Document:

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                                                                    EXHIBIT 4.1
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                                GRIDWARE, INC.

                          2000 EQUITY INCENTIVE PLAN

                           Adopted: January 12, 2000
                  Approved By Stockholders: January 12, 2000
                      Termination Date: January 11, 2010

     1.   PURPOSES.

               (a)  Eligible Stock Award Recipients. The persons eligible to
receive Stock Awards are the Employees, Directors and Consultants of the Company
and its Affiliates.

               (b)  Available Stock Awards. The purpose of the Plan is to
provide a means by which eligible recipients of Stock Awards may be given an
opportunity to benefit from increases in value of the Common Stock through the
granting of the following Stock Awards: (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire
restricted stock.

               (c)  General Purpose. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.

     2.   DEFINITIONS.

               (a)  "Affiliate" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

               (b)  "Board" means the Board of Directors of the Company.

               (c)  "Code" means the Internal Revenue Code of 1986, as amended.

               (d)  "Committee" means a committee of one or more members of the
Board appointed by the Board in accordance with subsection 3(c).

               (e)  "Common Stock" means the common stock of the Company.

               (f)  "Company" means Gridware, Inc., a California corporation.
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               (g)  "Consultant" means any person, including an advisor, (i)
engaged by the Company or an Affiliate to render consulting or advisory services
and who is compensated for such services or (ii) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors who are not compensated by the Company for their services as
Directors or Directors who are merely paid a director's fee by the Company for
their services as Directors.

               (h)  "Continuous Service" means that the Participant's service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Participant's Continuous
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or an Affiliate
as an Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or
termination of the Participant's Continuous Service. For example, a change in
status from an Employee of the Company to a Consultant of an Affiliate or a
Director will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.

               (i)  "Covered Employee" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

               (j)  "Director" means a member of the Board of Directors of the
Company.

               (k)  "Disability" means (i) before the Listing Date, the
inability of a person, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of that person's position with the Company
or an Affiliate of the Company because of the sickness or injury of the person
and (ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

               (l)  "Employee" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.

               (m)  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

               (n)  "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:

                         (i)   If the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of

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determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

                         (ii)   In the absence of such markets for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.

                         (iii)  Prior to the Listing Date, the value of the
Common Stock shall be determined in a manner consistent with Section 260.140.50
of Title 10 of the California Code of Regulations. This provision only applies
to the extent necessary to meet the requirements of applicable California blue
sky laws.

               (o)  "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

               (p)  "Listing Date" means the first date upon which any security
of the Company is listed (or approved for listing) upon notice of issuance on
any securities exchange or designated (or approved for designation) upon notice
of issuance as a national market security on an interdealer quotation system.
For Stock Awards in which it is necessary to meet applicable California blue sky
laws, Listing Date means the first date upon which any security of the Company
is listed (or approved for listing) upon notice of issuance on any securities
exchange or designated (or approved for designation) upon notice of issuance as
a national market security on an interdealer quotation system if such securities
exchange or interdealer quotation system has been certified in accordance with
the provisions of Section 25100(o) of the California Corporate Securities Law of
1968.

               (q)  "Non-Employee Director" means a Director who either (i) is
not a current Employee or Officer of the Company or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

               (r)  "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

               (s)  "Officer" means (i) before the Listing Date, any person
designated by the Company as an officer and (ii) on and after the Listing Date,
a person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated thereunder.

               (t)  "Option" means an Incentive Stock Option or a Nonstatutory
Stock Option granted pursuant to the Plan.

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               (u)  "Option Agreement" means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

               (v)  "Optionholder" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

               (w)  "Outside Director" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

               (x)  "Participant" means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

               (y)  "Plan" means this Gridware, Inc. 2000 Equity Incentive Plan.

               (z)  "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to time.

               (aa) "Securities Act" means the Securities Act of 1933, as
amended.

               (bb) "Stock Award" means any right granted under the Plan,
including an Option, a stock bonus and a right to acquire restricted stock.

               (cc) "Stock Award Agreement" means a written agreement between
the Company and a holder of a Stock Award evidencing the terms and conditions of
an individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.

               (dd) "Ten Percent Stockholder" means a person who owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates.

     3.   ADMINISTRATION.

               (a)  Administration by Board. The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in subsection 3(c).

               (b)  Powers of Board. The Board shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:

                         (i)   To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; what type or

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combination of types of Stock Award shall be granted; the provisions of each
Stock Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive Common Stock pursuant to a Stock
Award; and the number of shares of Common Stock with respect to which a Stock
Award shall be granted to each such person.

                         (ii)  To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.

                         (iii) To amend the Plan or a Stock Award as provided in
Section 12.

                         (iv)  Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.

               (c)  Delegation to Committee.

                         (i)   General. The Board may delegate administration of
the Plan to a Committee or Committees of one (1) or more members of the Board,
and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

                         (ii)  Committee Composition when Common Stock is
Publicly Traded. At such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or solely of two
or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope
of such authority, the Board or the Committee may (1) delegate to a committee of
one or more members of the Board who are not Outside Directors the authority to
grant Stock Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award or (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code or
(2) delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.

               (d)  Effect of Board's Decision. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons.

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     4.   SHARES SUBJECT TO THE PLAN.

               (a)  Share Reserve. Subject to the provisions of Section 11
relating to adjustments upon changes in Common Stock, the Common Stock that may
be issued pursuant to Stock Awards shall not exceed in the aggregate one
million, seven hundred thousand, seven hundred and five (1,764,705) shares of
Common Stock.

               (b)  Reversion of Shares to the Share Reserve. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

               (c)  Source of Shares. The shares of Common Stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or
otherwise.

               (d)  Share Reserve Limitation. Prior to the Listing Date and to
the extent then required by Section 260.140.45 of Title 10 of the California
Code of Regulations, the total number of shares of Common Stock issuable upon
exercise of all outstanding Options and the total number of shares of Common
Stock provided for under any stock bonus or similar plan of the Company shall
not exceed the applicable percentage as calculated in accordance with the
conditions and exclusions of Section 260.140.45 of Title 10 of the California
Code of Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.

     5.   ELIGIBILITY.

               (a)  Eligibility for Specific Stock Awards. Incentive Stock
Options may be granted only to Employees. Stock Awards other than Incentive
Stock Options may be granted to Employees, Directors and Consultants.

               (b)  Ten Percent Stockholders.

                         (i)   A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.

                         (ii)  Prior to the Listing Date, a Ten Percent
Stockholder shall not be granted a Nonstatutory Stock Option unless the exercise
price of such Option is at least (i) one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant or (ii) such lower
percentage of the Fair Market Value of the Common Stock at the date of grant as
is permitted by Section 260.140.41 of Title 10 of the California Code of
Regulations at the time of the grant of the Option. This subsection 5(b)(ii)
only applies to those Stock Awards with respect to which it is necessary to meet
the requirements of applicable California blue sky laws.

                         (iii) Prior to the Listing Date, a Ten Percent
Stockholder shall not be granted a restricted stock award unless the purchase
price of the restricted stock is at least (i) one hundred percent (100%) of the
Fair Market Value of the Common Stock at the date of grant or

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(ii) such lower percentage of the Fair Market Value of the Common Stock at the
date of grant as is permitted by Section 260.140.41 of Title 10 of the
California Code of Regulations at the time of the grant of the Option. This
subsection 5(b)(iii) only applies to those Stock Awards with respect to which it
is necessary to meet the requirements of applicable California blue sky laws.

               (c)  Section 162(m) Limitation. Subject to the provisions of
Section 11 relating to adjustments upon changes in the shares of Common Stock,
no Employee shall be eligible to be granted Options covering more than six
hundred thousand (600,000) shares of Common Stock during any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, this subsection 5(c) shall not apply until (i) the earliest of:
(1) the first material modification of the Plan (including any increase in the
number of shares of Common Stock reserved for issuance under the Plan in
accordance with Section 4); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of stockholders at which Directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

               (d)  Consultants.

                         (i)   Prior to the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701, unless
the Company determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.

                         (ii)  From and after the Listing Date, a Consultant
shall not be eligible for the grant of a Stock Award if, at the time of grant, a
Form S-8 Registration Statement under the Securities Act ("Form S-8") is not
available to register either the offer or the sale of the Company's securities
to such Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

                         (iii) Rule 701 and Form S-8 generally are available to
consultants and advisors only if (i) they are natural persons; (ii) they provide
bona fide services to the issuer, its parents, its majority-owned subsidiaries
or majority-owned subsidiaries of the issuer's parent; and (iii) the services
are not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.

