lender shall be deemed to have
purchased, and hereby agrees to irrevocably purchase, from Issuing Bank a
participation in such Letter of Credit and any drawings honored thereunder in an
amount equal to such Lender’s Percentage of the maximum amount which is or at
any time may become available to be drawn thereunder. In the event that Borrower
shall fail for any reason to reimburse Administrative Agent (for the account of
the Issuing Bank) as provided in Section 2.4(d), Administrative Agent shall
promptly notify each Lender of the unreimbursed amount of such honored drawing
and of such Lender’s respective participation therein based on such Lender’s
Percentage. Each Lender’s obligation to reimburse Issuing Bank for amounts drawn
under Letters of Credit, as contemplated by this Section 2.4, shall be absolute
and unconditional and shall not be affected by any circumstance, including
(a) any setoff, counterclaim, recoupment, defense or other right which such
Lender may have against Administrative Agent, Issuing Bank, Borrower or any
other Person for any reason whatsoever; (b) the occurrence or continuance of a
Default, or (c) any other occurrence, event or condition, whether or not similar
to any of the foregoing. Each Lender shall make available to Administrative
Agent (for the account of Issuing Bank) an amount equal to its respective
participation, in Dollars and in same day funds, at the office of Administrative
Agent specified in such notice, not later than 12:00 p.m. (New York City time)
on the first business day (under the laws of the jurisdiction in which such
office of Administrative Agent is located) after the date notified by
Administrative Agent. In the event that any Lender fails to make available to
Administrative Agent (for the account of Issuing Bank) on such business day the
amount of such Lender’s participation in such Letter of Credit as provided in
this Section 2.4(e), Issuing Bank shall be entitled to recover (acting through
the Administrative Agent) such amount on demand from such Lender together with
interest thereon for three Business Days at the rate customarily

 

-20-

--------------------------------------------------------------------------------

used by Issuing Bank for the correction of errors among banks and thereafter at
the Base Rate. Nothing in this Section 2.4(e) shall be deemed to prejudice the
right of any Lender to recover from Issuing Bank any amounts made available by
such Lender to Issuing Bank pursuant to this Section in the event that it is
determined that the payment with respect to a Letter of Credit in respect of
which payment was made by such Lender constituted gross negligence or willful
misconduct on the part of Issuing Bank. In the event Issuing Bank shall have
been reimbursed by other Lenders pursuant to this Section 2.4(e) for all or any
portion of any drawing honored by Issuing Bank under a Letter of Credit, Issuing
Bank shall distribute (acting through the Administrative Agent) to each Lender
which has paid all amounts payable by it under this Section 2.4(e) with respect
to such honored drawing such Lender’s Percentage of all payments subsequently
received by Issuing Bank from Borrower in reimbursement of such honored drawing
when such payments are received. Any such distribution shall be made to a Lender
at its primary address set forth below its name on Appendix B or at such other
address as such Lender may request. If any payment received by Issuing Bank
pursuant to this Section 2.4 is required to be returned (including pursuant to
any settlement entered into by Issuing Bank in its discretion), each Lender
shall pay to Administrative Agent (for the account of Issuing Bank) its
Percentage thereof on demand of Issuing Bank, plus interest thereon from the
date of such demand to the date such amount is returned by such Lender, at a
rate per annum equal to the Federal Funds Rate from time to time in effect. The
obligations of the Lenders under this clause shall survive the payment in full
of the Obligations and the termination of this Agreement.

(f) Obligations Absolute. The obligation of a Borrower to reimburse Issuing Bank
for drawings honored under the Letters of Credit issued by it pursuant to
Section 2.4(d) and the obligations of Lenders under Section 2.4(e) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms hereof under all circumstances including any of the following
circumstances: (i) any lack of validity or enforceability of any Letter of
Credit; (ii) the existence of any claim, set-off, defense or other right which
Borrower or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such transferee
may be acting), Issuing Bank, Lender or any other Person or, in the case of a
Lender, against Borrower, whether in connection herewith, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between Borrower or one of its Subsidiaries and the beneficiary for
which any Letter of Credit was procured); (iii) any draft or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) payment by Issuing Bank under any Letter of
Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit; (v) any adverse
change in the business, operations, properties, assets, condition (financial or
otherwise) or prospects of Holdings or any of its Subsidiaries; (vi) any breach
hereof or any other Credit Document by any party thereto; (vii) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing; or (viii) the fact that an Event of Default or a Default shall have
occurred and be continuing; provided, in each case, that payment by Issuing Bank
under the applicable Letter of Credit shall not have constituted gross
negligence or willful misconduct of Issuing Bank under the circumstances in
question.

(g) Indemnification. Without duplication of any obligation of Borrower under
Section 10.2 or 10.3, in addition to amounts payable as provided herein,
Borrower hereby agrees to protect, indemnify, pay and save harmless Issuing Bank
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which Issuing
Bank may incur or be subject to as a consequence, direct or indirect, of (i) the
issuance of any Letter of Credit to Borrower by Issuing Bank, other than as a
result of (1) the gross negligence or willful misconduct of Issuing Bank or
(2) the wrongful dishonor by Issuing Bank of a proper demand for payment made
under any Letter of Credit issued by it, or (ii) the failure of Issuing Bank to
honor a drawing under any such Letter of Credit as a result of any Governmental
Act.

 

-21-

--------------------------------------------------------------------------------

(h) Additional Issuing Banks. Company may, at any time and from time to time
with the consent of Administrative Agent (which consent shall not be
unreasonably withheld or delayed) and such financial institution, designate one
or more additional financial institutions to act as an issuing bank under the
terms of this Agreement, subject to reporting requirements reasonably
satisfactory to the Administrative Agent with respect to issuances, amendments,
extensions and terminations of Letters of Credit by such additional issuing
bank, and with such other procedures and requirements with respect to the
issuance of Letters of Credit that such additional issuing bank may reasonably
require with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld or delayed). Any Lender designated as an issuing bank
pursuant to this paragraph (h) shall be deemed to be an “Issuing Bank” (in
addition to being a Lender) in respect of Letters of Credit issued or to be
issued by such Lender, and, with respect to such Letters of Credit, such term
shall thereafter apply to such Lender.

Company agrees that, with respect to any Issuing Bank (other than Bank of
America), neither Company nor any of its Subsidiaries shall mitigate such
Issuing Bank’s fronting risk with respect to any other Lender (the “Mitigating
Arrangements”), unless Company shall have offered to mitigate Bank of America’s
risk, as Issuing Bank, on terms that are no less favorable to Bank of America in
respect of its fronting risk than the Mitigating Arrangements are in respect of
such Issuing Bank’s fronting risk.

(i) Benefits as Agent. Issuing Bank shall have all of the benefits and
immunities (i) provided to Administrative Agent in Section 9 with respect to any
acts taken or omissions suffered by Issuing Bank in connection with Letters of
Credit issued by it or proposed to be issued by it and Letter of Credit
Applications pertaining to such Letters of Credit as fully as if the term
“Administrative Agent” as used in Section 9 included Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided herein with respect
to Issuing Bank.

(j) Replacement of Issuing Bank. Any Issuing Bank may be replaced at any time by
written agreement among Company, the Administrative Agent, the replaced Issuing
Bank and the successor Issuing Bank. Administrative Agent shall notify the
Lenders of any such replacement of such Issuing Bank. At the time any such
replacement shall become effective, Company shall pay all unpaid fees accrued
for the account of the replaced Issuing Bank pursuant to Section 2.11(b). From
and after the effective date of any such replacement, (i) the successor Issuing
Bank shall have all the rights and obligations of such Issuing Bank under this
Agreement with respect to Letters of Credit to be issued thereafter and
(ii) references herein to the term “Issuing Bank” shall be deemed to refer to
such successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require. After the replacement of
an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit issued by it prior to
such replacement, but shall not be required to issue additional Letters of
Credit.

(k) Reporting. If Issuing Bank is not the same Person as Administrative Agent,
on the first Business Day of each calendar month, Issuing Bank shall provide to
Administrative Agent a report listing all outstanding Letters of Credit and the
amounts and beneficiaries thereof and Administrative Agent shall promptly
provide such report to each Lender.

2.5. Pro Rata Shares; Availability of Funds.

(a) Pro Rata Shares. All participations shall be purchased by Lenders
simultaneously and proportionately to their respective Pro Rata Shares, it being
understood that no Lender shall be responsible for any default by any other
Lender in such other Lender’s obligation to purchase a participation

 

-22-

--------------------------------------------------------------------------------

required hereby nor shall any Commitment of any Lender be increased or decreased
as a result of a default by any other Lender in such other Lender’s obligation
to purchase a participation required hereby.

(b) Availability of Funds. Unless Administrative Agent shall have been notified
by any Lender prior to the applicable Credit Date that such Lender does not
intend to make available to Administrative Agent the amount of such Lender’s Pro
Rata Share for any drawings under a Letter of Credit requested on such Credit
Date, Administrative Agent may assume that such Lender has made such amount
available to Administrative Agent on such Credit Date and Administrative Agent
may, in its sole discretion, but shall not be obligated to, make available to
Issuing Bank a corresponding amount on such Credit Date. If such corresponding
amount is not in fact made available to Administrative Agent by such Lender,
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Credit Date until the date such amount is paid to Administrative Agent, at the
customary rate set by Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. If such Lender
does not pay such corresponding amount forthwith upon Administrative Agent’s
demand therefor, Administrative Agent shall promptly notify the Issuing Bank,
and Issuing Bank shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Credit Date until the date such amount is paid to Administrative Agent, at the
rate payable hereunder for drawings under Letters of Credit. Nothing in this
Section 2.5(b) shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that a Borrower may
have against any Lender as a result of any default by such Lender hereunder.

2.6. Use of Credit Extension. Borrower represents and warrants that each Credit
Extension shall be in the ordinary course of Borrower’s business. No Credit
Extension shall be used in any manner that causes or might cause such Credit
Extension to violate Regulation T, Regulation U or Regulation X of the Board of
Governors or any other regulation thereof or to violate the Exchange Act.

2.7. Evidence of Debt; Register; Lenders’ Books and Records.

(a) Lenders’ Evidence of Debt. Each Lender shall maintain on its internal
records an account or accounts evidencing the Obligations of Borrower to such
Lender. Any such recordation shall be conclusive and binding on Borrower, absent
manifest error; provided, that the failure to make any such recordation, or any
error in such recordation, shall not affect any Lender’s Commitments or
Borrower’s Obligations; and provided further, in the event of any inconsistency
between the Register and any Lender’s records, the recordations in the Register
shall govern.

(b) Register. Administrative Agent (or its agent or sub-agent appointed by it)
on behalf of Borrower shall maintain at the Principal Office a register for the
recordation of the names and addresses of Lenders and the Commitments of each
Lender from time to time (the “Register”). The Register shall be available for
inspection by Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Administrative Agent shall record, or shall
cause to be recorded, in the Register the Commitments in accordance with the
provisions of Section 10.6 and any such recordation shall be conclusive and
binding on Borrower and each Lender, absent manifest error; provided, failure to
make any such recordation, or any error in such recordation, shall not affect
any Lender’s Commitments or Borrower’s Obligations. Borrower hereby designates
Administrative Agent to serve as Borrower’s agent for purposes of maintaining
the Register as provided in this Section 2.7, and Borrower hereby agrees that,
to the extent Administrative Agent serves in such capacity, Administrative Agent
and its officers, directors, employees, agents, subagents and affiliates shall
constitute “Indemnitees.”

2.8. Interest.

 

-23-

--------------------------------------------------------------------------------

(a) Borrower agrees to pay to Issuing Bank, with respect to drawings honored
under any Letter of Credit, interest on the amount paid by Issuing Bank in
respect of each such honored drawing from the date such drawing is honored to
but excluding the date such amount is reimbursed by or on behalf of Borrower
(including reimbursement through a withdrawal from a Cash Collateral Account as
provided in Section 2.4(d)) at a rate equal to the Base Rate plus 2% per annum.

(b) Interest payable pursuant to Section 2.8(a) shall be computed on the basis
of a 365/366-day year for the actual number of days elapsed in the period during
which it accrues, and shall be payable on demand or, if no demand is made, on
the date on which the related drawing under a Letter of Credit is reimbursed in
full. Promptly upon receipt by Issuing Bank of any payment of interest pursuant
to Section 2.8(a), Issuing Bank shall distribute to each Lender, out of the
interest received by Issuing Bank in respect of the period from the date such
drawing is honored to but excluding the date on which Issuing Bank is reimbursed
for the amount of such drawing, the amount that such Lender would have been
entitled to receive in respect of the letter of credit fee that would have been
payable in respect of such Letter of Credit for such period if no drawing had
been honored under such Letter of Credit. In the event Issuing Bank shall have
been reimbursed by Lenders for all or any portion of such honored drawing,
Issuing Bank shall distribute to each Lender which has paid all amounts payable
by it under Section 2.4(e) with respect to such honored drawing such Lender’s
Percentage of any interest received by Issuing Bank in respect of that portion
of such honored drawing so reimbursed by Lenders for the period from the date on
which Issuing Bank was so reimbursed by Lenders to but excluding the date on
which such portion of such honored drawing is reimbursed by Borrower.

2.9. [Reserved].

2.10. Default Interest. If any fee or other amount payable by Borrower hereunder
is not paid when due and not fully reimbursed through a withdrawal from a Cash
Collateral Account as provided in Section 2.4(d), whether at stated maturity,
upon acceleration or otherwise, such overdue amount shall bear interest, after
as well as before judgment (and including post-petition interest in any
proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand, at a rate equal to Base Rate plus 2% per annum. Payment or
acceptance of the default interest provided for in this Section 2.10 is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Default or Event of Default or otherwise prejudice or limit any rights or
remedies of Administrative Agent or any Lender.

2.11. Fees.

(a) Borrower agrees to pay to Lenders:

(i) commitment fees equal to (A) the average of the daily difference between
(1) the Commitments and (2) the aggregate total undrawn amount under all Letters
of Credit, times (B) 0.15% per annum; and

(ii) letter of credit fees equal to (A) 0.75% per annum, times (B) the average
aggregate daily maximum amount available to be drawn under all Letters of Credit
(regardless of whether any conditions for drawing could then be met and
determined as of the close of business on any date of determination).

All fees referred to in this Section 2.11(a) shall be paid to Administrative
Agent at its Principal Office and upon receipt, Administrative Agent shall
promptly distribute to each Lender its Pro Rata Share. All fees referred to in
Section 2.11(a) shall be calculated on the basis of a 360-day year and the
actual number of days elapsed and shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31

 

-24-

--------------------------------------------------------------------------------

of each year during the Commitment Period, commencing on the first such date to
occur after the Closing Date, and ending on the Maturity Date.

(b) Borrower agrees to pay directly to Issuing Bank, for its own account, such
documentary and processing charges for any issuance, amendment, transfer or
payment of a Letter of Credit as are in accordance with Issuing Bank’s standard
schedule for such charges and as in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.

(c) In addition to any of the foregoing fees, Borrower agrees to pay to Agents
such other fees in the amounts and at the times separately agreed upon,
including in the Fee Letter.

2.12. Grant of Security Interest; Cash Collateral Accounts.

(a) As collateral security for the payment and performance in full of all the
Obligations, Borrower hereby pledges and grants to the Collateral Agent for the
benefit of the Secured Parties, a first priority lien on and security interest
in all of the right, title and interest of Borrower in, to and under the
following property, wherever located, and whether now existing or hereafter
arising or acquired from time to time (collectively, the “Borrower Collateral”):

(i) the Borrower Cash Collateral Account;

(ii) the Cash Collateral in the Borrower Cash Collateral Account;

(iii) all books and records relating to the Borrower Collateral; and

(iv) all proceeds and products of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing, any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to Borrower from time to time with respect to any of the
foregoing.

(b) As collateral security for the payment and performance in full of all the
Obligations, the Grantor Subsidiaries hereby pledge and grant to the Collateral
Agent for the benefit of the Secured Parties, an exclusive lien on and security
interest in all of the right, title and interest of such Grantor Subsidiary in,
to and under the following property, wherever located, and whether now existing
or hereafter arising or acquired from time to time (collectively, the “Grantor
Subsidiary Collateral” and, together with the Borrower Collateral, the
“Collateral”):

(i) all Subsidiary Cash Collateral Accounts;

(ii) all Cash Collateral in Subsidiary Cash Collateral Accounts;

(iii) all books and records relating to the Grantor Subsidiary Collateral; and

(iv) all proceeds and products of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing, any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to such Grantor Subsidiary from time to time with respect to
any of the foregoing.

(c) Borrower hereby agrees to deposit such additional amount of cash in the
Borrower Cash Collateral Account, which shall be transferred to Subsidiary Cash
Collateral Accounts within one Business Day following deposit into the Borrower
Cash Collateral Account at the request of Borrower

 

-25-

--------------------------------------------------------------------------------

substantially in the form of Exhibit E, such that the Collateral Agent, for the
benefit of Secured Parties, has a perfected exclusive security interest in Cash
Collateral held in Subsidiary Cash Collateral Accounts equal, at all times, to
105% of the total undrawn amount of all Letters of Credit securing the
Obligations.

(d) To the extent requested by Borrower, funds in any Cash Collateral Account
may be invested in Certificates of Deposit issued by Administrative Agent and
agreed to by Borrower and Administrative Agent; provided, that the maturity date
of any such Certificate of Deposit shall be at least one Business Day prior to
the Maturity Date.