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     6.   OPTION PROVISIONS.

     Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:

               (a)  Term. Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, no Incentive Stock Option shall be exercisable after
the expiration of ten (10) years from the date it was granted. In addition, for
Options granted in which it is necessary to meet the requirements of applicable
California blue sky laws, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

               (b)  Exercise Price of an Incentive Stock Option. Subject to the
provisions of subsection 5(b)(i) regarding Ten Percent Stockholders, the
exercise price of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

               (c)  Exercise Price of a Nonstatutory Stock Option. Subject to
the provisions of subsection 5(b)(ii), the exercise price of each Nonstatutory
StockOption shall be not less than eighty-five percent (85%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

               (d)  Consideration. The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is exercised
or (ii) at the discretion of the Board at the time of the grant of the Option
(or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to
the Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

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     In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

               (e)  Transferability of an Incentive Stock Option. An Incentive
Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

               (f)  Transferability of a Nonstatutory Stock Option. A
Nonstatutory Stock Option shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option. In addition, for Options granted with respect
to which it is necessary to meet the requirements of applicable California blue
sky laws, Nonstatutory Stock Option granted prior to the Listing Date shall not
be transferable except by will or by the laws of descent and distribution and,
to the extent provided in the Option Agreement, to such further extent as
permitted by Section 260.140.41(d) of Title 10 of the California Code of
Regulations at the time of the grant of the Option, and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.

               (g)  Vesting Generally. The total number of shares of Common
Stock subject to an Option may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be equal. The
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. The vesting provisions of individual Options
may vary. The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of shares of Common Stock as to which an
Option may be exercised.

               (h)  Minimum Vesting Prior to the Listing Date. Notwithstanding
the foregoing subsection 6(g) to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:

                         (i)   Options granted prior to the Listing Date to an
Employee who is not an Officer, Director or Consultant shall provide for vesting
of the total number of shares of Common Stock at a rate of at least twenty
percent (20%) per year over five (5) years from the date the Option was granted,
subject to reasonable conditions such as continued employment; and

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                         (ii)  Options granted prior to the Listing Date to
Officers, Directors or Consultants may be made fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company.

               (i)  Termination of Continuous Service. In the event an
Optionholder's Continuous Service terminates (other than upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date
of termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service or such longer or shorter period specified in the Option
Agreement (for Options with respect to which it is necessary to meet the
requirements of applicable California blue sky laws, this period shall not be
less than thirty (30) days for Options granted prior to the Listing Date unless
such termination is for cause), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate.

               (j)  Extension of Termination Date. An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
6(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

               (k)  Disability of Optionholder. In the event that an
Optionholder's Continuous Service terminates as a result of the Optionholder's
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination or such longer or shorter
period specified in the Option Agreement (for Options in which it is necessary
to meet the requirements of applicable California blue sky laws, this period
shall not be less than six (6) months for Options granted prior to the Listing
Date) or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified herein, the Option shall terminate.

               (l)  Death of Optionholder. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death or such longer or shorter period specified in
the Option Agreement (for Options in which it is necessary to meet the
requirements of applicable California blue sky laws, this

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period shall not be less than six (6) months for Options granted prior to the
Listing Date) or (2) the expiration of the term of such Option as set forth
in the Option Agreement. If, after death, the Option is not exercised within the
time specified herein, the Option shall terminate.

               (m)  Early Exercise. The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Any unvested shares of Common Stock so purchased may
be subject to a repurchase option in favor of the Company or to any other
restriction the Board determines to be appropriate. Provided that the
"Repurchase Limitation" in subsection 10(h) is not violated for any Common Stock
that is subject to applicable California blue sky laws, the Company will not
exercise its repurchase option until at least six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.

               (n)  Right of Repurchase. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares of Common Stock acquired by the
Optionholder pursuant to the exercise of the Option. Provided that the
"Repurchase Limitation" in subsection 10(h) is not violated for any Common Stock
that is subject to applicable California blue sky laws, the Company will not
exercise its repurchase option until at least six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the
Board otherwise specifically provides in the Option.

               (o)  Right of First Refusal. The Option may, but need not,
include a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares of Common
Stock received upon the exercise of the Option.

               (p)  Re-Load Options.

                         (i)   Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Unless otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

                         (ii)  Any such Re-Load Option shall (1) provide for a
number of shares of Common Stock equal to the number of shares of Common Stock
surrendered as part or all of the exercise price of such Option; (2) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (3) have an exercise
price

                                       11
<PAGE>

which is equal to one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Re-Load Option on the date of exercise of the
original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described for
Options under the Plan.

                         (iii) Any such Re-Load Option may be an Incentive Stock
Option or a Nonstatutory Stock Option, as the Board may designate at the time of
the grant of the original Option; provided, however, that the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on the exercisability of Incentive
Stock Options described in subsection 10(d) and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.

     7.   PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

               (a)  Stock Bonus Awards. Each stock bonus agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                         (i)   Consideration. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.

                         (ii)  Vesting. Shares of Common Stock awarded under the
stock bonus agreement may, but need not, be subject to a share repurchase option
in favor of the Company in accordance with a vesting schedule to be determined
by the Board. For Shares of Common Stock awarded under the stock bonus agreement
with respect to which it is necessary to meet the requirements of applicable
California blue sky laws, the shares will also be subject to the "Repurchase
Limitation" in subsection 10(h).

                         (iii) Termination of Participant's Continuous Service.
In the event a Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the Participant which
have not vested as of the date of termination under the terms of the stock bonus
agreement. For shares of Common Stock awarded under the stock bonus agreement
with respect to which it is necessary to meet the requirements of applicable
California blue sky laws, the shares will also be subject to the "Repurchase
Limitation" in subsection 10(h).

                         (iv)  Transferability. Rights to acquire shares of
Common Stock under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the stock bonus agreement remains subject to the
terms of the

                                       12
<PAGE>

stock bonus agreement before the Listing Date. For rights to acquire shares
of Common Stock under the stock bonus agreement with respect to which it is
necessary to meet the requirements of applicable California blue sky laws, this
right shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant.

               (b)  Restricted Stock Awards. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                         (i)   Purchase Price. The purchase price of restricted
stock awards made prior shall not be less than eighty-five percent (85%) of the
Common Stock's Fair Market Value on the date such award is made or at the time
the purchase is consummated. In addition, for restricted stock awards with
respect to which it is necessary to meet the requirements of applicable
California blue sky laws, the purchase price shall be subject to the provisions
of subsection 5(b)(iii).

                         (ii)  Consideration. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion, provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

                         (iii) Vesting. Shares of Common Stock acquired under
the restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board. For shares of Common Stock acquired under the
restricted stock purchase agreement with respect to which it is necessary to
meet the requirements of applicable California blue sky laws, the shares will
also be subject to the "Repurchase Limitation" in subsection 10(h).

                         (iv)  Termination of Participant's Continuous Service.
In the event a Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held
by the Participant which have not vested as of the date of termination under the
terms of the restricted stock purchase agreement. For shares of Common Stock
acquired under the restricted stock purchase agreement with respect to which it
is necessary to meet the requirements of applicable California blue sky laws,
the shares will also be subject to the "Repurchase Limitation" in subsection
10(h).

                         (v)   Transferability. Rights to acquire shares of
Common Stock under the restricted stock purchase agreement shall be transferable
by the Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement

                                       13
<PAGE>

remains subject to the terms of the restricted stock purchase agreement. In
addition, before the Listing Date, rights to acquire shares of Common Stock
under the restricted stock purchase agreement with respect to which it is
necessary to meet the requirements of applicable California blue sky laws, shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of the Participant only by the
Participant.

     8.   COVENANTS OF THE COMPANY.

               (a)  Availability of Shares. During the terms of the Stock
Awards, the Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Stock Awards.

               (b)  Securities Law Compliance. The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

     9.   USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

     10.  MISCELLANEOUS.

               (a)  Acceleration of Exercisability and Vesting. The Board shall
have the power to accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part thereof will vest
in accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

               (b)  Stockholder Rights. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

               (c)  No Employment or other Service Rights. Nothing in the Plan
or any instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant any right to continue to serve the Company or an Affiliate
in the capacity in effect at the time the Stock Award was granted or shall
affect the right of the Company or an Affiliate to terminate (i) the employment
of an Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the

                                       14
<PAGE>

service of a Director pursuant to the Bylaws of the Company or an Affiliate, and
any applicable provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may be.

               (d)  Incentive Stock Option $100,000 Limitation. To the extent
that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options.

               (e)  Investment Assurances. The Company may require a
Participant, as a condition of exercising or acquiring Common Stock under any
Stock Award, (i) to give written assurances satisfactory to the Company as to
the Participant's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling or
otherwise distributing the Common Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.

               (f)  Withholding Obligations. To the extent provided by the terms
of a Stock Award Agreement, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
Common Stock under a Stock Award by any of the following means (in addition to
the Company's right to withhold from any compensation paid to the Participant by
the Company) or by a combination of such means: (i) tendering a cash payment;
(ii) authorizing the Company to withhold shares of Common Stock from the shares
of Common Stock otherwise issuable to the Participant as a result of the
exercise or acquisition of Common Stock under the Stock Award, provided,
however, that no shares of Common Stock are withheld with a value exceeding the
minimum amount of tax required to be withheld by law; or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

               (g)  Information Obligation. Prior to the Listing Date, to the
extent required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

                                       15
<PAGE>

               (h)  Repurchase Limitation. The terms of any repurchase option
shall be specified in the Stock Award and may be either at Fair Market Value at
the time of repurchase or at not less than the original purchase price. To the
extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:

                         (i)   Fair Market Value. If the repurchase option gives
the Company the right to repurchase the shares of Common Stock upon termination
of employment at not less than the Fair Market Value of the shares of Common
Stock to be purchased on the date of termination of Continuous Service, then (i)
the right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

                         (ii)  Original Purchase Price. If the repurchase option
gives the Company the right to re purchase the shares of Common Stock upon
termination of Continuous Service at the original purchase price, then (i) the
right to repurchase at the original purchase price shall lapse at the rate of at
least twenty percent (20%) of the shares of Common Stock per year over five (5)
years from the date the Stock Award is granted (without respect to the date the
Stock Award was exercised or became exercisable) and (ii) the right to
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Options after such date of termination, within ninety
(90) days after the date of the exercise) or such longer period as may be agreed
to by the Company and the Participant (for example, for purposes of satisfying
the requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock").

                         (iii) Application of Subsection 10(h). This subsection
10(h) only applies to those Stock Awards with respect to which it is necessary
to meet the requirements of applicable California blue sky laws.

     11.  ADJUSTMENTS UPON CHANGES IN STOCK.

               (a)  Capitalization Adjustments. If any change is made in the
Common Stock subject to the Plan, or subject to any Stock Award, without the
receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities subject
to the Plan pursuant to subsection 4(a) and the maximum number of securities
subject to award to any person pursuant to subsection 5(c), and the outstanding

                                       16
<PAGE>

Stock Awards will be appropriately adjusted in the class(es) and number of
securities and price per share of Common Stock subject to such outstanding Stock
Awards. The Board shall make such adjustments, and its determination shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)

               (b)  Change in Control--Dissolution or Liquidation. In the event
of a dissolution or liquidation of the Company, then all outstanding Stock
Awards shall terminate immediately prior to such event.

               (c)  Change in Control--Asset Sale, Merger, Consolidation or
Reverse Merger. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.

               (d)  Change in Control--Securities Acquisition. After the Listing
Date, in the event of an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or an Affiliate) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of Directors and provided that such acquisition is not a result of, and
does not constitute a transaction described in, subsection 1l(c) hereof, then
with respect to Stock Awards held by Participants whose Continuous Service has
not terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full.

     12.  AMENDMENT OF THE PLAN AND STOCK AWARDS.

               (a)  Amendment of Plan. The Board at any time, and from time to
time, may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

                                       17
<PAGE>

               (b)  Stockholder Approval. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

               (c)  Contemplated Amendments. It is expressly contemplated that
the Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Employees with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

               (d)  No Impairment of Rights. Rights under any Stock Award
granted before amendment of the Plan shall not be impaired by any amendment of
the Plan unless (i) the Company requests the consent of the Participant and (ii)
the Participant consents in writing.

               (e)  Amendment of Stock Awards. The Board at any time, and from
time to time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

     13.  TERMINATION OR SUSPENSION OF THE PLAN.

               (a)  Plan Term. The Board may suspend or terminate the Plan at
any time. Unless sooner terminated, the Plan shall terminate on the day before
the tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

               (b)  No Impairment of Rights. Suspension or termination of the
Plan shall not impair rights and obligations under any Stock Award granted while
the Plan is in effect except with the written consent of the Participant.

     14.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

     15.  CHOICE OF LAW.

     The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.

                                       18<PAGE>

                            ASSET PURCHASE AGREEMENT

          This Asset Purchase Agreement, dated as of September 4, 2000 (this
"Agreement"), is entered into by and among Corinthian Schools, Inc., a Delaware
corporation ("Buyer"), Educorp, Inc. a California corporation ("Seller"), and
Dr. Rashed B. Elyas and Ken Boyle ("Owners").

                                   BACKGROUND

          A.  Owners are the sole stockholders of Seller, which owns, operates
and administers those certain proprietary, post-secondary, vocational training
schools known as (A) Nova Institute of Health Technology located at (i) 3000 S.
Robertson Blvd., Third Floor, Los Angeles, California 90034, (ii) 12449 Putnam
Street, Whittier, California 90602, and (iii) 520 N. Euclid Avenue, Ontario,
California 91762, and (B) Educorp Career College, located at 230 E. Third
Street, Long Beach, California 90802 (collectively, the "Schools," and
individually, a "School").

          B.  Buyer desires to buy, through the payment of cash and the
assumption of certain liabilities of Seller, and Seller desires to sell,
substantially all assets and property owned by Seller and used in the business
of the Schools, upon the terms and conditions hereinafter set forth.

                                   AGREEMENT

          In consideration of the mutual covenants contained in this Agreement
and intending to be legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I
                          SALE AND PURCHASE OF ASSETS

          1.1  Purchased Assets to be Transferred.  Subject to the terms and
conditions of this Agreement, Seller hereby agrees to sell, assign, convey,
transfer and deliver to Buyer at the Closing (as defined herein), and Buyer
hereby agrees to purchase from Seller, all of the Seller's right, title and
interest in, to and under all of the business, properties, assets, goodwill,
rights and claims and property owned by Seller and used in the business of the
Schools of the types set forth below (the "Purchased Assets"), free and clear of
all mortgages, pledges, liens, claims, restrictions, encumbrances and security
interests of any kind or nature except as described on Schedule 5.8(b) (such
                                                       ---------------
mortgages, pledges, liens, etc., as described on Schedule 5.8(b), the "Permitted
                                                 ---------------
Exceptions"), and except for the Excluded Assets (as defined in Section 1.2
hereof):

               1.1.1  Accounts Receivable. All of Seller's accounts receivable,
notes receivable and other receivables (and causes of action related to any of
the foregoing) ("Accounts Receivable");

               1.1.2  Inventory. All of Seller's inventory, including without
limitation, textbooks, course materials and supplies;

               1.1.3  Equipment. All of Seller's computer hardware, printers,
other data processing equipment, other machinery and equipment, furniture,
fixtures, leasehold improvements, furnishings, classroom equipment and other
tangible personal property used at the Schools;

               1.1.4  Records. All of Seller's records related to or used in
connection with the operation of the Schools or pertaining to the Purchased
Assets, including, without limitation, all student

                                      -1-
<PAGE>

records, ledgers, financial statements and records, operating data,
correspondence, employment records, placement records, marketing materials,
information and data, mailing lists and copies of all documents and other
information and data filed by Seller with any state, federal or local government
authority or any guaranty or accrediting agency, whether on computer disk, in
paper form or otherwise;

               1.1.5  Contracts and Leases. All of the rights of Seller under
contracts, purchase orders and leases applicable to the Schools to which Seller
is a party entered into in the course of Seller's business, including, without
limitation, those identified as Assumed Contracts in Schedule 5.9;
                                                     ------------

               1.1.6  Intellectual Property. All rights of Seller with respect
to patents, trademarks, service marks, logos, licenses and copyrights (whether
or not registered) and all applications and registrations therefor, owned or
licensed by Seller, and all rights of Seller with respect to computer programs
and software, including those described in Schedule 5.10, except (a) such
                                           -------------
patents, trademarks, service marks, logos, licenses and copyrights with respect
to computer programs and software related to the "Edutown" enterprise of Seller
which are specifically set forth on Schedule 1.2.2, and (b) such rights to the
                                    --------------
Curriculum (as defined in Section 5.8.5) as Buyer shall license to Edutown LLC
on the Closing Date by entering into a license agreement in substantially the
form attached hereto as Exhibit D (the "License Agreement");