(e) Each Credit Party agrees and acknowledges that Cash Collateral shall not be
subject to withdrawal from any Cash Collateral Account for any purpose
whatsoever (other than by Administrative Agent to reimburse Issuing Bank for
drawings under a Letter of Credit in accordance with Section 2.4(d), to pay
interest and fees payable hereunder or to satisfy other Obligations in
accordance with Section 8.3(b), or by Bank of America as deposit bank to pay its
customary fees and charges in respect of the Cash Collateral Accounts as
required pursuant to the Control Agreements) and shall not otherwise be
available to Holdings or any Subsidiary, except (i) that Cash Collateral shall
be transferred from the Borrower Cash Collateral Account to Subsidiary Cash
Collateral Accounts in accordance with Section 2.12(b) or (ii) upon the payment
in full of all Obligations, termination of all Commitments and the termination
or expiration of all Letters of Credit.

(f) If Administrative Agent is required to terminate a Certificate of Deposit on
a date other than the maturity date of such Certificate of Deposit due to an
event pursuant to Section 2.4(d) or 8.2(b) or as otherwise provided in this
Agreement, the amount of Cash Collateral remaining in the Cash Collateral
Accounts shall be reduced by the amount of any loss, cost and expense
attributable to such event. A certificate of Administrative Agent setting forth
in reasonable detail the amount of such loss, cost or expense shall be delivered
to Borrower and shall be conclusive and binding absent manifest error.

(g) So long as no Default exists, any interest accruing on Cash Collateral shall
be paid to Borrower or the Grantor Subsidiary, as applicable, at intervals to be
agreed between the Collateral Agent and Borrower.

(h) Upon the payment in full of all Obligations, the cancellation or termination
of the Commitments and the termination or expiration of all outstanding Letters
of Credit, (i) the security interest granted hereby shall automatically
terminate hereunder and of record and all rights to the Collateral shall revert
to the Credit Parties, and (ii) upon any such termination, the Collateral Agent
shall, at the Credit Parties’ expense, promptly execute and deliver to the
Credit Parties or otherwise authorize the filing of such documents as the Credit
Parties shall reasonably request, including financing statement amendments to
evidence such termination; provided, however, that the security interests
granted hereby shall continue to be effective, or be reinstated, as the case may
be, if, at any time, payment or any part thereof of any of the Obligations is
rescinded or must otherwise be restored or returned by the Collateral Agent or
any other Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or any Grantor Subsidiary,or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Borrower or any Grantor Subsidiary or any
substantial part of its property, or otherwise, all as though such payments had
not been made.

2.13. Commitment Reductions.

(a) Company may, upon not less than three Business Days’ prior written or
telephonic notice confirmed in writing to Administrative Agent (which original
written or telephonic notice Administrative Agent will promptly transmit by
facsimile or telephone to each applicable Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty,

 

-26-

--------------------------------------------------------------------------------

the Commitments in an amount up to the amount by which the Commitments exceed
the Letter of Credit Usage at the time of such proposed termination or
reduction; provided, any such partial reduction of the Commitments shall be in
an aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in
excess of that amount.

(b) Company’s notice to Administrative Agent shall designate the date (which
shall be a Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Commitments shall be
effective on the date specified in Company’s notice and shall reduce the
Commitment of each Lender proportionately to its Percentage thereof.

2.14. [Reserved].

2.15. [Reserved].

2.16. General Provisions Regarding Payments.

(a) All payments by Borrower of interest, fees and other Obligations shall be
made in Dollars in same day funds, without defense, setoff or counterclaim, free
of any restriction or condition, and delivered to Administrative Agent not later
than 1:00 p.m. (New York City time) on the date due at the Principal Office
designated by Administrative Agent for the account of Lenders; for purposes of
computing interest and fees, funds received by Administrative Agent after that
time on such due date shall be deemed to have been paid by Borrower on the next
succeeding Business Day.

(b) [Reserved].

(c) Administrative Agent (or its agent or sub-agent appointed by it) shall
promptly distribute to each Lender at such address as such Lender shall indicate
in writing, the amount due to such Lender, to the extent received by
Administrative Agent.

(d) Whenever any payment to be made hereunder shall be stated to be due on a day
that is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest or fees hereunder.

(e) Administrative Agent shall deem any payment by or on behalf of Borrower
hereunder that is not made in same day funds prior to 1:00 p.m. (New York City
time) to be a non-conforming payment. Any such payment shall not be deemed to
have been received by Administrative Agent until the later of (i) the time such
funds become available funds, and (ii) the applicable next Business Day.
Administrative Agent shall give prompt telephonic notice to Borrower and each
applicable Lender (confirmed in writing) if any payment is non-conforming. Any
payment not conformed according to the following sentence and not fully
reimbursed through a withdrawal from a Cash Collateral Account as provided in
Section 2.4(d) may constitute or become a Default or Event of Default in
accordance with the terms of Section 8.1(a). Interest shall continue to accrue
on any principal as to which a non-conforming payment is made until such funds
become available funds (but in no event less than the period from the date of
such payment to the next succeeding applicable Business Day) at the rate
determined pursuant to Section 2.10 from the date such amount was due and
payable until the date such amount is paid in full (or reimbursed through a
withdrawal from a Cash Collateral Account as provided in Section 2.4(d)).

2.17. Ratable Sharing. Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment through the exercise of any right of set-off
or banker’s lien, by counterclaim or cross action or by the enforcement of any
right under the Credit Documents or otherwise, or as

 

-27-

--------------------------------------------------------------------------------

adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amounts
payable in respect of Letters of Credit, fees and other amounts then due and
owing to such Lender hereunder or under the other Credit Documents
(collectively, the “Aggregate Amounts Due” to such Lender) which is greater than
the proportion received by any other Lender in respect of the Aggregate Amounts
Due to such other Lender, then the Lender receiving such proportionately greater
payment shall (a) notify Administrative Agent and each other Lender of the
receipt of such payment and (b) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of a
participation simultaneously upon the receipt by such seller of its portion of
such payment) in the Aggregate Amounts Due to the other Lenders so that all such
recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion
to the Aggregate Amounts Due to them; provided, if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender upon the bankruptcy or reorganization of a Borrower
or otherwise, those purchases shall be rescinded and the purchase prices paid
for such participations shall be returned to such purchasing Lender ratably to
the extent of such recovery, but without interest. Borrower expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker’s lien, set-off or
counterclaim with respect to any and all monies owing by Borrower to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder. Notwithstanding anything to the contrary
contained herein, the provisions of this Section 2.17 shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to non-Defaulting Lenders as opposed to Defaulting Lenders.

2.18. [Reserved].

2.19. Increased Costs; Capital Adequacy.

(a) Compensation For Increased Costs and Taxes. Subject to the provisions of
Section 2.20 (which shall be controlling with respect to the matters covered
thereby), in the event that any Lender (which term shall include Issuing Bank
for purposes of this Section 2.19(a)) shall determine that a Change in Law:
(i) imposes, modifies or holds applicable any reserve (including any marginal,
emergency, supplemental, special or other reserve), special deposit, compulsory
loan, FDIC insurance or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, or advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of such
Lender; (ii) imposes any other condition (other than with respect to Taxes) on
or affecting such Lender (or its applicable lending office) or its obligations
hereunder or the London interbank market or (iii) imposes any Taxes on or in
respect of such Lender’s loans, letters of credit, commitments, or other
obligations or its deposits, reserves, other liabilities or capital attributable
thereto (other than (A) Excluded Taxes or (B) any Taxes indemnifiable under
Section 2.20) and the result of either of the foregoing is to increase the cost
to such Lender of agreeing to make, making or maintaining Letters of Credit
hereunder or to reduce any amount received or receivable by such Lender (or its
applicable lending office) with respect thereto; then, in any such case,
Borrower shall promptly pay to such Lender, upon receipt of the statement
referred to in the next sentence, such additional amount or amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as may be
necessary to compensate such Lender for any such increased cost or reduction in
amounts received or receivable hereunder. Such Lender shall deliver to Company
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Lender under this Section 2.19(a), which statement shall be conclusive and
binding upon all parties hereto absent manifest error.

(b) Capital Adequacy Adjustment. In the event that any Lender (which term shall
include Issuing Bank for purposes of this Section 2.19(b)) shall have determined
that a Change in Law

 

-28-

--------------------------------------------------------------------------------

has or would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender’s Commitments or Letters of Credit, or
participations therein or other obligations hereunder with respect to the
Commitments or the Letters of Credit to a level below that which such Lender or
such controlling corporation could have achieved but for such Change in Law
(taking into consideration the policies of such Lender or such controlling
corporation with regard to capital adequacy), then from time to time, within
five Business Days after receipt by Company from such Lender of the statement
referred to in the next sentence, Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation on an after-tax basis for such reduction. Such Lender shall deliver
to Company (with a copy to Administrative Agent) a written statement, setting
forth in reasonable detail the basis for calculating the additional amounts owed
to Lender under this Section 2.19(b), which statement shall be conclusive and
binding upon all parties hereto absent manifest error.

2.20. Taxes; Withholding, etc.

(a) Payments to Be Free and Clear. All sums payable by any Credit Party
hereunder and under the other Credit Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax.

(b) Withholding of Taxes. If Company, the Administrative Agent or in the case of
United States federal withholding tax, any other withholding agent is required
by Law to make any deduction or withholding on account of any Tax (including any
Other Taxes) from or in respect of any sum paid or payable by or on account of
any Credit Party under any of the Credit Documents: (i) the applicable
withholding agent shall make such deduction or withholding and shall timely pay
the full amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable Law; and (ii) if such Tax is not an Excluded Tax, the
sum payable by the applicable Credit Party shall be increased to the extent
necessary to ensure that, after such deduction or withholding has been made
(including any deduction or withholding attributable to amounts payable under
this Section 2.20), the Administrative Agent or applicable Lender, as the case
may be, receives an amount equal to what it would have received had no such
deduction or withholding been made; provided, however, that no Credit Party
shall be required to increase any such amounts payable pursuant to clause
(ii) of this Section 2.20(b), in respect of (A) Taxes on the overall net income
of the Administrative Agent or a Lender, (B) Taxes attributable to (I) a
Lender’s failure to comply with the requirements of paragraph (e) of this
Section 2.20 or (II) if a Lender is not the beneficial owner of any amounts
payable under any Credit Document for United States federal withholding Tax
purposes, the beneficial owner (the “Beneficial Owner”)’s failure to deliver any
form that it is legally eligible to deliver for the purposes of establishing a
reduction of or exemption from United States federal withholding Taxes, (C) in
the case of a Lender, United States federal withholding Taxes imposed on amounts
payable to such Lender or a Beneficial Owner pursuant to a Law in effect at the
time such Lender (or such Beneficial Owner) acquires its interest in the
applicable Commitment or Letter of Credit (or changes a lending office), except
to the extent that such Lender (or such Beneficial Owner)’s assignor (if any)
was entitled, immediately prior to the time of assignment (or changing the
lending office), to receive additional amounts from Credit Parties with respect
to such amounts pursuant to clause (ii) of this Section 2.20(b) or (D) any
United States federal withholding Taxes imposed pursuant to FATCA (such Taxes in
(A) through (D) “Excluded Taxes”). The applicable withholding agent making such
deduction or withholding shall deliver to the Administrative Agent the original
or a certified copy of a receipt issued by the relevant Governmental Authority
evidencing such payment or other evidence reasonably satisfactory to the
Administrative Agent.

(c) In addition, Company agrees to pay any Other Taxes to the applicable
Governmental Authority in accordance with applicable Laws.

 

-29-

--------------------------------------------------------------------------------

(d) Company agrees to indemnify each Agent and each Lender for (i) the full
amount of Taxes (other than Excluded Taxes) imposed on or in respect of any
payment under any Credit Document that would have been paid by a Credit Party
pursuant to paragraph (b) of this Section 2.20 and Other Taxes (including any
such Taxes or Other Taxes attributable to any amounts payable under this
Section 2.20) payable by such Agent or such Lender (whether or not such Taxes or
Other Taxes are correctly or legally imposed) and (ii) any reasonable expenses
arising therefrom or with respect thereto, provided that Company shall not be
required to indemnify any Agent or Lender pursuant to this Section 2.20(d) for
any penalty incurred as a result of a failure by such Agent or Lender (as
applicable) to notify Company of the Tax claim giving rise to such penalty
within one hundred and eighty (180) days after such Agent or Lender has actual
knowledge of such claim. A certificate from the relevant Lender or Agent,
setting forth in reasonable detail the basis and calculation of such Taxes or
Other Taxes shall be conclusive, absent manifest error.

(e) Evidence of Exemption from Withholding Tax. Each Lender shall, at such times
as are reasonably requested by Company or Administrative Agent, provide Company
and Administrative Agent with any documentation prescribed by Law or reasonably
requested by Company or Administrative Agent certifying as to any entitlement of
such Lender to an exemption from, or reduction in, withholding tax with respect
to any payments to be made to such Lender under the Credit Documents. Each
Lender shall, whenever a lapse in time or change in such Lender’s circumstances
renders such documentation obsolete, expired or inaccurate in any material
respect, deliver promptly to Company and Administrative Agent updated or other
appropriate documentation (including any new documentation reasonably requested
by the applicable withholding agent) or promptly notify Company and
Administrative Agent of its inability to do so.

Without limiting the foregoing:

(A) Each Lender that is not a United States person (as such term is defined in
Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax
purposes (a “Non-U.S. Lender”) shall, to the extent it is legally eligible to do
so, deliver to Administrative Agent and Company, on or prior to the Closing Date
(in the case of each Lender listed on the signature pages hereof on the Closing
Date) or on or prior to the date of the Assignment Agreement pursuant to which
it becomes a Lender (in the case of each other Lender), and at such other times
as may be necessary in the determination of Company or Administrative Agent
(each in the reasonable exercise of its discretion), (i) two original copies of
Internal Revenue Service Form W-8BEN or W-8ECI (or, in each case, any successor
forms), properly completed and duly executed by such Lender, and such other
documentation required under the Internal Revenue Code and reasonably requested
by Company or Administrative Agent to establish that such Lender is not subject
to deduction or withholding of United States federal income tax with respect to
any payments to such Lender of principal, interest, fees or other amounts
payable under any of the Credit Documents, (ii) if such Lender is not a “bank”
or other Person described in Section 881(c)(3) of the Internal Revenue Code, a
Certificate re Non-Bank Status substantially in the form of Exhibit C, together
with two original copies of Internal Revenue Service Form W-8BEN (or any
successor form), properly completed and duly executed by such Lender or (iii) to
the extent a Lender is not the beneficial owner (for example, where the Lender
is a partnership, or is a participant holding a participation granted by a
participating Lender), Internal Revenue Service Form W-8IMY (or any successor
forms) of the Lender, accompanied by a Form W-8ECI, W-8BEN, a Certificate re
Non-Bank Status substantially in the form of Exhibit C, Form W-9, Form W-8IMY or
any other required information from each beneficial owner, as applicable
(provided that, if one or more beneficial owners are claiming the portfolio
interest exemption, the Certificate re Non-Bank Status substantially in the form
of Exhibit C may be provided by such Lender on behalf of such beneficial owner)
and such other documentation required under the Internal Revenue Code and
reasonably

 

-30-

--------------------------------------------------------------------------------

requested by Company or Administrative Agent to establish that such Lender is
not subject to deduction or withholding of United States federal income tax with
respect to any payments to such Lender under any of the Credit Documents.

(B) Each Lender that is a United States person (as such term is defined in
Section 7701(a)(30) of the Internal Revenue Code) for United States federal
income tax purposes (a “U.S. Lender”) deliver to Administrative Agent and
Company on or prior to the Closing Date (or, if later, on or prior to the date
on which such Lender becomes a party to this Agreement) two original copies of
Internal Revenue Service Form W-9 (or any successor form), properly completed
and duly executed by such Lender, certifying that such U.S. Lender is entitled
to an exemption from United States backup withholding tax, or otherwise prove
that it is entitled to such an exemption.

(C) If a payment made to a Lender under any of the Credit Documents would be
subject to United States federal withholding tax imposed by FATCA if such Lender
were to fail to comply with the applicable reporting requirements of FATCA
(including those contained in Section 1471(b) or 1472(b) of the Internal Revenue
Code, as applicable), such Lender shall deliver to Administrative Agent and
Company, at the time or times prescribed by Law and at such time or times
reasonably requested by Administrative Agent or Company, such documentation
prescribed by applicable Law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional
documentation reasonably requested by Administrative Agent or the Company as may
be necessary for Administrative Agent or Company to comply with its obligations
under FATCA, to determine whether such Lender has complied with such Lender’s
obligations under FATCA and whether any amount is required to be deducted and
withheld from such payment. For purposes of this paragraph, FATCA shall include
any amendments made to FATCA after the date of this Agreement.

(f) Treatment of Certain Refunds. If Administrative Agent or Lender determines,
in its reasonable discretion, that it has received a refund of any Tax as to
which it has been indemnified by Company or other applicable Credit Party or
with respect to which Company or such other applicable Credit Party has paid
additional amounts pursuant to this Section 2.20, it shall promptly pay to
Company or such other applicable Credit Party an amount equal to such refund
(but only to the extent of indemnity payments made, or additional amounts paid,
by Company or such other applicable Credit Party under this Section 2.20 with
respect to any Tax giving rise to such refund), net of all out-of-pocket
expenses (including any Taxes) of Administrative Agent, or such Lender, as the
case may be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund). This Section 2.20(f) shall
not be construed to require any indemnified party to make available its Tax
returns (or any other information relating to its Taxes which it deems
confidential) to the indemnifying party or any other Person.