               1.1.7  Warranty Rights. All rights of Seller relating to or
arising out of express or implied warranties, representations or guarantees from
suppliers with respect to any of the Purchased Assets, and all causes of action
arising therefrom;

               1.1.8  Prepaid Expenses. All of Seller's prepaid security,
vendor, utility and other deposits and expenses;

               1.1.9 Permits. To the extent transferable, Seller's licenses,
permits, certifications, approvals and other governmental and regulatory
authorizations required under all laws, rules and regulations applicable to or
affecting the Schools, including those described in Schedule 5.5(a);
                                                    ---------------

               1.1.10  Goodwill and Other Intangibles. All of the goodwill and
going concern value of the Schools and all other intangibles used in connection
with the Schools;

               1.1.11  Curriculum Materials. All rights of Seller with respect
to Curriculum used in connection with the educational programs of the Schools,
whether proprietary or licensed from third parties (including all periodic
updates to the curriculum as developed or used by Seller or any such third
parties); provided, however, that on the Closing Date, Buyer and Edutown LLC
          -----------------
shall enter the License Agreement and Edutown shall thereby receive the rights
to use the Curriculum in the manner set forth in such agreement; and

               1.1.12  Other Assets. All other assets and property of any kind,
wherever located, which is owned, leased or licensed by Seller and used in the
business of the Schools (other than the Excluded Assets), including, without
limitation, promotional and marketing materials.

          1.2  Excluded Assets. The Excluded Assets shall not be conveyed
hereunder. The "Excluded Assets" means:

               1.2.1  Cash. All of Seller's cash or cash equivalents on hand at
the Closing and Seller's bank accounts relating thereto;

                                      -2-
<PAGE>

               1.2.2  "Edutown" Assets.  Edutown is a web based education portal
designed to offer a wide variety of career training programs online in
affiliation with other schools.  The programs of study include all programs
which were offered at the Schools prior to the Closing Date; provided, however,
                                                             -----------------
that all such programs shall be offered solely online through Edutown LLC
through its Internet web sites.  Additionally, Seller shall have the use of the
Curricula pursuant to the License Agreement after the Closing Date.  Excluded
assets include Edutown LLC's Internet websites, software, programming language,
administration platform, the curricula and the adapted curricula and syllabi for
online delivery, together with all proprietary and intangible rights associated
therewith.  Additionally, Excluded Assets include such tangible property of
Seller specifically identified on Schedule 1.2.2 attached hereto; and
                                  --------------

               1.2.3  Other Assets.  Such other assets as are identified on
Schedule 1.2.2 attached hereto.
--------------

                                   ARTICLE II
                                 CONSIDERATION

          2.1  Purchase Price.  The purchase price payable to Seller in
connection with the transfer to Buyer of the Purchased Assets shall be (i) the
cash consideration referred to in Section 2.2, plus (ii) the assumption of
liabilities of Seller referred to in Section 2.3 (collectively, the "Purchase
Price").

          2.2  Cash Consideration.  The cash consideration portion of the
Purchase Price shall be Eleven Million, Nine Hundred and Sixty-Thousand
Dollars($11,960,000.00), payable as follows at the Closing: (A) Buyer shall pay
to Seller, by wire transfer to Seller's Account Number 001042211 of Marathon
Bank, 11150 West Olympic Blvd, Los Angeles, CA 90064, Telephone Number (310)
559-9551, Routing Number 1222-40308, Ten Million, Seven Hundred and Sixty-
Thousand Dollars ($10,760,000.00) (the "Closing Payment"), and (B) Buyer shall
deposit with Wells Fargo, or any other mutually satisfactory escrow agent (the
"Escrow Agent"), by wire transfer to an account designated by Escrow Agent on or
before the Closing Date, One Million, Two Hundred Thousand Dollars
($1,200,000.00) (the "Deferred Payment"), which amount shall be held and
distributed in accordance with the terms of the escrow agreement between Buyer,
Seller and the Owners, substantially in the form attached hereto as Exhibit A
                                                                    ---------
(the "Escrow Agreement"), and which shall be held to satisfy any Losses of Buyer
(as defined in Section 9.12) for which Seller and Owners, jointly and severally,
are required to indemnify Buyer pursuant to Section 9.12 hereof.  Seller and the
Owners shall be solely responsible for the payment of all fees and costs for the
administration of the Escrow Agreement by the Escrow Agent, and shall defend,
indemnify and hold harmless Buyer from and against any and claims by Escrow
Agent for such fees and/or costs.  Any fees or costs deducted by Escrow Agent
from the Deferred Payment, if any, shall be deducted from the amount of the
Deferred Payment that would otherwise be available for payment to Seller, and in
no event shall the amount of any such fees or costs be used as an offset or
credit against amounts owed to Buyer by Seller and the Owners pursuant to this
Agreement.

          2.3  Obligations and Liabilities to be Assumed.  Upon the terms and
subject to the conditions contained herein, at the Closing, Buyer shall, by an
instrument of assumption to be executed and delivered at the Closing
substantially in the form of Exhibit B hereto (the "Assignment and Assumption
                             ---------
Agreement"), assume only the following liabilities (the "Assumed Liabilities")
of Seller and the Schools: (i) current trade accounts payable and accrued
expenses, except to the extent such accounts payable and accrued expenses relate
to liabilities of the types described in clauses (i) through (viii) in Section
2.4 below, (ii) all capital lease obligations (including current portion), (iii)
the School's

                                      -3-
<PAGE>

teach-out obligation with respect to students enrolled as of the Closing, (iv)
all liabilities and obligations of Seller assumed by Buyer for the Assumed
Contracts identified in Schedule 5.9.
                        ------------

          2.4  Excluded Liabilities.  Buyer shall not assume, or otherwise be
responsible for, any liabilities or obligations (whether actual or contingent,
matured or unmatured, liquidated or unliquidated, or known or unknown)
(collectively, the "Excluded Liabilities") of Seller, any other owner or
operator of the Schools prior to the Closing Date, or any Affiliate of any of
the foregoing, other than those liabilities and obligations which have been
specifically assumed by Buyer pursuant to Section 2.3.  The "Excluded
Liabilities" shall include, without limitation, any liabilities or obligations
to the extent that they relate to, are connected with, are based upon or arise
out of the following: (i) regulatory liabilities imposed by the U.S. Department
of Education (the "DOE") and/or the applicable state regulatory agencies with
respect to Seller and/or the Schools for periods prior to the Closing Date, (ii)
liabilities relating to employees of Seller and the Schools for periods prior to
the Closing Date (including, without limitation, salary, bonuses, payroll taxes
payable, accrued vacation liability or other compensation or benefits), (iii)
liabilities with respect to accounts payable incurred on or before the Closing
Date that are set forth on Schedule 2.4, (iv) liabilities and costs (including
                           ------------
those incurred post-Closing) associated with or caused by a determination by the
DOE that the Seller and/or Schools have not demonstrated compliance with 34 CFR
668.15 (Factors of Financial Responsibility) and 34 CFR 668.16 (Standards of
Administrative Capability) for dates and periods prior to Closing Date, (v) Tax
liabilities of Seller or the Owners (including, without limitation, sales tax
liabilities in connection with this Agreement), (vi) liabilities with respect to
the claims referenced on Schedule 5.14 hereto, (vii) liabilities associated with
Seller's line of credit or other long-term debt of Seller (including current
portion), (viii) any intercompany payables or debt (whether to any of the Owners
or any Affiliate of Seller or the Owners) and (ix) any other liability or
obligation which has not been specifically assumed by Buyer pursuant to Section
2.3.

          2.5  Allocation of Purchase Price.  Buyer and Seller agree that the
Purchase Price shall be allocated among the Purchased Assets in accordance with
the allocation set forth in Schedule 2.5 attached hereto.  Buyer and Seller
                            ------------
agree that each will report the federal, state and local income Tax and other
Tax consequences of the purchase and sale contemplated hereby in a manner
consistent with such allocation and that neither will take any position
inconsistent therewith upon examination of any Tax return, in any refund claim,
in any litigation or otherwise.  For the purposes of this Agreement, the term
"Tax" or "Taxes" means any foreign, federal, state, county or local income,
sales and use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
governmental entity, and any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof.

          2.6  Working Capital Adjustment. If the Purchased Working Capital (as
defined below) is less than that reflected by such assets and liabilities on the
Company's audited balance sheet dated as of November 30, 1999 (the "Working
Capital Threshold"), then Seller and/or the Owners, jointly and severally, shall
pay to Buyer within ten (10) business days after final determination of the
amount of the Purchased Working Capital (pursuant to the procedures set forth in
Section 2.7), by wire transfer of immediately available funds to Buyer's Account
Number 4500-154999 of Union Bank of California Bank, Orange, CA , ABA Routing
Number 122000496, an amount of cash which equals the amount by which such
Working Capital is less than the Working Capital Threshold (the "Working Capital
Adjustment"). The term "Purchased Working Capital" shall mean all current assets
purchased by Buyer hereunder (accounts receivable, net of allowance for doubtful
accounts, inventory and prepaid expenses), minus all assumed current liabilities
assumed by Buyer hereunder (current

                                      -4-
<PAGE>

portion of capital lease obligation, short term accounts payable and accrued
expenses and deferred tuition), each as of the Closing Date.

          2.7. Post-Closing Audit.  (A) Within five (5) business days of the
Closing Date, Seller shall deliver to Buyer true and correct copies of all
financial books and records of Seller necessary for Buyer to prepare a balance
sheet of Seller dated as of the Closing Date.  Within fifteen (15) business days
after receipt of such books and records from Seller, Buyer shall prepare, and
have audited, a balance sheet dated as of the Closing Date (the "Closing Balance
Sheet") on which shall be shown the purchased current assets and the assumed
current liabilities of the Seller as of the Closing Date, and from which the
Purchased Working Capital can be calculated.

          (B)  The Closing Balance Sheet shall be prepared in accordance with
Generally Accepted Accounting Principles ("GAAP"), applied on a basis consistent
with Buyer's past practices, and audited by Almich & Associates ("Almich") in
accordance with Generally Accepted Government Auditing Standards ("GAGAS").
Upon receipt of the Closing Balance Sheet prepared by Buyer, Seller shall have
fifteen (15) business days in which to review it and either accept it or
identify objections by written notice to Buyer.  If, within fifteen (15)
business days following delivery of the Closing Balance Sheet to Seller, Seller
has not given notice to Buyer of objections to the Closing Balance Sheet (such
notice must contain a statement of the basis of Seller's objections in
reasonable detail), then the calculation of Purchased Working Capital as shown
on the Closing Balance Sheet shall be used in computing the Working Capital
Adjustment, if any.  If exceptions or objections are noted by Seller, Buyer,
Seller and their respective accountants shall meet to resolve the dispute.  If
such dispute has not been resolved within fifteen (15) business days after
Seller gives notice of an objection, then the issues in dispute shall be
submitted to the Los Angeles office of KPMG LLP(the "Accountants") for
resolution.  If the issues are submitted to the Accountants for resolution: (i)
each party will furnish to the Accountants such work papers and other documents
and information relating to the disputed issues as the Accountants may request
and are available to such party (or its accountants), and will be afforded the
opportunity to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants; (ii) the
determination by the Accountants, as set forth in a notice delivered to the
parties, will be binding and conclusive on the parties; and (iii) Buyer, on the
one hand, and Seller, on the other hand, will each bear 50% of the fees of the
Accountants for such determination.  The amount of Purchased Working Capital and
the Working Capital Adjustment for all purposes of this Agreement shall be as
determined in accordance with this Section 2.7.

                                  ARTICLE III
                                    CLOSING

          3.1  Closing.  Consummation of the purchase and sale of the Purchased
Assets contemplated hereby is referred to herein as the "Closing," and the date
on which the Closing takes place is referred to herein as the "Closing Date."
The Closing shall take place, as soon as practicable following satisfaction or
waiver of all conditions precedent to the parties' obligations to close, at the
offices of Buyer at 6 Hutton Centre Drive, Suite 400, Santa Ana, California.
Delivery of documents at the Closing may be accomplished by facsimile, to be
followed by delivery of originals by overnight courier of national reputation on
the day after the Closing.  The Closing shall be effective at 12:01 a.m. on the
Closing Date.

          3.2  Deliveries by Seller and Owners at Closing.  At the Closing,
Seller and Owners shall deliver or cause to be delivered to Buyer the following:

                                      -5-
<PAGE>

               (1)  Certified resolutions of Seller's Board of Directors and, if
     required by applicable law, Seller's shareholders, authorizing the
     execution, delivery and performance of this Agreement and the consummation
     of the transactions contemplated herein;

               (2)  a duly executed Bill of Sale substantially in the form of
     Exhibit C hereto (the "Bill of Sale") and such other instruments of
     ---------
     conveyance as shall, in the opinion of Buyer and its counsel, be necessary
     to vest in Buyer title to the Purchased Assets;

               (3)  a duly executed Assignment and Assumption Agreement;

               (4)  a duly executed Escrow Agreement;

               (5)  An officers' certificate signed by the President and the
     Chief Financial Officer of Seller, or such other officer reasonably
     acceptable to Buyer, certifying (i) as to the representations, warranties
     and covenants of Seller made herein as provided in Sections 8.1(1), and
     8.1(3), and (ii) as to the absence of a material adverse change as provided
     in Section 8.1(2);

               (6)  Duly executed estoppel certificates and consents to
     assignment of lease (executed by the landlords of the Facilities (as
     defined below));

               (7)  Duly executed Assignments and Assumption of Lease for each
     of the Facilities in form and substance satisfactory to Buyer and its
     counsel (the "Lease Assignment");

               (8)  A duly executed Non-Competition Agreement substantially in
     the form of Exhibit E attached hereto (the "Non-Competition Agreement"),
                 ---------
     executed by Seller and each of the Owners, in which Seller and the Owners
     shall have agreed to not participate in the business of proprietary, post-
     secondary education in the State of California for a period of five years
     after the Closing Date;

               (9)  A duly executed License Agreement; and

               (10) Any other documents reasonably requested by Buyer and its
     counsel to effectuate the transactions contemplated hereby.

          3.3  Deliveries by Buyer at Closing.  At the Closing, Buyer shall
deliver or cause to be delivered to Seller the following:

               (1)  The Closing Payment;

               (2)  Certified resolutions of the Board of Directors of Buyer
     authorizing the execution, delivery and performance of this Agreement and
     the consummation of the transactions contemplated herein;

               (3)  A duly executed Assignment and Assumption Agreement;

               (4)  A duly executed Lease Assignments for each of the
     Facilities;

               (5)  a duly executed Non-Competition Agreement;

                                      -6-
<PAGE>

               (6)  a duly executed Escrow Agreement

               (7)  a duly executed License Agreement; and

               (8)  Any other documents reasonably necessary to effectuate the
     transactions contemplated hereby.

                                  ARTICLE IV
                                 TERMINATION

          4.1  Termination.  This Agreement may be terminated only as follows
and in each case only by written notice:

               (1)  At any time by mutual written consent of Seller and Buyer;

               (2)  Prior to the Closing, by Buyer if Seller or the Owners shall
     be in breach of any covenant, undertaking, representation or warranty
     contained herein, which breach either (a) materially misrepresents the
     business, operations or financial condition of the Seller as of the date
     hereof, (b) causes a material adverse change in the business, operations or
     financial condition of the Schools or (b) prohibits the satisfaction of a
     condition to the Closing;

               (3)  Prior to the Closing, by Buyer if the DOE, the California
     Bureau for Private Postsecondary and Vocational Education ("BPPVE"), the
     State of California or any of its agencies, any applicable regulatory body,
     any guaranty agency or any accreditation agency (including, but not limited
     to the Accrediting Commission of Career Schools and Colleges of Technology
     (hereinafter, "ACCSCT") determines that the Seller or the Schools, or any
     of their respective programs, will not be certified as eligible to receive
     funds administered under Title IV of the Higher Education Act of 1965, as
     amended (hereinafter, "Title IV");

               (4)  Prior to the Closing, by Buyer, at its sole and absolute
     discretion, if, based on the DOE pre-review of the application for
     certification and provisional extension of certification, Buyer determines
     that the Schools will be unable to obtain certification by the DOE
     subsequent to the Closing Date at any time, in a timely matter, or without
     being subject to material adverse conditions; or

               (5)  If the Closing has not occurred before the ninetieth (90th)
     day after the date hereof, by Seller or Buyer, by notice to all other
     parties, at any time thereafter and before the Closing.

          4.2  Effect of Termination.  In the event of termination of this
Agreement by either Buyer or Seller in accordance with the applicable provisions
above, this Agreement shall forthwith terminate upon notice thereof duly given
in accordance with the provisions hereof, and there shall be no liability of any
nature on the part of either Buyer or Seller (or their respective officers or
directors) to the other, except for liabilities arising from a breach of this
Agreement prior to such termination; provided, however, that Seller's and
                                     -----------------
Owners' obligations under the last sentence of Section 5.20 shall survive the
termination of this Agreement; and provided further, however, that if this
                                   -------------------------
Agreement is terminated prior to the Closing, the parties obligations under
their previously executed Confidentiality and Non-Disclosure Agreement shall
survive.