2.21. Obligation to Mitigate. Each Lender (which term shall include Issuing Bank
for purposes of this Section 2.21) agrees that, as promptly as practicable after
the officer of such Lender responsible for administering its Commitments or
Letters of Credit, as the case may be, becomes aware of the occurrence of an
event or the existence of a condition that would cause such Lender to receive
payments under Section 2.19 or 2.20, it will, to the extent not inconsistent
with the internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts to (a) make, issue, fund or maintain its
Credit Extensions, through another office of such Lender, or (b) take such other
measures as such Lender may deem reasonable, if the additional amounts which
would otherwise be required to be paid to such Lender pursuant to Section 2.19
or 2.20 would be materially reduced and if, as determined by such Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Letters of Credit through such other office or in accordance with such other
measures, as the case may be,

 

-31-

--------------------------------------------------------------------------------

would not otherwise adversely affect such Commitments or Letters of Credit or
the interests of such Lender; provided, such Lender will not be obligated to
utilize such other office pursuant to this Section 2.21 unless Borrower agrees
to pay all incremental expenses incurred by such Lender as a result of utilizing
such other office as described above. A certificate as to the amount of any such
expenses payable by Borrower pursuant to this Section 2.21 (setting forth in
reasonable detail the basis for requesting such amount) submitted by such Lender
to Company (with a copy to Administrative Agent) shall be conclusive absent
manifest error.

2.22. Defaulting Lenders. Anything contained herein to the contrary
notwithstanding, in the event that any Lender becomes a Defaulting Lender
hereunder, then, so long as such Lender is a Defaulting Lender, (a) such
Defaulting Lender shall be deemed not to be a “Lender” for purposes of voting on
any matters (including the granting of any consents or waivers) with respect to
any of the Credit Documents, provided that any waiver, amendment or modification
requiring the consent of all Lenders or each affected Lender which adversely
affects such Defaulting Lender differently than other affected Lenders shall
require the consent of such Defaulting Lender; (b) to the extent permitted by
applicable law, any amount payable to such Defaulting Lender hereunder (whether
on account of principal, interest, fees or otherwise) shall, in lieu of being
distributed to such Defaulting Lender, be retained by Administrative Agent in a
segregated account and subject to any applicable requirements of law, be applied
(i) first, to the payment of any amounts owing by such Defaulting Lender to
Administrative Agent hereunder, (ii) second, to the payment of any amounts owing
by such Defaulting Lender to the Issuing Banks hereunder (pro rata in accordance
with such amounts), (iii) third, to the funding of cash collateralization of any
participating interest in any Letter of Credit in respect of which such
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by Administrative Agent or the applicable Issuing Bank,
(iv) fourth, if so determined by Administrative Agent, the Issuing Banks and
Borrower, held in such account as cash collateral for future funding obligations
of any Defaulting Lender under this Agreement, (v) fifth, pro rata, to the
payment of any amounts owing to Borrower or the Lenders as a result of any
judgment of a court of competent jurisdiction obtained by Borrower or any Lender
against such Defaulting Lender as a result of such Defaulting Lender’s breach of
its obligations under this Agreement and (vi) sixth, to such Defaulting Lender
or as otherwise directed by a court of competent jurisdiction; (c) fees under
Section 2.11 shall cease to accrue on that portion of such Defaulting Lender’s
Commitment that remains unfunded or which has not been included in any
determination of Letter of Credit Usage pursuant to this Section 2.22; and
(d) if any Letter of Credit Usage exists at the time a Lender becomes a
Defaulting Lender then: (i) such Letter of Credit Usage shall be reallocated
among the non-Defaulting Lenders in accordance with their respective Pro Rata
Share but only to the extent the sum of the Exposure of all non-Defaulting
Lenders plus such Defaulting Lender’s Pro Rata Share of the Letter of Credit
Usage does not exceed the total of all Commitments of all non-Defaulting
Lenders, (ii) if that portion of the Letter of Credit Usage attributable to all
non-Defaulting Lenders is reallocated pursuant to this Section 2.22, then the
fees payable to the Lenders pursuant to Section 2.11 shall be adjusted in
accordance with such non-Defaulting Lenders’ Percentages determined in
accordance with such reallocation, and (iii) if any Defaulting Lender’s Pro Rata
Share of the Letter of Credit Usage is not reallocated pursuant to this
Section 2.22, then, without prejudice to any rights or remedies of the
Administrative Agent, any Issuing Bank or any Lender hereunder, all fees payable
to the Lenders pursuant to Section 2.11 with respect to such Defaulting Lender’s
Pro Rata Share of the Letter of Credit Usage that is not reallocated shall be
payable to the applicable Issuing Bank until such portion of the Letter of
Credit Usage is reallocated. No Commitment of any Lender shall be increased or
otherwise affected, and, except as otherwise expressly provided in this
Section 2.22, performance by Borrower of its obligations hereunder and the other
Credit Documents shall not be excused or otherwise modified as a result of any
Lender becoming a Defaulting Lender or the operation of this Section 2.22. The
rights and remedies against a Defaulting Lender under this Section 2.22 are in
addition to other rights and remedies which Borrower, Administrative Agent and
the Issuing Banks and the Lenders may have against such Defaulting Lender. In
the event that each of Administrative Agent, Borrower, and the Issuing Banks
agrees that a Defaulting Lender has adequately

 

-32-

--------------------------------------------------------------------------------

remedied all matters that caused such Lender to be a Defaulting Lender, then
such Lender shall cease to be a Defaulting Lender hereunder and the Letter of
Credit Usage shall be readjusted to reflect the inclusion of such Lender’s
Commitment.

2.23. Removal or Replacement of a Lender. Anything contained herein to the
contrary notwithstanding, in the event that: (a) (i) any Lender (an
“Increased-Cost Lender”) shall give notice to Company that such Lender is
entitled to receive payments under Section 2.19 or 2.20, (ii) the circumstances
which entitle such Lender to receive such payments shall remain in effect, and
(iii) such Lender shall fail to withdraw such notice within five Business Days
after Company’s request for such withdrawal; or (b) (i) any Lender shall be a
Defaulting Lender and (ii) such Defaulting Lender shall fail to cure the default
as a result of which it has become a Defaulting Lender within five Business Days
after Company’s request that it cure such default; or (c) in connection with any
proposed amendment, modification, termination, waiver or consent with respect to
any of the provisions hereof as contemplated by Section 10.5(b), the consent of
Requisite Lenders shall have been obtained but the consent of one or more of
such other Lenders (each a “Non-Consenting Lender”) whose consent is required
shall not have been obtained; then, with respect to each such Increased-Cost
Lender, Defaulting Lender or Non-Consenting Lender (the “Terminated Lender”),
Company may, by giving written notice to Administrative Agent and any Terminated
Lender of its election to do so, elect to cause such Terminated Lender (and such
Terminated Lender hereby irrevocably agrees) to assign its outstanding Letters
of Credit and its Commitments, if any, in full to one or more Eligible Assignees
(each, a “Replacement Lender”) in accordance with the provisions of Section 10.6
and Borrower shall pay the fees, if any, payable thereunder in connection with
any such assignment from an Increased Cost Lender or a Non-Consenting Lender and
the Defaulting Lender shall pay the fees, if any, payable thereunder in
connection with any such assignment from such Defaulting Lender; provided,
(A) on the date of such assignment, the Replacement Lender shall pay to
Terminated Lender an amount equal to the sum of (1) an amount equal to the
principal of, and all accrued interest on, all outstanding Letters of Credit of
the Terminated Lender, (2) an amount equal to all unreimbursed drawings that
have been funded by such Terminated Lender, together with all then unpaid
interest with respect thereto at such time and (3) an amount equal to all
accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to
Section 2.11; (B) on the date of such assignment, Borrower shall pay any amounts
payable to such Terminated Lender pursuant to Section 2.19 or 2.20; or otherwise
as if it were a prepayment and (C) in the event such Terminated Lender is a
Non-Consenting Lender, each Replacement Lender shall consent, at the time of
such assignment, to each matter in respect of which such Terminated Lender was a
Non-Consenting Lender; provided, Company may not make such election with respect
to any Terminated Lender that is also an Issuing Bank unless, prior to the
effectiveness of such election, Borrower shall have caused each outstanding
Letter of Credit issued thereby to be cancelled. Upon the prepayment of all
amounts owing to any Terminated Lender and the termination of such Terminated
Lender’s Commitments, if any, such Terminated Lender shall no longer constitute
a “Lender” for purposes hereof; provided, any rights of such Terminated Lender
to indemnification hereunder shall survive as to such Terminated Lender.

SECTION 3. CONDITIONS PRECEDENT

3.1. Closing Date. The effectiveness of the Commitments of the Lenders and the
agreements of Issuing Bank hereunder are subject to the satisfaction, or waiver
in accordance with Section 10.5, of the following conditions on or before the
Closing Date:

(a) Credit Documents. Administrative Agent shall have received this Agreement
executed and delivered by Borrower, Holdings and the Lenders as of the Closing
Date.

(b) Organization Documents; Incumbency. Administrative Agent shall have received
(i) copies of the Organization Documents of Borrower and Guarantor;
(ii) signature and

 

-33-

--------------------------------------------------------------------------------

incumbency certificates of the officers of Borrower and Guarantor executing the
Credit Documents to which it is a party; (iii) resolutions of the Board of
Directors or similar governing body of Borrower and Guarantor approving and
authorizing the execution, delivery and performance of this Agreement and the
other Credit Documents to which it is a party or by which it or its assets may
be bound as of the Closing Date, certified as of the Closing Date by its
secretary or an assistant secretary as being in full force and effect without
modification or amendment; and (iv) a good standing certificate from the
applicable Governmental Authority of Company’s jurisdiction of incorporation,
organization or formation dated a recent date prior to the Closing Date.

(c) Payment of Fees and Expenses. Company shall have paid all accrued reasonable
fees and expenses of Administrative Agent, Arranger and Lenders for which
invoices have been presented (including the fees and expenses of counsel for
Administrative Agent and the local counsel for Lenders) and those fees payable
on the Closing Date referred to in Section 2.11 (c).

(d) Opinions of Counsel to Credit Parties. Administrative Agent shall have
received the written opinions of (i) Simpson Thacher & Bartlett LLP, special
counsel for Credit Parties, and (ii) J. Devitt Kramer, in-house counsel for
Company, in the forms of Exhibits A-1 and A-2, respectively, and as to such
other matters as Administrative Agent may reasonably request, dated as of the
Closing Date and otherwise in form and substance reasonably satisfactory to
Administrative Agent (and each Credit Party hereby instructs each such counsel
to deliver such opinions to Agents and Lenders).

(e) Closing Date Certificate. Holdings and Company shall have delivered to
Administrative Agent an originally executed Closing Date Certificate, together
with all attachments thereto.

(f) Cash Collateral Accounts. The Cash Collateral Accounts shall have been
established in form and substance reasonably satisfactory to Administrative
Agent; provided that no Control Agreements shall be required to be entered into
as of the Closing Date.

(g) UCC Financing Statements. Administrative Agent shall have received proper
precautionary UCC-1 financing statements with respect to the Collateral in form
for filing in the relevant office in the jurisdiction of organization of each
Credit Party (other than Holdings).

(h) Payment of Expenses. Company shall have paid all accrued reasonable expenses
of Administrative Agent, Arranger and Lenders for which invoices have been
presented (including the fees and expenses of counsel for Administrative Agent
and the local counsel for Lenders).

3.2. Conditions to Each Credit Extension. The obligation of Issuing Bank to make
any Credit Extension is subject to the satisfaction, or waiver in accordance
with Section 10.5, of the following conditions precedent:

(a) receipt by the Administrative Agent as of the initial Credit Date, for each
Grantor Subsidiary, of (i) copies of the Organization Documents of such Grantor
Subsidiary; (ii) signature and incumbency certificates of the officers of such
Grantor Subsidiary executing the Credit Documents to which it is a party;
(iii) resolutions of the Board of Directors or similar governing body of such
Grantor Subsidiary approving and authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is a
party or by which it or its assets may be bound as of the Credit Date, certified
as of the Credit Date by its secretary or an assistant secretary as being in
full force and effect without modification or amendment; (iv) a Grantor
Subsidiary Joinder executed and delivered by such Grantor Subsidiary; and (v) a
good standing certificate

 

-34-

--------------------------------------------------------------------------------

from the applicable Governmental Authority of such Grantor Subsidiary’s
jurisdiction of incorporation, organization or formation dated a recent date
prior to the initial Credit Date;

(b) after making the Credit Extensions requested on such Credit Date, the Letter
of Credit Usage shall not exceed the Commitments then in effect;

(c) as of such Credit Date, the representations and warranties contained herein
and in the other Credit Documents shall be true and correct in all material
respects on and as of that Credit Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date;

(d) as of such Credit Date, no event shall have occurred and be continuing or
would result from the consummation of the applicable Credit Extension that would
constitute an Event of Default or a Default;

(e) on or before the date of issuance of any Letter of Credit, Administrative
Agent shall have received a Letter of Credit Application, in form and substance
satisfactory to the Issuing Bank, and such other documents or information as
Issuing Bank may reasonably require in connection with the issuance of such
Letter of Credit;

(f) (i) Cash Collateral in an amount not less than 105% of the total undrawn
amount of all Letters of Credit (after giving effect to such Credit Extension)
shall be in the Subsidiary Cash Collateral Accounts, subject to Administrative
Agent’s perfected exclusive security interest therein, and (ii) the Issuing Bank
shall be reasonably satisfied that such cash shall not be from any borrowing;

(g) the Administrative Agent shall have received the written opinion of Powers
Pyles Sutter & Verville PC, regulatory counsel for Credit Parties, in the form
of Exhibit A-3, dated as of the Credit Date (and each Credit Party hereby
instructs each such counsel to deliver such opinion to Agents and Lenders); and

(h) the Administrative Agent shall have received the written opinions of
(i) Simpson Thacher & Bartlett LLP, and (ii) J. Devitt Kramer, in the forms of
Exhibits A-4 and A-5, respectively, and as to such other matters as
Administrative Agent may reasonably request, dated as of the Credit Date and
otherwise in form and substance reasonably satisfactory to Administrative Agent
(and each Grantor Subsidiary hereby instructs each such counsel to deliver such
opinions to Agents and Lenders).

SECTION 4. REPRESENTATIONS AND WARRANTIES

Holdings and Company represent and warrant to Agents and Lenders that:

4.1. Existence, Qualification and Power; Compliance with Laws. Each Credit Party
and each of its Subsidiaries (a) is a Person duly organized or formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization as identified in Schedule 4.1, (b) has all
requisite power and authority to (i) own or lease its assets and carry on its
business and (ii) execute, deliver and perform its obligations under the Credit
Documents to which it is a party, (c) is duly qualified and in good standing
under the Laws of each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification, (d) is in
compliance with

 

-35-

--------------------------------------------------------------------------------

all Laws, orders, writs, injunctions and orders and (e) has all requisite
governmental licenses, Educational Approvals, authorizations, consents and
approvals to operate its business as currently conducted; except in each case
referred to in clause (c), (d) or (e), to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect.

4.2. Authorization; No Contravention. The execution, delivery and performance by
each Credit Party of each Credit Document to which such Person is a party, and
the consummation of the Transactions, are within such Credit Party’s corporate
or other powers, 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 (other than as
permitted by Section 6.1), or require any payment to be made under (i) the
Existing Credit Agreement or the Senior Notes Indenture (or any refinancings
thereof), (ii) any other Contractual Obligation to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries or (iii) any material 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 material Law or Educational Law; except
with respect to any conflict, breach or contravention or payment (but not
creation of Liens) referred to in clause (b)(ii), to the extent that such
conflict, breach, contravention or payment could not reasonably be expected to
have a Material Adverse Effect.

4.3. Governmental Authorization; Other Consents. No material approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority, Educational Agency, or any other Person is necessary or
required in connection with (a) the execution, delivery or performance by, or
enforcement against, any Credit Party of this Agreement or any other Credit
Document, or for the consummation of the Transactions, (b) the grant by any
Credit 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 priority thereof) or (d) the exercise by Administrative
Agent or any Lender of its rights under the Credit Documents or the remedies in
respect of the Collateral pursuant to the Collateral Documents, except for
(i) the approvals, consents, exemptions, authorizations, actions, notices and
filings which have been duly obtained, taken, given or made and are in full
force and effect and (ii) those approvals, consents, exemptions, authorizations
or other actions, notices or filings, the failure of which to obtain or make
could not reasonably be expected to have a Material Adverse Effect.

4.4. Binding Effect. This Agreement and each other Credit Document has been duly
executed and delivered by each Credit Party that is party thereto. This
Agreement and each other Credit Document constitutes, a legal, valid and binding
obligation of such Credit Party, enforceable against each Credit Party that is
party thereto in accordance with its terms, except as such enforceability may be
limited by Debtor Relief Laws and by general principles of equity.

4.5. Financial Statements; No Material Adverse Effect

(a) The Historical Financial Statements were prepared in accordance with GAAP,
and, in the case of financial statements for the fiscal years ended June 30,
2009 and 2010, were audited in accordance with GAGAS, to the extent required by
the DOE, and fairly present in all material respects the financial condition of
Education Management and its Subsidiaries as of the dates thereof and their
results of operations for the periods covered thereby in accordance with GAAP
consistently applied throughout the periods covered thereby, except as otherwise
expressly noted therein. During the period from June 30, 2011, to and including
the Closing Date, there has been (i) no sale, transfer or other disposition by
Education Management or any of its Subsidiaries of any material part of the
business or property of Education Management or any of its Subsidiaries, taken
as a whole and (ii) no purchase or other acquisition by Education Management or
any of its Subsidiaries of any business or property (including any Equity

 

-36-

--------------------------------------------------------------------------------

Interests of any other Person) material in relation to the consolidated
financial condition of Education Management and its Subsidiaries, in each case,
which is not reflected in the foregoing financial statements or in the notes
thereto or has not otherwise been disclosed in writing to the Lenders prior to
the Closing Date.

(b) Since June 30, 2011, 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.

4.6. Litigation. Except as disclosed in the Annual Report on Form 10-K and the
Quarterly Report on Form 10-Q filed by Education Management with the Securities
and Exchange Commission on August 30, 2011 and November 8, 2011, respectively,
there are no actions, suits, proceedings, claims or disputes pending or, to the
knowledge of Holdings or Borrower, threatened in writing or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against Holdings or any of its Subsidiaries or against any of their properties
or revenues that relates to the Transactions (to the extent brought by any
Governmental Authority or any Educational Agency) or that either individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.

4.7. No Default. Neither Holdings nor any of its Subsidiaries 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.

4.8. [Reserved].

4.9. Environmental Compliance.

(a) There are no claims, actions, suits, or proceedings alleging potential
liability or responsibility for violation of, or otherwise relating to, any
Environmental Law that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

(b) Except as specifically described in Schedule 4.9(b) or except as could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) none of the properties currently or formerly owned, leased
or operated by any Credit Party or any of its Subsidiaries is listed or proposed
for listing on the NPL or on the CERCLIS or any analogous foreign, state or
local list or is adjacent to any such property; (ii) there are no and never have
been any underground or aboveground 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, leased or
operated by any Credit Party or any of its Subsidiaries or, to its knowledge, on
any property formerly owned or operated by any Credit Party or any of its
Subsidiaries; (iii) there is no asbestos or asbestos-containing material on any
property currently owned or operated by any Credit Party or any of its
Subsidiaries; and (iv) Hazardous Materials have not been released, discharged or
disposed of by any Person on any property currently or formerly owned, leased or
operated by any Credit Party or any of its Subsidiaries and Hazardous Materials
have not otherwise been released, discharged or disposed of by any of the Credit
Parties and their Subsidiaries at any other location.

(c) The properties owned, leased or operated by Holdings and its Subsidiaries do
not contain any Hazardous Materials in amounts or concentrations which
(i) constitute, or constituted a violation of, (ii) require remedial action
under, or (iii) could give rise to liability under, Environmental Laws, which
violations, remedial actions and liabilities, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.

 

-37-

--------------------------------------------------------------------------------

(d) Except as specifically disclosed in Schedule 4.9(d), neither Holdings 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
for such investigation or assessment or remedial or response action that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

(e) 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 Credit Party or any of its Subsidiaries have been disposed of in a manner
not reasonably expected to result, individually or in the aggregate, in a
Material Adverse Effect.

(f) Except as would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, none of the Credit Parties and their
Subsidiaries has contractually assumed any liability or obligation under or
relating to any Environmental Law.

4.10. Taxes . Except as set forth in Schedule 4.10, Holdings and its
Subsidiaries have filed all material Federal, state and other tax returns and
reports required to be filed, and have paid all material Federal, state and
other taxes, assessments, fees and other governmental charges levied or imposed
upon them or their properties, income or assets otherwise due and payable,
except those (a) which are not overdue by more than thirty (30) days or
(b) which are being contested in good faith by appropriate proceedings
diligently conducted and for which adequate reserves have been provided in
accordance with GAAP.

4.11. [Reserved].

4.12. [Reserved].

4.13. Margin Regulations; Investment Company Act

(a) Borrower is engaged nor will it engage, principally or as one of its
important activities, in the business of purchasing or carrying Margin Stock, or
extending credit for the purpose of purchasing or carrying Margin Stock, and no
Credit Extension and no drawings under any Letter of Credit will be used for any
purpose that violates Regulation U of the Board of Governors.

(b) No Credit Party and no Person Controlling any Credit Party is or is required
to be registered as an “investment company” under the Investment Company Act of
1940.

4.14. Disclosure. No report, financial statement, certificate or other written
information furnished by or on behalf of any Credit Party to any Agent or any
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or any other Credit
Document (as modified or supplemented by other information so furnished) when
taken as a whole contains any material misstatement of fact or omits to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not materially misleading; provided
that, with respect to projected financial information, Holdings and Company
represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time of preparation; it being
understood that such projections may vary from actual results and that such
variances may be material.

4.15. [Reserved].

 

-38-

--------------------------------------------------------------------------------

4.16. Solvency. After giving effect to the transactions contemplated hereby, the
Credit Parties, on a consolidated basis, are Solvent.

4.17. [Reserved].

4.18. Governmental Authority and Licensing; Education Agency Approvals;
Compliance with Educational Laws.

(a) Except as set forth on Schedule 4.18, Holdings, Borrower, each Subsidiary
and each School have, since July 1, 2008, received the licenses, permits, and
approvals of all federal, state, and local governmental authorities necessary to
conduct their businesses, including without limitation, all material Educational
Approvals, necessary for each School to conduct its operations and offer its
educational programs except where the failure to obtain or maintain the same
would not reasonably be expected to have a Material Adverse Effect. Without
limiting the foregoing and except as set forth on Schedule 4.18, since July 1,
2008, each School, as applicable: (i) has qualified under all necessary laws and
regulations to participate in Title IV Programs and has been approved by the DOE
for that purpose; (ii) has been accredited by the applicable Accrediting Bodies
and no such Accreditation has been suspended or revoked; and (iii) has been duly
licensed approved to the full extent required for its existing operations by any
Educational Agency or Educational Law. Except as set forth on Schedule 4.18, no
proceeding, and to the knowledge of Holdings, Borrower, each Subsidiary or any
School, no investigation, which could reasonably be expected to result in a
Material Adverse Effect or in a finding or disallowance based upon Title IV
ineligibility of any School owned or operated by Borrower, any Credit Party or
any of its Subsidiaries is pending or, to their knowledge, threatened, and to
their knowledge no ground exists that could reasonably be expected to result in
a Material Adverse Effect.

(b) Except as set forth on Schedule 4.18, Holdings, Borrower, each Subsidiary
and each School, as applicable, has since July 1, 2008 been in material
compliance with all applicable Educational Laws except where such non-compliance
could not reasonably be expected to result in a Material Adverse Effect. Without
limiting the foregoing, except as set forth on Schedule 4.18 and except where
such non-compliance could not reasonably be expected to result in a Material
Adverse Effect, since July 1, 2008: (i) each School has qualified as an
“eligible institution”, as defined in 34 C.F.R. § 600.2 or as an eligible
“proprietary institution of higher education” as defined at 34 C.F.R. § 600.5;
(ii) each School has derived no more than 90 percent of its revenues, for any
consecutive two year period, from Title IV Program funds as calculated in
compliance with 34 C.F.R. § 668.28; (iii) each School has timely reported any
change or shifts in ownership or control, or the addition of new educational
programs or locations, in compliance with 34 C.F.R. §§ 600.2, 600.10, 600.20,
600.21, 600.31, 600.32, and 668.8, as applicable; (iv) each School has complied
with the Gainful Employment Disclosure and Reporting Requirements, as
applicable, for the relevant periods; (v) each School has complied in all
material respects with the terms of its Program Participation Agreement and the
requirements of 34 C.F.R. § 668.14, including without limitation the prohibition
on the payment of commissions, bonuses, or other incentive payments in 34 C.F.R.
§ 668.14(b)(22); (vi) none of the Schools has been placed by the DOE on a method
of Title IV Program funding other than the advance payment method or heightened
cash monitoring Level I; (vii) each School has complied with the applicable
financial reporting requirements of each Educational Agency, and all financial
reports and statements submitted to each such Educational Agency fairly and
accurately presents, in all material respects, the financial condition of the
Credit Party and each School, as applicable, including with respect to the cash
management practices of the Borrower and each Subsidiary; (viii) each School is
in compliance with the requirements of 34 C.F.R. §§ 668.171-175, including all
reporting requirements for institutions that are in the “zone alternative” or
with respect to the posting of a letter of credit pursuant to the alternative
standards of financial responsibility set forth in 34 C.F.R. § 688.175;
(ix) each School has complied with the Cohort Default Rate regulations set forth
in 34 C.F.R.

 

-39-

--------------------------------------------------------------------------------

Part 668, Subparts M and N; and (x) each School has complied with the Program
Integrity Regulations as applicable for the relevant periods under such
regulations.

4.19. Collateral. With respect to the Borrower Collateral, the provisions of
this Agreement, together with either (i) the Borrower Control Agreement or
(ii) the Borrower Cash Collateral Account being held at Bank of America and
titled for the benefit of the Collateral Agent, is effective to create in favor
of Collateral Agent for the benefit of the Secured Parties a legal, valid and
enforceable first priority Lien on the Borrower Collateral. Borrower represents
and warrants that the lien securing the Obligations (as defined in the Existing
Credit Agreement) on the Cash Collateral in the Borrower Cash Collateral Account
will be released in its entirety when such Cash Collateral is transferred to
Subsidiary Cash Collateral Accounts and no further action is required for such
release. With respect to the Grantor Subsidiary Collateral of each Grantor
Subsidiary, the provisions of this Agreement, together with either (i) the
Subsidiary Control Agreement of such Grantor Subsidiary or (ii) the Subsidiary
Cash Collateral Account of such Grantor Subsidiary being held at Bank of America
and titled for the benefit of the Collateral Agent, is effective to create in
favor of Collateral Agent for the benefit of the Secured Parties a legal, valid
and enforceable exclusive Lien on such Grantor Subsidiary Collateral. No filing
or other action will be necessary to perfect or protect such Liens. The Cash
Collateral was funded from cash on Borrower’s balance sheet, and none of the
Collateral constitutes proceeds of any borrowing.

4.20. Patriot Act. To the extent applicable, each Credit Party is in compliance,
in all material respects, with the (i) Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the Untied States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001). No Credit Extension will be used,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

SECTION 5. AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Obligation
hereunder which is accrued and payable shall remain unpaid or unsatisfied, or
any Letter of Credit shall remain outstanding, each of Holdings and Company
shall, and shall (except in the case of the covenants set forth in Sections 5.1,
5.2 and 5.3) cause each Subsidiary to:

5.1. Financial Statements. Deliver to the Administrative Agent for prompt
further distribution to each Lender:

(a) as soon as available, but in any event within ninety (90) days after the end
of each fiscal year (beginning with the fiscal year ending on June 30, 2012),
(i) a consolidated balance sheet of Holdings and its Subsidiaries as at the end
of such fiscal year, and the related consolidated statements of income or
operations, stockholders’ equity 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; and (ii) with
respect to such consolidated financial statements, audited and accompanied by a
report and opinion of Ernst & Young LLP or any other independent registered
public accounting firm of nationally recognized standing, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to a “going concern” emphasis paragraph or a
qualification or disclaimer related to generally accepted accounting principles
or generally accepted auditing

 

-40-

--------------------------------------------------------------------------------

standards or other material qualification or exception (provided that a
paragraph in the audit report emphasizing a change in accounting as the result
of new accounting rules promulgated by regulatory bodies such as the Financial
Accounting Standards Board, the SEC or the American Institute of Certified
Public Accountants shall be permitted);

(b) as soon as available, but in any event within forty-five (45) days after the
end of each of the first three (3) fiscal quarters of each fiscal year
(beginning with the fiscal quarter ending on December 31, 2011), a consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such fiscal
quarter, and the related (i) consolidated statements of income or operations for
such fiscal quarter and for the portion of the fiscal year then ended and
(ii) consolidated statements of cash flows for the portion of the fiscal year
then ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year, all in reasonable
detail and certified by a Responsible Officer of Company as fairly presenting in
all material respects the financial condition, results of operations,
stockholders’ equity and cash flows of Holdings and its Subsidiaries in
accordance with GAAP, subject only to audit and normal year-end adjustments and
the absence of footnotes;

(c) as soon as available, and in any event no later than sixty (60) days after
the end of each fiscal year, a detailed consolidated budget for the following
fiscal year (including a projected consolidated balance sheet of Holdings and
its Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow and projected income and a
summary of the material underlying assumptions applicable thereto), and, as soon
as available, significant revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the “Projections”), which Projections
shall in each case be accompanied by a certificate of a Responsible Officer
stating that such Projections are based on reasonable estimates, information and
assumptions and that such Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material respect;

(d) simultaneously with the delivery of each set of consolidated financial
statements referred to in Sections 5.1(a) and 5.1(b) above, the related
consolidating financial statements reflecting the adjustments necessary to
eliminate the accounts of Subsidiaries (if any) from such consolidated financial
statements; and

(e) promptly upon furnishing to the DOE, financial statements of Education
Management and its Subsidiaries audited in accordance with GAGAS.

Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this
Section 5.1 may be satisfied with respect to financial information of Holdings
and its Subsidiaries by furnishing (A) the applicable financial statements of
any direct or indirect parent of Holdings or (B) Company’s or Holdings’ (or any
direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as
applicable, filed with the SEC; provided that, with respect to each of clauses
(A) and (B), (1) to the extent such information relates to a parent of Holdings,
such information is accompanied by consolidating information that explains in
reasonable detail the differences between the information relating to such
parent, on the one hand, and the information relating to Holdings and its
Subsidiaries on a standalone basis, on the other hand and (2) to the extent such
information is in lieu of information required to be provided under
Section 5.1(a), such materials are accompanied by a report and opinion of
Ernst & Young LLP or any other independent registered public accounting firm of
nationally recognized standing, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and shall not be subject
to a “going concern” emphasis paragraph or a qualification or disclaimer related
to generally accepted accounting principles or generally accepted auditing
standards or other material qualification or exception (provided that a
paragraph in the audit report emphasizing a change in accounting as the result
of new accounting rules

 

-41-

--------------------------------------------------------------------------------

promulgated by regulatory bodies such as the Financial Accounting Standards
Board, the SEC or the American Institute of Certified Public Accountants shall
be permitted).

5.2. Certificates; Other Information. Deliver to the Administrative Agent for
prompt further distribution to each Lender:

(a) [Reserved];

(b) [Reserved];

(c) promptly after the same are publicly available, copies of all annual,
regular, periodic and special reports and registration statements which Holdings
or Company files with the SEC or with any Governmental Authority that may be
substituted therefor (other than amendments to any registration statement (to
the extent such registration statement, in the form it became effective, is
delivered), exhibits to any registration statement and, if applicable, any
registration statement on Form S-8) and in any case not otherwise required to be
delivered to Administrative Agent pursuant hereto;

(d) promptly after the furnishing thereof, copies of any material requests or
material notices received by any Credit Party (other than in the ordinary course
of business) or material statements or material reports furnished to any holder
of debt securities of any Credit Party or any of its Subsidiaries pursuant to
the terms of the documentation governing any Indebtedness in a principal amount
greater than the Threshold Amount and not otherwise required to be furnished to
Lenders pursuant to any other clause of this Section 5.2;

(e) [Reserved];

(f) promptly furnish to Collateral Agent written notice of any change (i) in any
Credit Party’s corporate name or (ii) in any Credit Party’s jurisdiction of
organization. Company agrees not to effect or permit any change referred to in
the preceding sentence unless amendments to the financing statements referred to
in Section 3.1(g) have been filed in the applicable offices; and

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

Documents required to be delivered pursuant to Section 5.1(a) or (b) or
Section 5.2(c) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date (A) on which
Company posts such documents, or provides a link thereto on Company’s website on
the Internet at the website address listed on Appendix B; or (B) on which such
documents are posted on Company’s behalf on IntraLinks/IntraAgency or another
relevant website (a “Platform”), if any, to which each Lender and Administrative
Agent have access (whether a commercial, third-party website or whether
sponsored by Administrative Agent); provided that: (1) upon written request by
Administrative Agent, Company shall deliver paper copies of such documents to
Administrative Agent for further distribution to each Lender until a written
request to cease delivering paper copies is given by Administrative Agent and
(2) Company shall notify (which may be by facsimile or electronic mail)
Administrative Agent of the posting of any such documents and provide to
Administrative Agent by electronic mail electronic versions (i.e., soft copies)
of such documents. Each Lender shall be solely responsible for timely accessing

 

-42-

--------------------------------------------------------------------------------

posted documents or requesting delivery of paper copies of such documents from
Administrative Agent and maintaining its copies of such documents.

Borrower hereby acknowledges that certain of the Lenders (each, a “Public
Lender”) may have personnel who do not wish to receive material non-public
information with respect to Holdings or its Affiliates, or the respective
securities of any of the foregoing, and who may be engaged in investment and
other market-related activities with respect to such Persons’ securities.
Borrower hereby agrees that, so long as Education Management or any of its
Subsidiaries is the issuer of any outstanding debt or equity securities that are
traded publicly or in the Rule 144A market, it will use commercially reasonable
efforts to identify that portion of the information that may be distributed to
the Public Lenders and that (A) all such information shall be clearly and
conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word
“PUBLIC” shall appear prominently on the first page thereof; (B) by marking such
information “PUBLIC,” Borrower shall be deemed to have authorized Administrative
Agent, Arranger, Issuing Bank and the Lenders to treat such information as not
containing any material non-public information (although it may be sensitive and
proprietary) with respect to the Borrower or its securities for purposes of
United States Federal and state securities laws (provided, however, that to the
extent such information constitutes non-public information regarding Borrower
and its Subsidiaries, they shall be treated as set forth in Section 10.17);
(y) all information marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated “Public Side Information”; and
(z) Administrative Agent and Arranger shall be entitled to treat any such
information that are not marked “PUBLIC” as being suitable only for posting on a
portion of the Platform not designated “Public Side Information.”