                                      -7-
<PAGE>

                                   ARTICLE V
              REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNERS

          As a material inducement to Buyer to enter into this Agreement, to
purchase the Purchased Assets and to assume the Assumed Liabilities, Seller and
Owners, jointly and severally, hereby represent and warrant (a) as of the date
hereof and (b) as of the Closing Date, that:

          5.1  Organization and Corporate Power.  Seller is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
California, the jurisdiction in which it is incorporated. Seller has all
requisite power and authority to own and operate its properties, to carry on its
business as now conducted, to enter into this Agreement and to consummate the
transactions contemplated hereunder. Seller is duly qualified to do business in
each jurisdiction in which the failure to be so qualified would have an adverse
effect on the operation of the Schools. True and correct copies of Seller's
articles of incorporation and bylaws have been furnished to Buyer and reflect
all amendments made thereto at any time prior to the date of this Agreement and
the Closing Date.

          5.2  Capacity; Authorization; Binding Effect.  Seller has the power,
legal capacity and authority to execute, deliver and perform this Agreement and
each other document being executed in connection herewith to which it is a
party. Seller has the power, legal capacity and authority to transfer, convey
and deliver the Purchased Assets, free and clear of all liens, claims,
encumbrances, options, rights and restrictions, except as otherwise disclosed in
Schedule 5.8(b). All corporate and other proceedings required to be taken by or
---------------
on the part of Seller, including all action required to be taken by the
directors or stockholders of Seller, to authorize Seller to enter into and carry
out this Agreement and the related documents contemplated herein, have been duly
and properly taken. This Agreement has been, and each of the related documents
will be at Closing, duly executed and delivered by Seller and constitute, or
will when delivered constitute, the valid and binding obligations of Seller,
enforceable against Seller, in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).

          5.3  Ownership of Schools.  The Schools are owned and operated by
Seller directly, and no other Person has any ownership interest in the Schools.
No other Person has any right, option, subscription or other arrangement to
purchase or otherwise acquire any interest in the Schools. For purposes of this
Agreement, the term "Person" shall include any individual, corporation,
partnership, joint venture, trust, unincorporated association or government or
any agency or political subdivisions thereof.

          5.4  No Conflicts.  The execution, delivery and performance of this
Agreement and each other document being executed by Seller in connection
herewith, and the consummation by Seller of the transactions contemplated hereby
and thereby will not: (a) violate any provisions of law applicable to Seller;
(b) with or without the giving of notice or the passage of time, or both,
conflict with or result in the breach of any provision of the articles of
incorporation or bylaws of Seller, or any instrument, license, agreement or
commitment to which Seller is a party or by which any of its assets or
properties is bound, including the Assumed Contracts (as defined in Section 5.9
hereof); (c) constitute a violation of any order, judgment or decree to which
Seller is a party or by which any of its assets or properties is bound; or (d)
require any approval of, or filing or registration with, any governmental entity
or regulatory authority other than those set forth or described on Schedule 5.4
                                                                   ------------
or Schedule 6.3 attached hereto.
   ------------

                                      -8-
<PAGE>

          5.5  Compliance with Laws; Licenses and Permits.  Except as disclosed
in Schedule 5.5, Seller is not in violation of any law, regulation or
   ------------
requirement of any governmental authority and Seller has not received notice of
any such violation. Seller currently maintains all licenses, accreditations,
certificates, permits, consents, authorizations and other governmental or
regulatory approvals (the "Licenses and Permits") necessary for Seller to
conduct the business and operations of the Schools as presently being conducted,
including, without limitation, all requisite approvals for the educational and
training programs currently offered from the Schools' institutional accrediting
agency and the state in which the Schools operate. Each program offered by the
Schools is an eligible program in compliance with the requirements of 34 C.F.R.
(S) 668.8. Seller has duly filed all reports and returns required to be filed by
it with respect to the Schools with governmental authorities and accrediting
bodies and complied with all stipulations, conditions or other requirements that
they have imposed. The Licenses and Permits for the Schools are in full force
and effect, and no proceedings for the suspension or cancellation of any of them
is pending or threatened. No application made by Seller for any Licenses and
Permits during the last five years has been denied. Schedule 5.5(a) attached
                                                    ---------------
hereto is a true, correct and complete list of all Licenses and Permits held by
Seller with respect to the Schools and the governmental authority or accrediting
body granting such Licenses and Permits. Seller has delivered to Buyer true and
correct copies of all such Licenses and Permits. Seller has received no notice
that any of the Licenses and Permits will not be renewed and, to Seller's
knowledge, there is no basis for nonrenewal. The Schools are accredited as set
forth on Schedule 5.5(b) attached hereto, are certified by the DOE as an
         ---------------
eligible institution under Title IV and are parties to, and in compliance with,
valid program participation agreements with the DOE with respect to the Schools'
respective operations, and are authorized by the state in which they are located
to operate for-profit postsecondary educational institutions. Seller has not
received any notice, not previously complied with, in respect of any alleged
violation of the rules or regulations of the DOE, any state licensing body, or
any applicable accrediting body in respect of the Schools, including sales and
marketing activities, or the terms of any program participation agreement to
which it is or was a party. If any such notices have been received and complied
with, Seller has disclosed in writing their receipt and disposition to Buyer
prior to the execution of this Agreement. Other than as set forth on Schedule
                                                                     --------
5.5(c) attached hereto, Seller is not aware of any investigation or review of
------
Seller's student financial aid programs or any review of any School's state
license accreditation by any Person.

          5.6  Recruitment; Admissions Procedures; Attendance; Reports.
Schedule 5.6(a) attached hereto is a complete list of all policy manuals and
---------------
other statements of procedures or instruction relating to recruitment of
students for the Schools, including (a) procedures for assisting in the
application by prospective students for direct or indirect state or federal
financial assistance; (b) admissions procedures, including any descriptions of
procedures for insuring compliance with state or federal or other appropriate
standards or tests of eligibility; and (c) procedures for encouraging and
verifying attendance, minimum required attendance policies, and other relevant
criteria relating to course completion and certification (collectively, the
"Policy Guidelines"). Schedule 5.6(b) attached hereto sets forth a list of the
                      ---------------
Policy Guidelines with respect to those students continuing in the Schools after
the Closing Date (the "Disclosed Guidelines"). Seller has delivered to Buyer
true, correct and complete copies of all Policy Guidelines, Disclosed Guidelines
and all documents and other information disseminated to students or prospective
students. Seller's operations with respect to the Schools have been conducted in
accordance with the Policy Guidelines and all relevant standards imposed by
applicable accrediting bodies, agencies administering state or federal
governmental programs in which Seller participates, and other applicable laws or
regulations. Seller has submitted all reports, audits, and other information,
whether periodic in nature or pursuant to specific requests, including, without
limitation, all annual compliance audits and audited financial statements, for
the Schools to all agencies or other entities with which such filings are
required relating to its compliance with (i) applicable accreditation standards
governing its activities and (ii) laws or regulations governing programs
pursuant

                                      -9-
<PAGE>

to which Seller or its students receive funding. Complete and accurate records
for all present and past students attending the Schools have been maintained
consistent with the operations of a school business. All forms and records with
respect to the Schools have been prepared, completed, maintained and filed in
accordance with all applicable federal and state laws and regulations, and are
true and correct. All financial aid grants and loans, disbursements and record
keeping relating thereto have been completed in compliance with all federal and
state requirements, and there are no deficiencies in respect thereto. The
Schools and Seller have complied with the legal requirements that no student at
the Schools be funded prior to the date for which such student was eligible for
funding. Seller covenants and agrees that it shall reimburse Buyer for and
indemnify Buyer against any fines, penalties, expenses, costs and other losses
Buyer may incur as a result of any pre-eligibility funding prior to the Closing
Date. The records of each student at the Schools conform in form and substance
to all relevant regulatory requirements.

          5.7  Cohort Default Rate.  Schedule 5.7 attached hereto sets forth the
                                     ------------
cohort default rate for the Schools, calculated in the manner prescribed by the
DOE, of all students attending the Schools receiving assistance pursuant to
Title IV programs for the fiscal years 1993 through 1999.  Such schedule is
materially correct and accurate in all respects.

          5.8  Title to and Condition of the Purchased Assets.

               5.8.1  Leased Facilities.  The leased facilities described on
Schedule 5.8(a) (the "Facilities") constitute the only real property used in
---------------
connection with the operation of the Schools by Seller.

               5.8.2  Laws and Regulations; Records.  All of Seller's
operations with respect to the Schools are conducted at the Facilities, and all
of the tangible Purchased Assets and records relating to intangible Purchased
Assets of the Schools are located at the Facilities. Seller is not under any
contractual or other legal obligation, and has not entered into any commitment,
to make capital improvements or alterations to the Facilities. The Facilities
are not subject to any zoning ordinance or other restrictions which would
prohibit the use and enjoyment of the Facilities in the manner in which the
Facilities are currently used and the Facilities are not subject to any
condemnation proceedings. Each Facility and Seller's use thereof is in
compliance with all laws, including, without limitation, the Americans with
Disabilities Act.

               5.8.3  Title.  Seller owns outright, and has good and marketable
title to, all of the Purchased Assets, free and clear of all liens, claims and
encumbrances, options, rights, and restrictions, other than as set forth on
Schedule 5.8(b). All leases for tangible personal property used by Seller in
---------------
connection with the operation of the Schools are (i) valid and in full force and
effect, (ii) are enforceable in accordance with their terms, and (iii) are
capable of being assigned, and will in fact be assigned to Buyer, upon the
execution and delivery by Buyer and Seller of the Assignment and Assumption
Agreement. Neither Seller nor any of the other parties thereto is in default
under any such lease, and no event, act or omission has occurred which (with or
without notice, the passage of time or the happening or occurrence of any other
event) would result in a default thereunder.

               5.8.4  Condition of Purchased Assets.  The tangible Purchased
Assets and properties of the Schools which are owned or leased by Seller and
used in connection with the operation of the Schools are in good operating
condition, order and repair, useable in the ordinary course of business
consistent with past practice and are sufficient and adequate for all current
operations. Seller has not received notice of any violation of or default under
any law, ordinance, order, regulation or requirement relating to any of the
Purchased Assets which remains uncured or has not been resolved.

                                      -10-
<PAGE>

          5.8.5  Title; Condition and Quality of the Curriculum.  (a) Seller
owns outright, and has good and marketable title to, the Curriculum of the
Schools, free and clear of all encumbrances, and the execution of this Agreement
will vest good and marketable title to the Curriculum in Buyer, free and clear
of all encumbrances, except for the rights reconveyed by Buyer to Seller
pursuant to the License Agreement executed at Closing.  No employee or Affiliate
of Seller or any of the Owners or any other Person owns or has any interest,
directly or indirectly, in any part of the Curriculum.  Seller does not use any
part of the Curriculum by consent of any other Person and is not required to and
does not make any payments to others with respect thereto.  No component of the
Curriculum infringes or violates any copyright, patent, trade secret, trademark,
service mark, registration or other proprietary right of any other Person, and
Seller's and Owner's past and current use of any part of the Curriculum does not
infringe upon or violate any such right.  Neither Seller nor any of the Owners
have taken any action, or failed to take any action, to cause any part of the
Curriculum to enter the public domain.  The term "Curriculum" or Curricula, as
used in this Agreement, means the curriculum used in the educational programs of
the Schools in the form of computer programs, slide shows, texts, films, videos
or any other form or media, including, without limitation, the following items:
(1) course objectives, (2) lesson plans, (3) exams, (4) class materials
(including interactive or computer-aided materials), (5) faculty notes, (6)
course handouts, (7) diagrams, (8) syllabi, (9) sample externship and placement
materials, (10) clinical checklists, (11) course and faculty evaluation
materials, (12) policy and procedure manuals, and (13) other related materials.
The Curriculum shall also include, without limitation, (a) all copyrights,
copyright applications, copyright registrations and trade secrets relating to
the above-listed items and (b) Revisions.  The term "Revisions," as used in this
Agreement, means all periodic updates or revisions to the Curriculum as
developed or used by Seller during its period of operation of the Schools from
the beginning of time through the Closing Date.

      5.9 Assumed Contracts.  Schedule 5.9 attached hereto lists each
                              ------------
assumed contract of Seller (the "Assumed Contracts") relating to the Schools or
to which any of the Purchased Assets is subject or bound that individually, or
together as a series of related contracts involving the same party or parties,
or the successors to such party or parties:  (a) obligates Seller or its
Affiliates to pay an amount of $5,000 or more, (b) has an unexpired term as of
the date of this Agreement in excess of six months, (c) was not made in the
ordinary course of business, or (d) is in any way otherwise material to the
operation of the Schools.  Each Assumed Contract is valid and existing.  Seller
has duly performed all its obligations under the Assumed Contracts to the extent
that such obligations to perform have accrued.  Seller has not received written
notice of any alleged breach or default, and no event which would (with the
passage of time, notice or both) constitute a material breach or default by
Seller or any other party or obligor with respect thereto has occurred.  True
and correct copies of the Assumed Contracts, including all amendments and
supplements thereto, have been delivered to Buyer or are attached to Schedule
                                                                     --------
5.9. Each of the Assumed Contracts is (i) enforceable in accordance with their
---
terms, and (ii) is capable of being assigned to Buyer and will in fact be
assigned to Buyer upon the execution and delivery by Buyer and Seller of the
Assignment and Assumption Agreement.   For purposes of this Agreement, the term
"Affiliate" of any Person means any other Person who directly or indirectly
controls, is controlled by, or is under common control with such Person.

      5.10  Tradenames; Confidential Information.  All tradenames, trademarks
or service marks and all forms, derivatives and graphic presentations thereof
of Seller having any value to the operation of the Schools are set forth or
described on Schedule 5.10 attached hereto (collectively, the "Tradenames").
             -------------
Seller has the right to the use of each Tradename as an assumed business name in
the counties in which such Tradename is used, and Schedule 5.10 lists all
                                                  -------------
registrations of each Tradename as a trademark, servicemark or assumed name.
Seller has not licensed any other Person to use any Tradename.  Seller has not
been sued or threatened with suit for infringement, violation or breach with
respect to any Tradename, and no basis exists for any such suit.  Except as
disclosed on Schedule 5.10,
             -------------

                                      -11-
<PAGE>

Seller is not on notice of any infringement, violation or breach of the
Tradename by any other Person. Seller has the right to use and license, free and
clear of any claims or rights of any third party, all trade secrets, customer
lists, know-how, curricula and any other confidential information required for
or used in the operation of the Schools. Seller is not in any way making any
unlawful or wrongful use of any trade secrets, customer lists, know-how,
curricula or any other confidential information of any third party, including,
without limitation, any former employer of any present or past employee of
Seller in connection with the operation of the Schools.

      5.11  Financial Statements; Indebtedness.  Attached hereto as Schedule
                                                                    --------
5.11(a) are the following financial statements of Seller:  (a) audited Balance
-------
Sheets at November 30, 1999, 1998 and 1997 and audited Statements of Operations
and Statements of Cash Flows for the years ended November 30, 1999, 1998 and
1997 (including consolidating schedules containing corresponding Statements of
Assets and Liabilities and Statements of Revenue and Expenses of the Schools in
the form appropriate for filing with the DOE), and (b) an unaudited Balance
Sheet at June 30, 2000 and an unaudited Statement of Operations and Statement of
Cash Flows for the seven months ended June 30, 2000  (collectively, the
"Financial Statements").  The basis of presentation of the Financial Statements
of the Seller and each of the Schools is disclosed on Schedule 5.11(b) attached
                                                      ----------------
hereto or in the notes thereto.  Except as disclosed on Schedule 5.11(b), the
                                                        ----------------
balance sheets included in the Financial Statements present fairly in accordance
with GAAP the assets and liabilities of Seller and each of the Schools as of the
respective dates thereof, and the related statements of revenue and expenses
present fairly in accordance with GAAP the results of operations of Seller and
each of the Schools for the respective periods covered thereby.  The Financial
Statements (i) have been prepared based upon the books and records of Seller in
a manner consistent with Seller's standard internal accounting practices,
consistently applied, and (ii) fairly present the financial position of Seller
as of the dates of such Financial Statements and the results of operations for
the periods covered by such Financial Statements.  Except as disclosed on
Schedule 5.11(b), Seller has maintained the books and records of the Seller and
----------------
the Schools in accordance with applicable laws, rules and regulations and with
GAAP and GAGAS, and such books and records are, and during the periods covered
by the Financial Statements were, materially correct and complete, fairly
reflecting the income, expenses, assets and liabilities of the Seller and the
Schools.  On the date hereof, Seller does not have any liabilities required to
be set forth in a balance sheet prepared in accordance with GAAP and GAGAS that
were not included in the latest balance sheet included in the Financial
Statements.  Except as provided in Schedule 5.11(c), Seller is not required to
                                   ----------------
provide any letters of credit, guarantees or other financial security
arrangements in connection with any transactions, approvals or licenses in the
ordinary course of the Schools' business.  As of the date hereof, Seller has no
indebtedness, liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, other than:

               (1) those set forth or reserved against in the balance sheet of
     Seller as of June 30, 2000, to the extent set forth, reserved against or
     disclosed;

               (2) those incurred since June 30, 2000 in the ordinary course of
     business of the Schools and consistent in nature with past practice, and in
     an aggregate amount of not more than $20,000; and

               (3) those described in the Schedules attached hereto.