5.3. Notices. Promptly after obtaining knowledge thereof, notify Administrative
Agent:

(a) of the occurrence of any Default; and

(b) of any matter that has resulted or could reasonably be expected to result in
a Material Adverse Effect, including arising out of or resulting from (i) breach
or non-performance of, or any default or event of default under, a Contractual
Obligation of any Credit Party or any Subsidiary, (ii) any dispute, litigation,
investigation, proceeding or suspension between any Credit Party or any
Subsidiary and any Governmental Authority or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting any Credit Party
or any Subsidiary, including pursuant to any applicable Environmental Laws or
Education Laws or the assertion or occurrence of any noncompliance by any Credit
Party or any of its Subsidiaries with, or liability under, any Environmental Law
or Environmental Permit or any Education Law.

Each notice pursuant to this Section shall be accompanied by a written statement
of a Responsible Officer of Company (x) that such notice is being delivered
pursuant to Section 5.3(a) or (b) (as applicable) and (y) setting forth details
of the occurrence referred to therein and stating what action Company has taken
and proposes to take with respect thereto.

5.4. Payment of Obligations. Pay, discharge or otherwise satisfy as the same
shall become due and payable, all its material obligations and liabilities in
respect of Taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its property.

5.5. Preservation of Existence, etc. (a) Preserve, renew and maintain in full
force and effect its legal existence under the Laws of the jurisdiction of its
organization except in a transaction permitted by Section 6.3 and (b) take all
reasonable action to maintain all rights, privileges (including its good
standing), permits, licenses and franchises necessary or desirable in the normal
conduct of its business,

 

-43-

--------------------------------------------------------------------------------

except (i) to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect or (ii) pursuant to a transaction permitted by
Section 6.3.

5.6. 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, repair and condition, ordinary wear and tear excepted and
casualty or condemnation excepted, and (b) make in all material respects
necessary renewals, replacements, modifications, improvements, upgrades,
extensions and additions thereof or thereto in accordance with prudent industry
practice.

5.7. [Reserved].

5.8. Compliance with Laws. Comply with the requirements of all Laws, Educational
Laws and all orders, writs, injunctions and decrees applicable to it or to its
business or property, except if the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Company will, and will cause each Subsidiary and
each School to, comply with (i) all applicable Laws and Educational Laws, the
violation of which would terminate or materially impair the eligibility of
Company or any School or Subsidiary for participation, if applicable, in any
student financial assistance programs, including but not limited to the Title IV
Programs, where such termination or material impairment would have a Material
Adverse Effect, (ii) the federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq.,
and all other consumer credit laws applicable to Company or any Subsidiary in
connection with the advancing of student loans, except for such laws and
regulations the violation of which, in the aggregate, will not result in the
assessment of penalties and damages claims against Company or any Subsidiary
where such penalties and damage claims would have a Material Adverse Effect,
(iii) all applicable statutory and regulatory State Educational Agency
requirements for authorization to provide post-secondary education in the
jurisdictions in which its educational facilities are located or in which
students reside, except for such requirements the violation of which will not
have a Material Adverse Effect, and (iv) all applicable Accrediting Body
requirements, except for such requirements the violation of which would not have
a Material Adverse Effect. Without limiting the generality of the foregoing and
notwithstanding any limitation contained therein, Parent and Borrower shall, and
shall cause each School to, maintain in full force and effect (i) its status as
an “eligible institution,” as defined in 34 C.F.R. § 600.2 (and the other
sections incorporated therein by reference) and 600.5, (ii) its eligibility to
participate in all Title IV Programs in which and to the extent that it
currently participates, (iii) its Accreditations, and (iv) its licenses to
provide postsecondary education in all jurisdictions where it is so licensed,
except in cases where a failure to maintain such status, eligibility or license
does not result in a Material Adverse Effect.

5.9. Books and Records. Maintain proper books of record and account, in which
entries that are full, true and correct in all material respects and are in
conformity with GAAP consistently applied shall be made of all material
financial transactions and matters involving the assets and business of
Holdings, Company or such Subsidiary, as the case may be. Without limiting the
foregoing, Company agrees that cash in any Cash Collateral Account shall be
classified as restricted cash on the balance sheet of Education Management and
each applicable Subsidiary and that the financial reports to Educational
Agencies and the footnotes to the financial statements of Education Management
and each such applicable Subsidiary shall expressly disclose that such cash
constitutes collateral securing the Obligations and is not available for any
purpose other than to reimburse drawings under Letters of Credit issued
hereunder, to pay fees payable to the Issuing Bank hereunder or to satisfy other
Obligations in accordance with Section 8.3(b).

5.10. Inspection Rights. Permit representatives and independent contractors of
Administrative Agent and each Lender to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss its affairs,

 

-44-

--------------------------------------------------------------------------------

finances and accounts with its directors, officers, and independent public
accountants, all at the reasonable expense of Company and at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to Company; provided that, excluding any such
visits and inspections during the continuation of an Event of Default, only
Administrative Agent on behalf of Lenders may exercise rights of Administrative
Agent and Lenders under this Section 5.10 and Administrative Agent shall not
exercise such rights more often than two (2) times during any calendar year
absent the existence of an Event of Default and only one (1) such time shall be
at Company’s expense; provided further that when an Event of Default exists,
Administrative Agent or any Lender (or any of their respective representatives
or independent contractors) may do any of the foregoing at the expense of
Company at any time during normal business hours and upon reasonable advance
notice. Administrative Agent and Lenders shall give Company the opportunity to
participate in any discussions with Company’s independent public accountants.

5.11. [Reserved].

5.12. [Reserved].

5.13. [Reserved].

5.14. Further Assurances and Information Regarding Collateral. At any time or
from time to time upon the request of Administrative Agent, at its expense,
promptly execute, acknowledge and deliver such further documents (including
Control Agreements) and do such other acts and things as Administrative Agent or
Collateral Agent may reasonably request in order to effect fully the purposes of
the Credit Documents. For avoidance of doubt, it is expressly agreed that a
request by Collateral Agent that Borrower and any Grantor Subsidiaries execute
and deliver Control Agreements after the initial Credit Extension is a
reasonable request. In furtherance and not in limitation of the foregoing, each
Credit Party shall take such actions as Administrative Agent or Collateral Agent
may reasonably request from time to time to ensure that the Obligations are
guarantied by the Guarantor and are secured by the Collateral. Each Credit Party
other than Holdings hereby irrevocably authorizes the Collateral Agent at any
time and from time to time to file in any relevant jurisdiction any financing
statements and amendments thereto that contain the information required by
Article 9 of the UCC for the filing of any financing statement or amendment
relating to the Collateral. If any Credit Party shall effect any change to
(i) its legal name, (ii) location of its chief executive office, (iii) its
identity or organizational structure, (iv) its Federal Taxpayer Identification
Number or organizational identification number, if any, or (v) its jurisdiction
of organization (in each case, including by merging with or into any other
entity, dissolving, liquidating, reorganizing or organizing in any other
jurisdiction) it shall give the Collateral Agent and Administrative Agent prompt
(and in any event within 5 Business Days of such change) written notice (in the
form of a certificate signed by a Responsible Officer of such Credit Party), or
such longer notice period agreed to by the Collateral Agent, of such change and
it shall take all action reasonably satisfactory to the Collateral Agent to
maintain the perfection and priority of the security interest of the Collateral
Agent in the Collateral, if applicable.

SECTION 6. NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Obligation
hereunder which is accrued and payable shall remain unpaid or unsatisfied, or
any Letter of Credit shall remain outstanding, Holdings and Company shall not,
nor shall they permit any Subsidiaries to, directly or indirectly:

6.1. Liens. Create, incur, assume or suffer to exist any Lien upon the
Collateral, other than (a) Liens securing the Obligations and (b) in the case of
Borrower Collateral only, Liens securing

 

-45-

--------------------------------------------------------------------------------

the Obligations (as defined in the Existing Credit Agreement); provided that no
such Liens under this clause (b) shall be perfected by control (within the
meaning of Section 9-104 of the UCC of the State of New York).

6.2. No Further Negative Pledges. Enter into or be party to any Contractual
Obligation prohibiting the creation, assumption or maintenance of any Lien on
the Collateral to secure the Obligations (or any refinancing thereof).

6.3. 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:

(a) any Subsidiary (other than Borrower) may merge with (i) Borrower in a
transaction permitted by Section 6.3(d) or (ii) any one or more other Persons;
provided that when any Subsidiary that is a Credit Party is merging with another
Person, a Credit Party shall be the continuing or surviving Person;

(b) (i) any Subsidiary that is not a Credit Party may merge or consolidate with
or into any other Subsidiary that is not a Credit Party and (ii) any Subsidiary
(other than Borrower) may liquidate or dissolve or change its legal form if
Holdings determines in good faith that such action is in the best interests of
Holdings and its Subsidiaries and if not materially disadvantageous to the
Lenders; provided that no Credit Party may liquidate or dissolve if it holds any
Collateral;

(c) any Subsidiary may Dispose of all or substantially all of its assets (upon
voluntary liquidation or otherwise) (other than any Collateral) to Company or to
another Subsidiary; provided that if the transferor in such a transaction is a
Grantor Subsidiary, then the transferee must either be Borrower or a Grantor
Subsidiary; and

(d) so long as no Default exists or would result therefrom, Company may merge
with any other Person; provided that (i) Company shall be the continuing or
surviving corporation or (ii) if the Person formed by or surviving any such
merger or consolidation is not Company (any such Person, the “Successor
Company”), (A) the Successor Company shall be an entity organized or existing
under the laws of the United States, any state thereof, the District of Columbia
or any territory thereof, (B) the Successor Company shall expressly assume all
the obligations of Company under this Agreement and the other Credit Documents
to which Company is a party pursuant to a supplement hereto or thereto in form
reasonably satisfactory to Administrative Agent, (C) Guarantor, unless it is the
other party to such merger or consolidation, shall have by a supplement to the
Guaranty confirmed that its Guarantee shall apply to the Successor Company’s
obligations under this Agreement, and (D) Company shall have delivered to
Administrative Agent an officer’s certificate and an opinion of counsel, each
stating that such merger or consolidation and such supplement to this Agreement
or any Collateral Document comply with this Agreement; provided, further, that
if the foregoing are satisfied, the Successor Company will succeed to, and be
substituted for, Company under this Agreement.

6.4. Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by Company and
its Subsidiaries on the Closing Date or any business reasonably related or
ancillary thereto.

6.5. Amendment of Organization Documents. Amend, modify or change in any manner
materially adverse to the interests of the Lenders any Organization Document.

 

-46-

--------------------------------------------------------------------------------

6.6. Holding Company. In the case of Holdings, conduct, transact or otherwise
engage in any business or operations other than those incidental to (i) its
ownership of the Equity Interests of Company, (ii) the maintenance of its legal
existence, (iii) the performance of the Credit Documents, (iv) any public
offering of its common stock or any other issuance of its Equity Interests and
(v) any transaction that Holdings is permitted to enter into or consummate under
Section 6 of the Existing Credit Agreement as in effect on the date hereof.

SECTION 7. GUARANTY

7.1. Guaranty of the Obligations. Guarantor hereby irrevocably and
unconditionally guarantees to Administrative Agent for the ratable benefit of
the Beneficiaries the due and punctual payment in full of all Obligations when
the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed
Obligations”).

7.2. [Reserved].

7.3. Payment by Guarantor. Guarantor hereby agrees, in furtherance of the
foregoing and not in limitation of any other right which any Beneficiary may
have at law or in equity against Guarantor by virtue hereof, that upon the
failure of a Borrower to pay any of the Guaranteed Obligations when and as the
same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. § 362(a)), Guarantor will upon demand pay, or
cause to be paid, in cash, to Administrative Agent for the ratable benefit of
Beneficiaries, an amount equal to the sum of the unpaid principal amount of all
Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on
such Guaranteed Obligations (including interest which, but for a Borrower’s
becoming the subject of a case under the Bankruptcy Code, would have accrued on
such Guaranteed Obligations, whether or not a claim is allowed against Borrower
for such interest in the related bankruptcy case) and all other Guaranteed
Obligations then owed to Beneficiaries as aforesaid.

7.4. Liability of Guarantor Absolute. Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guaranteed
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, Guarantor agrees as follows:

(a) this Guaranty is a guaranty of payment when due and not of collectability.
This Guaranty is a primary obligation of Guarantor and not merely a contract of
surety;

(b) Administrative Agent may enforce this Guaranty upon the occurrence of an
Event of Default notwithstanding the existence of any dispute between Borrower
and any Beneficiary with respect to the existence of such Event of Default;

(c) the obligations of Guarantor hereunder are independent of the obligations of
Borrower and the obligations of any other guarantor of the obligations of
Borrower, and a separate action or actions may be brought and prosecuted against
Guarantor whether or not any action is brought against Borrower or any of such
other guarantors and whether or not Borrower is joined in any such action or
actions;

 

-47-

--------------------------------------------------------------------------------

(d) payment by Guarantor of a portion, but not all, of the Guaranteed
Obligations shall in no way limit, affect, modify or abridge Guarantor’s
liability for any portion of the Guaranteed Obligations which has not been paid.
Without limiting the generality of the foregoing, if Administrative Agent is
awarded a judgment in any suit brought to enforce Guarantor’s covenant to pay a
portion of the Guaranteed Obligations, such judgment shall not be deemed to
release Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by Guarantor, limit, affect, modify or abridge
Guarantor’s liability hereunder in respect of the Guaranteed Obligations;

(e) any Beneficiary, upon such terms as it deems appropriate, without notice or
demand and without affecting the validity or enforceability hereof or giving
rise to any reduction, limitation, impairment, discharge or termination of
Guarantor’s liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guaranteed Obligations; (ii) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Guaranteed Obligations or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept other guaranties of
the Guaranteed Obligations and take and hold security for the payment hereof or
the Guaranteed Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Guaranteed Obligations,
any other guaranties of the Guaranteed Obligations, or any other obligation of
any Person with respect to the Guaranteed Obligations; (v) enforce and apply any
security now or hereafter held by or for the benefit of such Beneficiary in
respect hereof or the Guaranteed Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that such Beneficiary may
have against any such security, in each case as such Beneficiary in its
discretion may determine consistent herewith and any applicable security
agreement, including foreclosure on any such security pursuant to one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
Guarantor against Borrower or any security for the Guaranteed Obligations; and
(vi) exercise any other rights available to it under the Credit Documents; and

(f) this Guaranty and the obligations of Guarantor hereunder shall be valid and
enforceable and shall not be subject to any reduction, limitation, impairment,
discharge or termination for any reason (other than payment in full of the
Guaranteed Obligations), including the occurrence of any of the following,
whether or not Guarantor shall have had notice or knowledge of any of them:
(i) any failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Credit Documents, at law, in
equity or otherwise) with respect to the Guaranteed Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) hereof, any of
the other Credit Documents or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guaranteed Obligations, in
each case whether or not in accordance with the terms hereof or such Credit
Document or any agreement relating to such other guaranty or security; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the other Credit Documents or from the proceeds of any security for
the Guaranteed Obligations, except to the extent such security also serves as
collateral for indebtedness

 

-48-

--------------------------------------------------------------------------------

other than the Guaranteed Obligations) to the payment of indebtedness other than
the Guaranteed Obligations, even though any Beneficiary might have elected to
apply such payment to any part or all of the Guaranteed Obligations; (v) any
Beneficiary’s consent to the change, reorganization or termination of the
corporate structure or existence of Holdings or any of its Subsidiaries and to
any corresponding restructuring of the Guaranteed Obligations; (vi) any failure
to perfect or continue perfection of a security interest in any collateral which
secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or
counterclaims which Borrower may allege or assert against any Beneficiary in
respect of the Guaranteed Obligations, including failure of consideration,
breach of warranty, payment, statute of frauds, statute of limitations, accord
and satisfaction and usury; and (viii) any other act or thing or omission, or
delay to do any other act or thing, which may or might in any manner or to any
extent vary the risk of Guarantor as an obligor in respect of the Guaranteed
Obligations.

7.5. Waivers by Guarantor. Guarantor hereby waives, for the benefit of
Beneficiaries: (a) any right to require any Beneficiary, as a condition of
payment or performance by Guarantor, to (i) proceed against Borrower, any other
guarantor of the Guaranteed Obligations or any other Person, (ii) proceed
against or exhaust any security held from Borrower, any such other guarantor or
any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of any Beneficiary in favor of Borrower
or any other Person, or (iv) pursue any other remedy in the power of any
Beneficiary whatsoever; (b) any defense arising by reason of the incapacity,
lack of authority or any disability or other defense of Borrower including any
defense based on or arising out of the lack of validity or the unenforceability
of the Guaranteed Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of Borrower from any cause other
than payment in full of the Guaranteed Obligations; (c) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (d) any defense based upon any Beneficiary’s errors or omissions
in the administration of the Guaranteed Obligations, except behavior which
amounts to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any legal
or equitable discharge of Guarantor’s obligations hereunder, (ii) the benefit of
any statute of limitations affecting Guarantor’s liability hereunder or the
enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims,
and (iv) promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property subject
thereto; (f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
hereof, notices of default hereunder or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the Guaranteed
Obligations or any agreement related thereto, notices of any extension of credit
to Borrower and notices of any of the matters referred to in Section 7.4 and any
right to consent to any thereof; and (g) any defenses or benefits that may be
derived from or afforded by law which limit the liability of or exonerate
guarantors or sureties, or which may conflict with the terms hereof.

7.6. Guarantor’s Rights of Subrogation, Contribution, etc. Until the Guaranteed
Obligations shall have been indefeasibly paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
Guarantor hereby waives any claim, right or remedy, direct or indirect, that
Guarantor now has or may hereafter have against Borrower or any of its assets in
connection with this Guaranty or the performance by Guarantor of its obligations
hereunder, in each case whether such claim, right or remedy arises in equity,
under contract, by statute, under common law or otherwise and including without
limitation (a) any right of subrogation, reimbursement or indemnification that
Guarantor now has or may hereafter have against Borrower with respect to the
Guaranteed Obligations, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Borrower, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guaranteed Obligations

 

-49-

--------------------------------------------------------------------------------

shall have been indefeasibly paid in full and the Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled,
Guarantor shall withhold exercise of any right of contribution Guarantor may
have against any other guarantor of the Guaranteed Obligations. Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, any rights of subrogation, reimbursement
or indemnification Guarantor may have against Borrower or against any collateral
or security, and any rights of contribution Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights any Beneficiary
may have against Borrower, to all right, title and interest any Beneficiary may
have in any such collateral or security, and to any right any Beneficiary may
have against such other guarantor. If any amount shall be paid to Guarantor on
account of any such subrogation, reimbursement, indemnification or contribution
rights at any time when all Guaranteed Obligations shall not have been finally
and indefeasibly paid in full, such amount shall be held in trust for
Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over
to Administrative Agent for the benefit of Beneficiaries to be credited and
applied against the Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms hereof.

7.7. Subordination of Other Obligations. Any Indebtedness of Borrower now or
hereafter held by Guarantor (the “Obligee Guarantor”) is hereby subordinated in
right of payment to the Guaranteed Obligations, and any such Indebtedness
collected or received by the Obligee Guarantor after an Event of Default has
occurred and is continuing shall be held in trust for Administrative Agent on
behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent
for the benefit of Beneficiaries to be credited and applied against the
Guaranteed Obligations but without affecting, impairing or limiting in any
manner the liability of the Obligee Guarantor under any other provision hereof.

7.8. Continuing Guaranty. This Guaranty is a continuing guaranty and shall
remain in effect until all of the Guaranteed Obligations shall have been paid in
full and the Commitments shall have terminated and all Letters of Credit shall
have expired or been cancelled. Guarantor hereby irrevocably waives any right to
revoke this Guaranty as to future transactions giving rise to any Guaranteed
Obligations.

7.9. Authority of Guarantor or Borrower. It is not necessary for any Beneficiary
to inquire into the capacity or powers of Guarantor or Borrower or the officers,
directors or any agents acting or purporting to act on behalf of any of them.

7.10. Financial Condition of Borrower. Any Credit Extension may be made to
Borrower or continued from time to time without notice to or authorization from
Guarantor regardless of the financial or other condition of Borrower at the time
of any such Credit Extension. No Beneficiary shall have any obligation to
disclose or discuss with Guarantor its assessment, or Guarantor’s assessment, of
the financial condition of Borrower. Guarantor has adequate means to obtain
information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the
Credit Documents, and Guarantor assumes the responsibility for being and keeping
informed of the financial condition of Borrower and of all circumstances bearing
upon the risk of nonpayment of the Guaranteed Obligations. Guarantor hereby
waives and relinquishes any duty on the part of any Beneficiary to disclose any
matter, fact or thing relating to the business, operations or conditions of
Borrower now known or hereafter known by any Beneficiary.

7.11.Bankruptcy, etc.

(a) So long as any Guaranteed Obligations remain outstanding, Guarantor shall
not, without the prior written consent of Administrative Agent acting pursuant
to the instructions of Requisite

 

-50-

--------------------------------------------------------------------------------

Lenders, commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency case or proceeding of or against Borrower. The
obligations of Guarantor hereunder shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any case or proceeding,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower or by any defense which
Borrower may have by reason of the order, decree or decision of any court or
administrative body resulting from any such proceeding.

(b) Guarantor acknowledges and agrees that any interest on any portion of the
Guaranteed Obligations which accrues after the commencement of any case or
proceeding referred to in clause (a) above (or, if interest on any portion of
the Guaranteed Obligations ceases to accrue by operation of law by reason of the
commencement of such case or proceeding, such interest as would have accrued on
such portion of the Guaranteed Obligations if such case or proceeding had not
been commenced) shall be included in the Guaranteed Obligations because it is
the intention of Guarantor and Beneficiaries that the Guaranteed Obligations
which are guaranteed by Guarantor pursuant hereto should be determined without
regard to any rule of law or order which may relieve Borrower of any portion of
such Guaranteed Obligations. Guarantor will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or similar
Person to pay Administrative Agent, or allow the claim of Administrative Agent
in respect of, any such interest accruing after the date on which such case or
proceeding is commenced.

(c) In the event that all or any portion of the Guaranteed Obligations are paid
by Borrower or reimbursed through a withdrawal from a Cash Collateral Account as
provided in Section 2.4(d), the obligations of Guarantor hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

7.12. Discharge of Guaranty upon Sale of Guarantor. If all of the Equity
Interests of Guarantor or any of its successors in interest hereunder shall be
sold or otherwise disposed of (including by merger or consolidation) in
accordance with the terms and conditions hereof, the Guaranty of Guarantor or
such successor in interest, as the case may be, hereunder shall automatically be
discharged and released without any further action by any Beneficiary or any
other Person effective as of the time of such sale.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES

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

(a) Non-Payment. Borrower or any other Credit Party fails to pay or reimburse
(including any reimbursement made pursuant to a withdrawal from a Cash
Collateral Account as provided in Section 2.4(d)) (i) when and as required to be
paid herein, any reimbursement of any drawing under a Letter of Credit, or
(ii) within five (5) Business Days after the same becomes due, any other amount
payable hereunder or with respect to any other Credit Document (including any
reimbursement made pursuant to a withdrawal from a Cash Collateral Account as
provided in Section 2.4(d)); or

(b) Specific Covenants. Company fails to perform or observe any term, covenant
or agreement contained in any of Section 2.6, 5.3(a) or 5.5(a) (solely with
respect to Holdings and Company) or Section 6; or

 

-51-

--------------------------------------------------------------------------------

(c) Other Defaults. Any Credit Party fails to perform or observe any other
covenant or agreement (not specified in Section 8.1(a) or (b) above) contained
in any Credit Document on its part to be performed or observed and such failure
continues for thirty (30) days after notice thereof by the Administrative Agent
to Company; or

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

(e) Cross-Default. Any Credit Party or any Subsidiary (i) fails to make any
payment beyond the applicable grace period with respect thereto, if any (whether
by scheduled maturity, required prepayment, acceleration, demand, or otherwise)
in respect of any Indebtedness (other than Indebtedness hereunder) having an
aggregate principal amount of not less than the Threshold Amount, or (ii) fails
to observe or perform any other agreement or condition relating to any such
Indebtedness, 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 a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness 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; provided that
this clause (e)(ii) shall not apply to secured Indebtedness that becomes due as
a result of the voluntary sale or transfer of the property or assets securing
such Indebtedness, if such sale or transfer is permitted hereunder and under the
documents providing for such Indebtedness; or

(f) Insolvency Proceedings, Etc. Any Credit Party or any of its Subsidiaries
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, administrator, administrative receiver or similar
officer for it or for all or any material part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator, administrator,
administrative receiver or similar officer is appointed without the application
or consent of such Person and the appointment continues undischarged or unstayed
for sixty (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 sixty (60) calendar days, or an order for relief is entered in any
such proceeding; or

(g) Inability to Pay Debts; Attachment. (i) Any Credit Party or any Subsidiary
becomes unable or admits in writing its inability or fails generally to pay its
debts in excess of the Threshold Amount 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 the Credit Parties, taken as
a whole, and is not released, vacated or fully bonded within sixty (60) days
after its issue or levy; or

(h) Judgments. There is entered against any Credit Party or any Subsidiary a
final judgment or order for the payment of money in an aggregate amount
exceeding the Threshold Amount (to the extent not covered by independent
third-party insurance as to which the insurer has been notified of such judgment
or order and has not denied coverage) and such judgment or order shall not have
been satisfied, vacated, discharged or stayed or bonded pending an appeal for a
period of sixty (60) consecutive days; or

 

-52-

--------------------------------------------------------------------------------

(i) [Reserved]; or

(j) Invalidity of Credit Documents. Any material provision of any Credit
Document, at any time after its execution and delivery and for any reason other
than as expressly permitted hereunder or thereunder (including as a result of a
transaction permitted under Section 6.3) or as a result of acts or omissions by
Administrative Agent or any Lender or the satisfaction in full of all the
Obligations, ceases to be in full force and effect; or any Credit Party contests
in writing the validity or enforceability of any provision of any Credit
Document; or any Credit Party denies in writing that it has any or further
liability or obligation under any Credit Document (other than as a result of
repayment in full of the Obligations and termination of all Commitments), or
purports in writing to revoke or rescind any Credit Document; or

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

(l) Collateral. Collateral Agent shall for any reason (other than after the
payment in full of all Obligations, termination of all Commitments and
terminations or expiration of all Letters of Credit) cease to have a perfected
first priority lien on the Borrower Collateral or a perfected exclusive lien on
the Grantor Subsidiary Collateral, or the Cash Collateral shall at any time
equal less than 105% of the total undrawn amount of all Letters of Credit
outstanding at such time and, if such deficiency exists as a result of the
Administrative Agent withdrawing funds from the Cash Collateral Accounts to pay
for fees due under Section 2.11 or as a result of Bank of America as deposit
bank withdrawing funds from the Cash Collateral Accounts for charges due to it,
such deficiency continues for five Business Days.

8.2. Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, upon notice to Company by Administrative Agent or (in the case of
clause (d)) Collateral Agent (in addition to Administrative Agent),
Administrative Agent or Collateral Agent may, or shall at the request of the
Requisite Lenders or Issuing Bank, take any or all of the following actions:

(a) terminate the Commitments;

(b) apply the Cash Collateral toward the Obligations and any other amounts due
under clause (c) below;

(c) declare all amounts owing or payable hereunder or under any of the other
Credit Documents to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
Borrower; and

(d) exercise on behalf of itself, the Lenders and Issuing Bank all rights and
remedies available to it, the Lenders and Issuing Bank under the Credit
Documentation or applicable law, including all remedies of a Secured Party under
the UCC.

(e) If an Event of Default described in Section 8.1(f) occurs, the Commitments
shall terminate automatically and all amounts owing or payable hereunder or
under any of the other Credit Documents shall be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower.

8.3 Application of Funds.

(a) Subject to Section 2.4(d) and Section 8.3(b), the Collateral shall be
applied to satisfy drawings under Letters of Credit as they occur. If any
Collateral remains on deposit after all Letters

 

-53-

--------------------------------------------------------------------------------

of Credit have either been fully drawn or expired, such remaining Collateral
shall be applied to the other Obligations, if any, in the order set forth below.

(b) After the exercise of remedies provided for in Section 8.2 above, any
amounts received on account of the Obligations shall be applied by
Administrative Agent in the following order:

First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts payable to Administrative Agent in its
capacity as such;

Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (including commitment fees but excluding letter of
credit fees) payable to the Lenders and Issuing Bank, ratably among them in
proportion to the respective amounts described in this clause Second payable to
them;

Third, to payment of that portion of the Obligations constituting accrued and
unpaid letter of credit fees and interest with respect to any drawings under the
Letters of Credit and other Obligations, ratably among the Lenders and Issuing
Bank in proportion to the respective amounts described in this clause payable to
them;

Fourth, to (a) payment of that portion of the Obligations constituting unpaid
principal with respect to any drawings under all Letters of Credit and (b) cash
collateralization of the aggregate undrawn amount of all Letters of Credit that
is not then cash collateralized, ratably among the Lenders and Issuing Bank in
proportion to the respective amounts described in this clause held by them; and

Last, the balance, if any, after all of the Obligations have been paid, to
Borrower.

SECTION 9. AGENTS

9.1. Appointment of Agents. Bank of America is hereby appointed Administrative
Agent and Collateral Agent hereunder and under the other Credit Documents and
each Lender hereby authorizes Bank of America to act as Administrative Agent and
Collateral Agent in accordance with the terms hereof and the other Credit
Documents. Each Agent hereby agrees to act in its capacity as such upon the
express conditions contained herein and the other Credit Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of the
Agents and no Lender or Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties hereunder, each Agent shall act solely as an agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Holdings or any of its Subsidiaries.

9.2. Powers and Duties. Each Lender irrevocably authorizes each Agent to take
such action on such Lender’s behalf and to exercise such powers, rights and
remedies hereunder and under the other Credit Documents as are specifically
delegated or granted to such Agent by the terms hereof and thereof, together
with such powers, rights and remedies as are reasonably incidental thereto. Each
Agent shall have only those duties and responsibilities that are expressly
specified herein and the other Credit Documents. Each Agent may exercise such
powers, rights and remedies and perform such duties by or through its officers,
directors, agents, sub-agents, employees or affiliates. For the avoidance of
doubt, in performing its functions and duties hereunder, no Agent assumes and
nor shall any Agent be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Holdings or any of its Subsidiaries.

 

-54-

--------------------------------------------------------------------------------

9.3. General Immunity.

(a) No Responsibility for Certain Matters. No Agent nor any of its officers,
partners, directors, employees, advisors, attorneys or agents shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency hereof or any other
Credit Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any other
documents furnished or made by any Agent to Lenders or by or on behalf of any
Credit Party, any Lender or any person providing the Settlement Service to any
Agent or any Lender in connection with the Credit Documents and the transactions
contemplated hereby or thereby or for the financial condition or business
affairs of any Credit Party or any other Person liable for the payment of any
Obligations, nor shall any Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Credit Documents or as to the existence or
possible existence of any Event of Default or Default or to make any disclosures
with respect to the foregoing. No Agent nor any of its officers, partners,
directors, employees, advisors, attorneys or agents shall be deemed to have
knowledge of any Default or Event of Default unless and until written notice
thereof is given to such Agent by a Borrower or a Lender. Anything contained
herein to the contrary notwithstanding, the duties of the Administrative Agent
shall be administrative in nature and the Administrative Agent shall not have
any liability arising from confirmations of the Letter of Credit Usage or the
component amounts thereof.

(b) Exculpatory Provisions. No Agent nor any of its officers, partners,
directors, employees, advisors, attorneys or agents shall be liable to any
Lender for any action taken or omitted by any Agent under or in connection with
any of the Credit Documents except to the extent caused by its or their gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final and non-appealable decision). Each Agent shall be
entitled to refrain from any act or the taking of any action (including the
failure to take an action) in connection herewith or any of the other Credit
Documents or from the exercise of any power, discretion or authority vested in
it hereunder or thereunder unless and until such Agent shall have received
instructions in respect thereof from Requisite Lenders (or such other Lenders as
may be required to give such instructions under Section 10.5) and, upon receipt
of such instructions from Requisite Lenders (or such other Lenders, as the case
may be), such Agent shall be entitled to act or refrain from acting, or to
exercise such power, discretion or authority, in accordance with such
instructions. Without prejudice to the generality of the foregoing, (i) each
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper Person or Persons,
including any settlement confirmation or other communication issues by any
Settlement Service, and shall be entitled to rely and shall be protected in
relying on opinions and judgments of attorneys (who may be attorneys for
Holdings and its Subsidiaries), accountants, experts and other professional
advisors selected by it; and (ii) no Lender shall have any right of action
whatsoever against any Agent as a result of such Agent acting or refraining from
acting hereunder or any of the other Credit Documents in accordance with the
instructions of Requisite Lenders (or such other Lenders as may be required to
give such instructions under Section 10.5).

(c) Delegation of Duties. Administrative Agent may perform any and all of its
duties and exercise its rights and powers under this Agreement or under any
other Credit Document by or through any one or more sub-agents appointed by
Administrative Agent. Administrative Agent and any such sub-agent may perform
any and all of its duties and exercise its rights and powers by or through their
respective directors, officers, employees, agents or Affiliates. The
exculpatory, indemnification and other provisions of this Section 9.3 and of
Section 9.6 shall apply to any of the directors, officers, employees, agents,
advisors, attorneys and Affiliates of Administrative Agent and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as

 

-55-

--------------------------------------------------------------------------------

Administrative Agent. All of the rights, benefits, and privileges (including the
exculpatory and indemnification provisions) of this Section 9.3 and of
Section 9.6 shall apply to any such sub-agent and to the Affiliates of any such
sub-agent, and shall apply to their respective activities as sub-agent as if
such sub-agent and Affiliates were named herein. Notwithstanding anything herein
to the contrary, with respect to each sub-agent appointed by Administrative
Agent, (i) such sub-agent shall be a third party beneficiary under this
Agreement with respect to all such rights, benefits and privileges (including
exculpatory rights and rights to indemnification) and shall have all of the
rights and benefits of a third party beneficiary, including an independent right
of action to enforce such rights, benefits and privileges (including exculpatory
rights and rights to indemnification) directly, without the consent or joinder
of any other Person, against any or all of the Credit Parties and the Lenders,
(ii) such rights, benefits and privileges (including exculpatory rights and
rights to indemnification) shall not be modified or amended without the consent
of such sub-agent, and (iii) such sub-agent shall only have obligations to
Administrative Agent and not to any Credit Party, Lender or any other Person and
no Credit Party, Lender or any other Person shall have any rights, directly or
indirectly, as a third party beneficiary or otherwise, against such sub-agent.

9.4. Agents Entitled to Act as Lender. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Letters of Credit, each Agent shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as if it were not performing the duties and functions delegated to it
hereunder, and the term “Lender” shall, unless the context clearly otherwise
indicates, include each Agent in its individual capacity. Any Agent and its
Affiliates may accept deposits from, lend money to, own securities of, and
generally engage in any kind of banking, trust, financial advisory or other
business with Holdings or any of its Affiliates as if it were not performing the
duties specified herein, and may accept fees and other consideration from
Borrower for services in connection herewith and otherwise without having to
account for the same to Lenders.

9.5. Lenders’ Representations, Warranties and Acknowledgment.

(a) Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Holdings and its
Subsidiaries in connection with Credit Extensions and conversions hereunder and
that it has made and shall continue to make its own appraisal of the
creditworthiness of Holdings and its Subsidiaries. No Agent shall have any duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Lenders or to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of any Credit Extension or at any time or
times thereafter, and no Agent shall have any responsibility with respect to the
accuracy of or the completeness of any information provided to Lenders.

(b) Each Lender, by delivering its signature page to this Agreement or an
Assignment Agreement shall be deemed to have acknowledged receipt of, and
consented to and approved, each Credit Document and each other document required
to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the
Closing Date.

9.6. Right to Indemnity. Each Lender, in proportion to its Pro Rata Share
(determined as of the time such indemnity is sought, it being understood and
agreed that if the Maturity Date shall have occurred, with respect to the
effected Letters of Credit or Commitments, such determination shall be made
immediately prior to giving effect thereto), severally agrees to indemnify each
Agent (and any affiliate thereof), to the extent that such Agent (or such
affiliate) shall not have been reimbursed by any Credit Party, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind

 

-56-

--------------------------------------------------------------------------------

or nature whatsoever which may be imposed on, incurred by or asserted against
such Agent (or any affiliate thereof) in exercising its powers, rights and
remedies or performing its duties hereunder or under the other Credit Documents
or otherwise in its capacity as such Agent in any way relating to or arising out
of this Agreement or the other Credit Documents; provided, no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent’s (or such affiliate’s) gross negligence or willful misconduct
(as determined by a court of competent jurisdiction in a final and
non-appealable decision). If any indemnity furnished to any Agent for any
purpose shall, in the opinion of such Agent, be insufficient or become impaired,
such Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished;
provided, in no event shall this sentence require any Lender to indemnify any
Agent against any liability, obligation, loss, damage, penalty, action,
judgment, suit, cost, expense or disbursement in excess of such Lender’s Pro
Rata Share thereof (determined as of the time such indemnity is sought, it being
understood and agreed that if the Maturity Date shall have occurred, with
respect to the Letters of Credit or Commitments, such determination shall be
made immediately prior to giving effect thereto); and provided further, this
sentence shall not be deemed to require any Lender to indemnify any Agent
against any liability, obligation, loss, damage, penalty, action, judgment,
suit, cost, expense or disbursement described in the proviso in the immediately
preceding sentence.

9.7. Successor Administrative Agent, Collateral Agent and Issuing Bank.
Administrative Agent may resign at any time by giving thirty days’ prior written
notice thereof to Lenders, Issuing Bank and Company. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon five Business Days’
notice to Company, to appoint a successor Administrative Agent. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent and the retiring Administrative
Agent shall promptly (a) transfer to such successor Administrative Agent all
Collateral held under the Collateral Documents, together with all records and
other documents necessary or appropriate in connection with the performance of
the duties of the successor Administrative Agent under the Credit Documents, and
(b) execute and deliver to such successor Administrative Agent such amendments
to financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Administrative
Agent of the security interests created under the Collateral Documents (in the
case of clauses (a) and (b), at the sole cost and expense of the Borrower). Upon
the effectiveness of the transfer of the Administrative Agent such retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder. After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent hereunder. If no successor Administrative Agent has been
appointed pursuant to the preceding sentences by the 30th day after the date of
such retiring Administrative Agent’s notice of resignation, Administrative
Agent’s resignation shall become effective in accordance with its notice and
Administrative Agent shall be discharged from all of its duties and obligations
hereunder (except that in the case of any collateral security held by
Administrative Agent on behalf of the Lenders or Issuing Bank under any of the
Credit Documents, the retiring Administrative Agent shall continue to hold such
collateral security until such time as a successor Administrative Agent is
appointed) and all payments, communications and determinations provided to be
made by, to or through Administrative Agent shall instead be made by or to each
Lender and Issuing Bank directly, until such time as a successor Administrative
Agent is appointed as provided for in this Section. The Requisite Lenders shall
thereafter perform all the duties of the Administrative Agent here under and/or
under any other Credit Document until such time, if any, as either (1) the
Requisite Lenders appoint a successor Administrative Agent (which appointment
shall be subject to the prior written approval of the Borrower (such approval
not to be unreasonably withheld) unless an Event of Default has occurred and is
continuing) or (2) Company appoints a successor Administrative Agent so long
(x) as the

 

-57-

--------------------------------------------------------------------------------

Lenders receive at least ten Business Days’ notice of such appointment (which
notice may be given at any time following the 30th day after the retiring
Administrative Agent’s notice of resignation) and (y) Company has not received a
written notice from the Requisite Lenders stating that the Requisite Lenders
object to such appointment.

Any resignation of Bank of America as Administrative Agent pursuant to this
Section shall also constitute the resignation of Bank of America or its
successor as Collateral Agent, and any successor Administrative Agent appointed
pursuant to this Section shall, upon its acceptance of such appointment, become
the successor Collateral Agent for all purposes hereunder. After any retiring
Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of
this Section 9 shall insure to its benefit as to any actions taken or omitted to
be taken by it while it was Collateral Agent. Any resignation of Bank of America
as Administrative Agent pursuant to this Section shall also constitute the
resignation of Bank of America or its successor as an Issuing Bank, and any
successor Administrative Agent appointed pursuant to this Section shall, upon
its acceptance of such appointment, become the successor Issuing Bank and
(i) such successor Issuing Bank shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring Issuing Bank, (ii) the
retiring Issuing Bank shall be discharged from all of its duties and obligations
hereunder or under the other Credit Documents, and (iii) the successor Issuing
Bank shall issue letters of credit in substitution for the Letters of Credit, if
any, outstanding at the time of such succession or make other arrangements
satisfactory to the retiring Issuing Bank to effectively assume the obligations
of the retiring Issuing Bank with respect to such Letters of Credit. If Bank of
America resigns as Issuing Bank, it shall retain all the rights, powers,
privileges and duties of the Issuing Bank hereunder with respect to all Letters
of Credit outstanding as of the effective date of its resignation as Issuing
Bank and all Letter of Credit Obligations with respect thereto.

9.8. Collateral Documents and Guaranty.

(a) Agents under Collateral Documents and Guaranty. Each Lender and each other
Secured Party (by its acceptance of the benefits of the Guaranty, the Collateral
and the Collateral Documents) hereby further authorizes Administrative Agent or
Collateral Agent, as applicable, on behalf of and for the benefit of Secured
Parties, to be the agent for and representative of Lenders with respect to the
Guaranty, the Collateral and the Collateral Documents.

(b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in
any of the Credit Documents to the contrary notwithstanding, Borrower,
Administrative Agent, Collateral Agent, each Lender and each other Secured Party
(by its acceptance of the benefits of the Guaranty, the Collateral and the
Collateral Documents) hereby agree that (i) no Lender shall have any right
individually to realize upon any of the Collateral or to enforce the Guaranty,
it being understood and agreed that all powers, rights and remedies hereunder
may be exercised solely by Administrative Agent, on behalf of Lenders in
accordance with the terms hereof and all powers, rights and remedies under the
Collateral Documents may be exercised solely by Collateral Agent, and (ii) in
the event of a foreclosure by Collateral Agent on any of the Collateral pursuant
to a public or private sale, Collateral Agent or any Lender or other Secured
Party may be the purchaser of any or all of such Collateral at any such sale and
Collateral Agent, as agent for and representative of Secured Parties (but not
any Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Collateral Agent at such sale.

9.9. Withholding Taxes. To the extent required by any applicable law, the
Administrative Agent may withhold from any payment to any Lender (which term
shall include any Issuing Bank for purposes of this Section 9.9) an amount
equivalent to any applicable withholding tax. If the Internal

 

-58-

--------------------------------------------------------------------------------

Revenue Service or any other Governmental Authority asserts a claim that
Administrative Agent did not properly withhold Tax from amounts paid to or for
the account of any Lender because the appropriate form was not delivered or was
not properly executed or because such Lender failed to notify Administrative
Agent of a change in circumstance which rendered the exemption from, or
reduction of, withholding tax ineffective or for any other reason, such Lender
shall indemnify fully and hold harmless Administrative Agent (to the extent that
the Administrative Agent has not already been reimbursed by a Credit Party
pursuant to Section 2.20 and without limiting or expanding the obligation of the
Credit Party to do so) for all amounts paid, directly or indirectly, by the
Administrative Agent as Taxes or otherwise, together with all expenses incurred,
including legal expenses and any other out-of-pocket expenses, whether or not
such Tax was correctly or legally imposed or asserted by the relevant
governmental authority. A certificate as to the amount of such payment or
liability delivered to any Lender by the Administrative Agent shall be
conclusive absent manifest error. The agreements in this Section 9.9 shall
survive the resignation and/or replacement of the Administrative Agent, any
assignment of rights by, or the replacement of, a Lender, the termination of the
Agreement and the repayment, satisfaction or discharge of all other Obligations.

SECTION 10. MISCELLANEOUS

10.1. Notices.

(a) Notices Generally. Any notice or other communication herein required or
permitted to be given to a Credit Party, Collateral Agent, Administrative Agent
or Issuing Bank, shall be sent to such Person’s address as set forth on Appendix
B or in the other relevant Credit Document, and in the case of any Lender, the
address as indicated on Appendix B or otherwise indicated to Administrative
Agent in writing. Except as otherwise set forth in paragraph (b) below, each
notice hereunder shall be in writing and may be personally served or sent by
facsimile or United States mail or courier service and shall be deemed to have
been given when delivered in person or by courier service and signed for against
receipt thereof, upon receipt of facsimile, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided, no notice to any Agent shall be effective until received by
such Agent; provided further, any such notice or other communication shall at
the request of the Administrative Agent be provided to any sub-agent appointed
pursuant to Section 9.3(c) hereto as designated by the Administrative Agent from
time to time.

(b) Electronic Communications. Notices and other communications to the Lenders
and the Issuing Bank hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by Administrative Agent, provided that the foregoing shall
not apply to notices to any Lender or the Issuing Bank pursuant to Section 2 if
such Lender or the Issuing Bank, as applicable, has notified Administrative
Agent that it is incapable of receiving notices under such Section by electronic
communication. Administrative Agent 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. Unless
Administrative Agent otherwise prescribes, (i) 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 (ii) 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 (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

-59-

--------------------------------------------------------------------------------

10.2. Expenses. Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to pay promptly (a) all the actual and reasonable
costs and expenses of preparation of the Credit Documents and any consents,
amendments, waivers or other modifications thereto (or any proposed consents,
amendments, waivers or modifications); (b) all the costs of furnishing all
opinions by counsel for Borrower and the other Credit Parties; (c) the
reasonable fees, expenses and disbursements of counsel to Agents (in each case
including allocated costs of internal counsel) in connection with the
negotiation, preparation, execution and administration of the Credit Documents
and any consents, amendments, waivers or other modifications thereto and any
other documents or matters requested by Company; (d) all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Collateral
Agent, for the benefit of Lenders pursuant hereto, including filing and
recording fees, expenses and taxes, stamp or documentary taxes, search fees,
title insurance premiums and reasonable fees, expenses and disbursements of
counsel to each Agent and of counsel providing any opinions that any Agent or
Requisite Lenders may request in respect of the Collateral or the Liens created
pursuant to the Collateral Documents; (e) all the actual costs and reasonable
fees, expenses and disbursements of any auditors, accountants, consultants or
appraisers; (f) all the actual costs and reasonable expenses (including the
reasonable fees, expenses and disbursements of any appraisers, consultants,
advisors and agents employed or retained by Collateral Agent and its counsel) in
connection with the custody or preservation of any of the Collateral; (g) all
other actual and reasonable costs and expenses incurred by each Agent in
connection with the syndication of the Letters of Credit and Commitments and the
negotiation, preparation and execution of the Credit Documents and any consents,
amendments, waivers or other modifications thereto and the transactions
contemplated thereby; and (h) after the occurrence of a Default or an Event of
Default, all costs and expenses, including reasonable attorneys’ fees (including
allocated costs of internal counsel) and costs of settlement, incurred by any
Agent and Lenders in enforcing any Obligations of or in collecting any payments
due from any Credit Party hereunder or under the other Credit Documents by
reason of such Default or Event of Default (including in connection with the
sale of, collection from, or other realization upon any of the Collateral or the
enforcement of the Guaranty) or in connection with any refinancing or
restructuring of the credit arrangements provided hereunder in the nature of a
“work-out” or pursuant to any insolvency or bankruptcy cases or proceedings.

10.3. Indemnity.

(a) In addition to the payment of expenses pursuant to Section 10.2, whether or
not the transactions contemplated hereby shall be consummated, each Credit Party
agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay
and hold harmless, each Agent and Lender and the officers, partners, members,
directors, trustees, advisors, employees, agents, sub-agents, attorneys and
Affiliates of each Agent and each Lender (each, an “Indemnitee”), from and
against any and all Indemnified Liabilities; provided, no Credit Party shall
have any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise from the gross
negligence or willful misconduct of that Indemnitee (as determined by a court of
competent jurisdiction in a final and non-appealable decision). To the extent
that the undertakings to defend, indemnify, pay and hold harmless set forth in
this Section 10.3 may be unenforceable in whole or in part because they are
violative of any law or public policy, the applicable Credit Party shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.

(b) To the extent permitted by applicable law, no Credit Party shall assert, and
each Credit Party hereby waives, any claim against each Lender, each Agent and
their respective Affiliates, directors, employees, attorneys, agents or
sub-agents, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) (whether or not the
claim therefor is based on contract, tort or duty imposed by any applicable
legal requirement) arising out of, in connection with, arising out of, as a
result of, or in any way related to, this Agreement or any Credit Document

 

-60-

--------------------------------------------------------------------------------

or any agreement or instrument contemplated hereby or thereby or referred to
herein or therein, the transactions contemplated hereby or thereby, any Letter
of Credit or any act or omission or event occurring in connection therewith, and
Holdings and Borrower hereby waives, releases and agrees not to sue upon any
such claim or any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor. No Credit Party shall have any liability for
any special, punitive, indirect or consequential damages relating to this
Agreement or any other Credit Document or arising out of its activities in
connection herewith or therewith (whether before or after the Closing Date). If
any amounts due under this Section 10.3 shall be have been paid after demand
therefor, the applicable Indemnitee shall promptly refund such amount to the
extent that there is a final and non-appealable judicial or arbitral
determination that such Indemnitee was not entitled to indemnification or
contribution rights with respect to such payment pursuant to the express terms
of this Section 10.3.

10.4. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by each
Credit Party at any time or from time to time subject to the consent of
Administrative Agent (such consent not to be unreasonably withheld or delayed),
without notice to any Credit Party or to any other Person (other than
Administrative Agent), any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general or special,
including Indebtedness evidenced by certificates of deposit, whether matured or
unmatured, but not including trust accounts) and any other Indebtedness at any
time held or owing by such Lender to or for the credit or the account of any
Credit Party against and on account of the obligations and liabilities of any
Credit Party to such Lender hereunder, the Letters of Credit and participations
therein and under the other Credit Documents, including all claims of any nature
or description arising out of or connected hereto, the Letters of Credit and
participations therein or with any other Credit Document, irrespective of
whether or not (a) such Lender shall have made any demand hereunder or (b) any
amounts in respect of the Letters of Credit or any other amounts due hereunder
shall have become due and payable pursuant to Section 2 and although such
obligations and liabilities, or any of them, may be contingent or unmatured.

10.5. Amendments and Waivers.

(a) Consent. Subject to the additional requirements of Sections 10.5(b) and
10.5(c), no amendment, modification, termination or waiver of any provision of
the Credit Documents, or consent to any departure by any Credit Party therefrom,
shall in any event be effective without the written concurrence of the Requisite
Lenders and Company.

(b) Affected Lenders’ Consent. Without the written consent of each Lender (other
than a Defaulting Lender) that would be affected thereby, no amendment,
modification, termination, or consent shall be effective if the effect thereof
would:

(i) extend the stated expiration date of any Letter of Credit beyond the
Maturity Date;

(ii) extend the time for any payment;

(iii) reduce any reimbursement obligation in respect of any Letter of Credit;

(iv) amend, modify, terminate or waive any provision of this Section 10.5(b),
Section 10.5(c) or any other provision of this Agreement that expressly provides
that the consent of all Lenders is required;

(v) amend the definition of “Requisite Lenders” or “Pro Rata Share”; or

 

-61-

--------------------------------------------------------------------------------

(vi) release all or substantially all of the Collateral or the Guarantor from
the Guaranty.

(c) Other Consents. No amendment, modification, termination or waiver of any
provision of the Credit Documents, or consent to any departure by any Credit
Party therefrom, shall:

(i) increase any Commitment of any Lender over the amount thereof then in effect
without the consent of such Lender; provided, no amendment, modification or
waiver of any condition precedent, covenant, Default or Event of Default shall
constitute an increase in the Commitment of any Lender;

(ii) amend, modify, terminate or waive any obligation of Lenders relating to the
purchase of participations in Letters of Credit as provided in Section 2.4(e),
any other provision contained in Section 2.4 or any other provision hereof as
the same applies to the rights or obligations of any Issuing Bank, in each case
without the written consent of Administrative Agent and of Issuing Bank; or

(iii) amend, modify, terminate or waive any provision of Section 9 as the same
applies to any Agent, or any other provision hereof as the same applies to the
rights or obligations of any Agent, in each case without the consent of such
Agent.

(d) Execution of Amendments, etc. Administrative Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute amendments,
modifications, waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on any Credit Party in
any case shall entitle any Credit Party to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 10.5 shall be binding
upon each Lender at the time outstanding, each future Lender and, if signed by a
Credit Party, on such Credit Party.

10.6. Successors and Assigns; Participations.

(a) Generally. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders. No Credit Party’s rights or
obligations hereunder nor any interest therein may be assigned or delegated by
any Credit Party without the prior written consent of all Lenders. Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, Affiliates of
each of the Agents and Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

(b) Register. Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and participations in Letters of Credit listed therein
for all purposes hereof, and no assignment or transfer of any such Commitment or
participations in Letters of Credit shall be effective, in each case, unless and
until recorded in the Register following receipt of an Assignment Agreement
effecting the assignment or transfer thereof as provided in Section 10.6(d).
Each assignment shall be recorded in the Register on the “Effective Date”
specified in the applicable Assignment Agreement, prompt notice thereof shall be
provided to Company and a copy of such Assignment Agreement shall be maintained.
The date of such recordation of a transfer shall be referred to herein as the
“Assignment Effective Date.” Any request, authority or consent of any Person
who, at the time of making such request or giving such authority or consent,

 

-62-

--------------------------------------------------------------------------------

is listed in the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding Commitments or
participations in Letters of Credit.

(c) Right to Assign. Each Lender shall have the right at any time to sell,
assign or transfer all or a portion of its rights and obligations under this
Agreement, including, without limitation, all or a portion of its participations
in Letters of Credit or Commitments owing to it or other Obligations (provided,
however, that each such assignment shall be of a uniform, and not varying,
percentage of all rights and obligations under and in respect of any
Commitments):

(i) to any Person meeting the criteria of clause (i) of the definition of the
term of “Eligible Assignee” with the consent of Administrative Agent and Issuing
Bank (each such consent not to be unreasonably withheld or delayed) and notice
to Company; or

(ii) to any Person meeting the criteria of clause (ii) of the definition of the
term of “Eligible Assignee” with the consents (except in the case of assignments
made by or to Bank of America), of each of Company, Administrative Agent and
Issuing Bank (each such consent not to be (x) unreasonably withheld or delayed
or (y) in the case of Company, required at any time an Event of Default shall
have occurred and then be continuing); provided, further, each such assignment
pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less
than $1,000,000 (or such lesser amount as may be agreed to by Company and
Administrative Agent or as shall constitute the aggregate amount of the
Commitments of the assigning Lender) with respect to the assignment of the
Commitments.

(d) Mechanics. Assignments may be made via an electronic settlement system
acceptable to Administrative Agent as designated in writing from time to time to
the Lenders by Administrative Agent (the “Settlement Service”). Each such
assignment shall be effected by the assigning Lender and proposed assignee
pursuant to the procedures then in effect under the Settlement Service, which
procedures shall be consistent with the other provisions of this Section 10.6.
Each assignor Lender and proposed assignee shall comply with the requirements of
the Settlement Service in connection with effecting any transfer of
participations in any Letter of Credit pursuant to the Settlement Service.
Assignments and assumptions (regardless of whether the Settlement Service is
utilized) shall require the execution and delivery to the Administrative Agent
of an Assignment Agreement. Assignments made pursuant to the foregoing provision
shall be effective as of the Assignment Effective Date. In connection with all
assignments there shall be delivered to Administrative Agent such forms,
certificates or other evidence, if any, with respect to United States federal
income tax withholding matters as the assignee under such Assignment Agreement
may be required to deliver pursuant to Section 2.20(e). A processing fee of
$3,500 will be required to be paid to Administrative Agent in connection with
any assignments (other than contemporaneous assignments by or to two or more
Related Funds).

(e) Representations and Warranties of Assignee. Each Lender, upon execution and
delivery hereof or upon succeeding to an interest in the Commitments, as the
case may be, represents and warrants as of the Closing Date or as of the
Assignment Effective Date that (i) it is an Eligible Assignee; (ii) it has
experience and expertise in the making of or investing in commitments or loans
such as the applicable Commitments, as the case may be; and (iii) it will make
or invest in, as the case may be, its Commitment for its own account in the
ordinary course and without a view to distribution of such Commitments within
the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of this
Section 10.6, the disposition of such Commitments or any interests therein shall
at all times remain within its exclusive control).

(f) Effect of Assignment. Subject to the terms and conditions of this
Section 10.6, as of the “Assignment Effective Date” (i) the assignee thereunder
shall have the rights and obligations of

 

-63-

--------------------------------------------------------------------------------

a “Lender” hereunder to the extent of its interest in the Commitments as
reflected in the Register and shall thereafter be a party hereto and a “Lender”
for all purposes hereof; (ii) the assigning Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned to the assignee,
relinquish its rights (other than any rights which survive the termination
hereof under Section 10.8) and be released from its obligations hereunder (and,
in the case of an assignment covering all or the remaining portion of an
assigning Lender’s rights and obligations hereunder, such Lender shall cease to
be a party hereto on the Assignment Effective Date; provided, anything contained
in any of the Credit Documents to the contrary notwithstanding, (x) Issuing Bank
shall continue to have all rights and obligations thereof with respect to such
Letters of Credit until the cancellation or expiration of such Letters of Credit
and the reimbursement of any amounts drawn thereunder and (y) such assigning
Lender shall continue to be entitled to the benefit of all indemnities hereunder
as specified herein with respect to matters arising out of the prior involvement
of such assigning Lender as a Lender hereunder); and (iii) the Commitments shall
be modified to reflect any Commitment of such assignee and any Commitment of
such assigning Lender, if any.

(g) Participations. Each Lender shall have the right at any time to sell one or
more participations to any Person (other than Holdings, any of its Subsidiaries
or any of its Affiliates) in all or any part of its Commitments or in any other
Obligation. The holder of any such participation, other than an Affiliate of the
Lender granting such participation, shall not be entitled to require such Lender
to take or omit to take any action hereunder except with respect to any
amendment, modification or waiver that would (i) extend the final scheduled
maturity of any Letter of Credit (unless such Letter of Credit is not extended
beyond the applicable Maturity Date) in which such participant is participating,
or reduce the rate or extend the time of payment of interest or fees thereon
(except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant’s participation over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Commitment shall not constitute a change in the
terms of such participation, and that an increase in any Commitment shall be
permitted without the consent of any participant if the participant’s
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by any Credit Party of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under the Collateral Documents (except as expressly provided in the Credit
Documents) supporting the Commitments hereunder in which such participant is
participating. Borrower agrees that each participant shall be entitled to the
benefits of Sections 2.19 and 2.20 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (c) of this
Section; provided, (i) a participant shall not be entitled to receive any
greater payment under Section 2.19 or 2.20 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
participant, except to the extent such entitlement to a greater payment results
from a Change in Law occurring after the sale of such participation and (ii) a
participant that would be a Non-U.S. Lender if it were a Lender shall not be
entitled to the benefits of Section 2.20 unless Company is notified of the
participation sold to such participant and such participant agrees, for the
benefit of the Borrower, to comply with Section 2.20 as though it were a Lender.
To the extent permitted by the applicable law, each participant also shall be
entitled to the benefits of Section 10.4 as though it were a Lender, provided
such participant agrees to be subject to Section 2.17 as though it were a
Lender.

Each Lender that sells a participation shall, acting solely for this purpose as
a non-fiduciary agent of each Borrower, maintain a register on which it enters
the name and address of each participant and the principal amounts (and stated
interest) of each participant’s interest in the other obligations under this
Agreement (the “Participant Register”). The entries in the Participant Register
shall be conclusive and such Lender shall treat each person whose name is
recorded in the Participant Register as the owner of such participation for all
purposes of this Agreement notwithstanding any notice to the contrary.

 

-64-

--------------------------------------------------------------------------------

(h) Certain Other Assignments. In addition to any other assignment permitted
pursuant to this Section 10.6, any Lender may assign and/or pledge all or any
portion of its Obligations owed by or to such Lender to secure obligations of
such Lender including, without limitation, any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors and any
operating circular issued by such Federal Reserve Bank; provided, no Lender, as
between Borrower and such Lender, shall be relieved of any of its obligations
hereunder as a result of any such assignment and pledge, and provided, further,
in no event shall the applicable Federal Reserve Bank, pledgee or trustee be
considered to be a “Lender” or be entitled to require the assigning Lender to
take or omit to take any action hereunder

(i) Resignation as Issuing Bank after Assignment. Notwithstanding anything to
the contrary contained herein, if at any time Bank of America assigns all of its
Commitment pursuant to subsection (c) above, Bank of America may, upon 30 days’
notice to the Borrower and the Lenders, resign as Issuing Bank. In the event of
any such resignation as Issuing Bank the Borrower shall be entitled to appoint
from among the Lenders a successor Issuing Bank hereunder; provided, however,
that no failure by the Borrower to appoint any such successor shall affect the
resignation of Bank of America as Issuing Bank. If Bank of America resigns as
Issuing Bank, it shall retain all the rights, powers, privileges and duties of
the Issuing Bank hereunder with respect to all Letters of Credit outstanding as
of the effective date of its resignation as Issuing Bank and all Letter of
Credit Obligations with respect thereto. Upon the appointment of a successor
Issuing Bank, (a) such successor shall succeed to and become vested with all of
the rights, powers, privileges and duties of the retiring Issuing Bank and
(b) the successor Issuing Bank shall issue letters of credit in substitution for
the Letters of Credit, if any, outstanding at the time of such succession or
make other arrangements satisfactory to Bank of America to effectively assume
the obligations of Bank of America with respect to such Letters of Credit.

10.7. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.

10.8. Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof and the making of any Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in Sections 2.19, 2.20, 10.2, 10.3 and
10.4 and the agreements of Lenders set forth in Sections 2.17, 9.3(b) and 9.6
shall survive the cancellation or expiration of the Letters of Credit and the
reimbursement of any amounts drawn thereunder, and the termination hereof.

10.9. No Waiver; Remedies Cumulative. No failure or delay on the part of any
Agent or any Lender in the exercise of any power, right or privilege hereunder
or under any other Credit Document shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other power, right or privilege. The
rights, powers and remedies given to each Agent and each Lender hereby are
cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other
Credit Documents. Any forbearance or failure to exercise, and any delay in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

10.10. Marshalling; Payments Set Aside. Neither any Agent nor any Lender shall
be under any obligation to marshal any assets in favor of any Credit Party or
any other Person or against or in payment of any or all of the Obligations. To
the extent that any Credit Party makes a payment or payments

 

-65-

--------------------------------------------------------------------------------

to Administrative Agent or Lenders (or to Administrative Agent, on behalf of
Lenders), or any Agent or Lenders enforce any security interests or exercise
their rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor or related thereto, shall be revived
and continued in full force and effect as if such payment or payments had not
been made or such enforcement or setoff had not occurred.

10.11. Severability. In case any provision in or obligation hereunder or under
any other Credit Document shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

10.12. Obligations Several; Independent Nature of Lenders’ Rights. The
obligations of Lenders hereunder are several and no Lender shall be responsible
for the obligations or Commitment of any other Lender hereunder. Nothing
contained herein or in any other Credit Document, and no action taken by Lenders
pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out hereof and it shall not be necessary for any other Lender to
be joined as an additional party in any proceeding for such purpose.

10.13. Headings. Section headings herein are included herein for convenience of
reference only and shall not constitute a part hereof for any other purpose or
be given any substantive effect.

10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES THEREOF.

10.15. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR
ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY (A) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (B) WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS; (C) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SECTION 10.1; (D) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; AND (E) AGREES THAT AGENTS AND LENDERS RETAIN
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION.

 

-66-

--------------------------------------------------------------------------------

10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL
AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT
DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE COMMITMENTS
MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

10.17. Confidentiality. Each Lender shall hold all non-public information
regarding Company and its Subsidiaries and their businesses identified as such
by Company and obtained by such Lender pursuant to the requirements hereof in
accordance with such Lender’s customary procedures for handling confidential
information of such nature, it being understood and agreed by Company that, in
any event, a Lender may make (i) disclosures of such information to Affiliates
of such Lender and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, trustees, advisors and representatives (and to
other persons authorized by a Lender or Agent to organize, present or
disseminate such information in connection with disclosures otherwise made in
accordance with this Section 10.17), (ii) disclosures of such information
reasonably required by any pledgee referred to in Section 10.6(h) or any bona
fide or potential assignee, transferee or participant in connection with the
contemplated assignment, transfer or participation by such Lender of any
Commitments or any participations therein or any direct or indirect contractual
counterparties (or the professional advisors thereto) in Swap Agreements
(provided such counterparties and advisors are advised of and agree to be bound
by the provisions of this Section 10.17), (iii) disclosure to any rating agency
when required by it, provided that, prior to any disclosure, such rating agency
shall undertake in writing to preserve the confidentiality of any confidential
information relating to the Credit Parties received by it from any Agent or any
Lender, (iv) disclosures required or requested by any governmental agency,
regulatory authority or representative thereof or pursuant to legal or judicial
process; provided, unless specifically prohibited by applicable law or court
order, each Lender shall make reasonable efforts to notify Company of any
request by any governmental agency or representative thereof (other than any
such request in connection with any examination of the financial condition or
other routine examination of such Lender by such governmental agency) for
disclosure of any such non-public information prior to disclosure of such
information, (v) disclosures of such information to any other party hereto,
(vi) disclosures of such information in connection with the exercise of any
remedies hereunder or under any other Credit Documents or any action or
proceeding relating to this

 

-67-

--------------------------------------------------------------------------------

Agreement or any other Credit Document or the enforcement of rights hereunder or
thereunder, (vii) disclosures of such information with the consent of Borrower,
(viii) disclosures if such information becomes available to any Lender or any of
their respective Affiliates on a non-confidential basis from a source other than
the Company and (ix) disclosures to the extent such information becomes publicly
available other than as a result of a breach of this Section.

10.18. Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged with respect to any of the Obligations,
including all charges or fees in connection therewith deemed in the nature of
interest under applicable law shall not exceed the Highest Lawful Rate. If the
rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate, the outstanding
amounts under the Letters of Credit issued hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect. In
addition, if when the Letters of Credit issued hereunder are repaid in full the
total interest due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, Borrower shall pay to
Administrative Agent an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of Lenders and Borrower to conform strictly to
any applicable usury laws. Accordingly, if any Lender contracts for, charges, or
receives any consideration which constitutes interest in excess of the Highest
Lawful Rate, then any such excess shall be cancelled automatically and, if
previously paid, shall at such Lender’s option be applied to the outstanding
amount of the Letters of Credit issued hereunder or be refunded to Borrower.

10.19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

10.20. Effectiveness. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto and receipt by Borrower
and Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.

10.21. Patriot Act. Each Lender and Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies Borrower that pursuant to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that
identifies Borrower, which information includes the name and address of Borrower
and other information that will allow such Lender or Administrative Agent, as
applicable, to identify Borrower in accordance with the Act.

10.22. Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment Agreement 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 the case may be, to the extent 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.

[Remainder of page intentionally left blank]

 

-68-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.

 

EDUCATION MANAGEMENT LLC By:   /s/ Edward H. West   Name: Edward H. West  
Title: President and Chief Financial Officer

 

EDUCATION MANAGEMENT HOLDINGS LLC By:   /s/ Dorinda A. Pannozzo   Name: Dorinda
A. Pannozzo   Title: Treasurer

--------------------------------------------------------------------------------

BANK OF AMERICA, N.A.,

as Administrative Agent and as Collateral Agent

By:  

/s/ Keri Shull

 

Name: Keri Shull

Title: Vice President

 

BANK OF AMERICA, N.A.,

as Issuing Bank

By:  

/s/ Keri Shull

 

Name: Keri Shull

Title: Vice President

 

BANK OF AMERICA, N.A.,

as Lender

By:  

/s/ Keri Shull

 

Name: Keri Shull

Title: Vice President

--------------------------------------------------------------------------------

APPENDIX A

TO LETTER OF CREDIT FACILITY AGREEMENT

Commitments

 

Name of Lender

  

Commitment

Bank of America, N.A.

   $150,000,000

 

APPENDIX A-1

--------------------------------------------------------------------------------

APPENDIX B

TO LETTER OF CREDIT FACILITY AGREEMENT

Notice Addresses

EDUCATION MANAGEMENT LLC

c/o EDMC

210 Sixth Avenue, 33rd Floor

Pittsburgh, Pennsylvania 15222

Attention: Todd S. Nelson, Chief Executive Officer

Telephone: 412-562-0900

Facsimile: 412-471-3288

Email: tnelson@edmc.edu

EDUCATION MANAGEMENT HOLDINGS LLC

c/o EDMC

210 Sixth Avenue, 33rd Floor

Pittsburgh, Pennsylvania 15222

Attention: Todd S. Nelson, Chief Executive Officer

Telephone: 412-562-0900

Facsimile: 412-471-3288

Email: tnelson@edmc.edu

in each case, with a copy to:

General Counsel

c/o EDMC

210 Sixth Avenue, 33rd Floor

Pittsburgh, Pennsylvania 15222

Attention: Devitt Kramer, Senior Vice President –

Corporate Counsel and Compliance

Telephone: 412-995-7315

Facsimile: 412-995-7322

and

SIMPSON THACHER & BARTLETT LLP

425 Lexington Avenue

New York, New York 10017

Attention: Melissa Hutson

Telephone: 212-455-7474

Facsimile: 212-455-2502

 

Appendix B-1

--------------------------------------------------------------------------------

BANK OF AMERICA, N.A.,

as Administrative Agent, Collateral Agent,

Issuing Bank and a Lender

BANK OF AMERICA, N.A.

100 North Tryon Street

NC1-007-17-15

Charlotte, North Carolina 28255

Attention: Keri Shull

Telephone: 980-388-7517

Facsimile: 704-683-9281

with a copy to:

BANK OF AMERICA, N.A.

901 Main Street

TX1-492-14-11

Dallas, Texas 75202

Attention: Annette Hunt

Telephone: 214-209-4108

Facsimile: 214-290-8378

 

Appendix B-2