Except as set forth in Schedule 5.5(c), there exists no condition relating to
                       ---------------
the Schools, whether absolute, accrued, contingent or otherwise, which could
have a materially adverse effect on the properties, business, Purchased Assets,
results of operations or condition (financial or otherwise) of the Schools or
which would prevent the operations of the Schools from being carried on in the
future in

                                      -12-
<PAGE>

substantially the same manner as they are presently being conducted. Except as
set forth on Schedule 5.11(d) attached hereto, there are no long-term fixed or
             ----------------
contractual liabilities relating to the operation of the Schools which are
required to be assumed by Buyer in order to continue to operate the Schools as
presently operated by Seller, the annual expense of which are not reflected in
the Financial Statements.

      5.12  Receivables.  The Accounts Receivable, except to the extent of
the allowance for doubtful accounts set forth in the Financial Statements, are
bona fide receivables, arose out of arms' length transactions in the normal and
usual practices of Seller and the Schools, are recorded correctly on the books
and records of Seller and the Schools, and Seller has no reason to believe that
such Accounts Receivables will not be collected in full in the ordinary course
of business within the ordinary time frame for such receivables.  Such
receivables are not subject to any defense, counterclaim or setoff or discounts
or credits not reflected in the Financial Statements (other than tuition refund
policies administered in accordance with all applicable legal requirements and
the applicable Policy Guidelines, and as reflected in reserves or allowance for
doubtful accounts shown on the Financial Statements), and (A) no facts or
circumstances exist which would cause any of such Accounts Receivable to have to
be written down or written off, and (B) since the date of Seller's most recent
audited Balance Sheet, seller has not discounted or sold such Accounts
Receivable or any portion thereof (either to the debtor(s) or in connection with
the sale of such receivables to a third party).

      5.13  Inventories.  The only inventories maintained by Seller in
connection with the operation of the Schools consist of supplies used in the
ordinary course of business of the Schools and are reflected on the Financial
Statements as "inventories."  Such supplies are reflected at cost (subject to
the following sentence), are usable in the ordinary and regular course of
business, are fit and sufficient for the purpose for which they were purchased,
and, at the date of this Agreement, are in customary amounts appropriate to
Seller's operations of the Schools.  All excess or obsolete items have been
written down to net realizable value or written off.

      5.14  Litigation.  Except as set forth in Schedule 5.14 attached
                                                -------------
hereto, (i) there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the knowledge of Seller, threatened against or affecting
the Schools or their respective operations at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality or accrediting body pertaining to or affecting Seller or the
Schools, (ii) neither Seller, the Owners, nor the Schools is the subject of any
governmental investigations or inquiries (including inquiries as to the
qualification to hold or receive any of the Licenses and Permits with respect to
the Schools) and (iii) there is no basis for any of the foregoing.

      5.15  Insurance.  Schedule 5.15 attached hereto sets forth the insurance
                        -------------
coverages maintained by Seller on the Facilities, the Purchased Assets and the
operations of the Schools, including all policies or binders of fire, extended
coverage, general and vehicular, fidelity and fiduciary liability, workers'
compensation, key-man life and other insurance held by Seller and all binders
for insurance to be purchased on or before Closing, in order to replace policies
expiring prior to the Closing or otherwise. Such policies and binders are in
full force and effect, and there is no breach or default with respect to any
provision contained in any such policy or binder, and all premiums, to the
extent due and payable, have been paid or the liability therefor properly
accrued. There are no claims pending or threatened under any of said policies
pertaining to the Schools or disputes with underwriters regarding coverage under
such policies pertaining to the Schools. Except as set forth on Schedule 5.15,
                                                                -------------
neither the execution, delivery and performance of this Agreement, nor the
consummation of the transactions contemplated hereby, will result in the loss to
Seller of any of the insurance policies listed or impair the rights of Seller
with respect to liabilities arising in connection with the operation of the
Schools prior to

                                      -13-
<PAGE>

the Closing. Within the five years prior to the date hereof, Seller has not been
denied insurance for the Schools, or been offered insurance for the Schools only
at a commercially prohibitive premium.

      5.16  Environmental Matters.  In connection with the operations of the
Schools, Seller has not generated, transported, stored, treated or disposed, nor
has Seller allowed or arranged for any third persons to transport, store, treat
or dispose, any hazardous substance to or at:  (a) any location other than a
site lawfully permitted to receive such hazardous substance for such purposes;
or (b) any location designated for remedial action pursuant to federal, state or
local statute and relating to the environment or waste disposal; nor has Seller
performed or arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any laws or regulations or in any
other manner which may result in liability for contamination or threat of
contamination of the environment.  No generation, use, handling, storage,
treatment, release, threat of release, discharge, spillage or disposal of any
hazardous substance, has occurred or is occurring at the Facilities or any other
facilities or properties owned or operated by Seller in connection with its
operation of the Schools.  Seller has not received notification, nor is it aware
of, any past or present failure by Seller to comply with any environmental laws,
regulations, permits, franchises, licenses or orders applicable to the Schools
or its operations.  Seller has not received any notification, nor is it aware
of, any past or present failure to comply with any environmental laws,
regulations, permits, franchises, licenses or orders applicable to its
operations of the Schools which may result in judicial, regulatory or other
legal proceedings having a material adverse impact on the operations of the
Schools or result in the imposition of any lien, claim, assessment or other
encumbrance against the Purchased Assets.  The Facilities do not contain
asbestos or polychlorinated biphenyls or any underground storage tanks.  Seller
acknowledges that Buyer is not assuming any of Seller's liabilities with respect
to the matters addressed in this Section 5.16 and that any liabilities of Seller
related to the matters addressed herein are Excluded Liabilities.

      5.17  Employee Benefit Plans.  Schedule 5.17 attached hereto sets
                                     -------------
forth a complete accurate and detailed description of all of Seller's employee
welfare and benefit plans ("Plans").  Seller acknowledges that Buyer is assuming
none of the Plans.  Seller has never sponsored, administered or contributed to
any employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1976, as amended ("ERISA"), that is subject to
Title IV of ERISA.  There are no accrued liabilities under any Plans, programs
or practices maintained on behalf of the employees of the Schools which are not
provided for on its books or in the Financial Statements or which have not been
fully provided for by contributions to such Plans, programs or practices.  As of
the date hereof, Seller does not maintain any employee welfare benefit plans, as
defined in Section 3(1) of ERISA, which provide post-retirement benefits to
former employees of the Schools and to current employees of the Schools after
their termination of employment (including, without limitation, medical and life
insurance benefits), other than as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended and interpreted by regulations
thereunder ("COBRA").  Seller shall provide any notices required under COBRA for
events occurring on or prior to the Closing Date and shall provide all benefits
required pursuant to COBRA in connection therewith.

      5.18  Employment Matters.  Seller and the Schools are in compliance with
all federal, state and local laws, rules and regulations affecting employment
and employment practices with respect to the Schools, including terms and
conditions of employment, employment discrimination and wages and hours, and
Seller is not engaged in any unfair labor practices with respect to employees of
the Schools; there are no complaints against Seller with respect to employees of
the Schools pending before the National Labor Relations Board or any similar
state or local labor agency; there are no labor strikes, slow-downs or stoppages
or other labor troubles pending or threatened with respect to any employees of
the Schools; no labor organization activities have occurred with respect to
employees of the Schools during the past three years; there are no collective
bargaining agreements binding on Seller relating to

                                      -14-
<PAGE>

the operation of the Schools; no grievances have been asserted against Seller
with respect to employees of the Schools; and Seller has not experienced any
work stoppage by its employees at the Schools during the last three years.

      5.19  Tax Matters.  Except as disclosed on Schedule 5.19, Seller and the
                                                 -------------
Owners have completed and filed on or before the due dates thereof or within
applicable extension periods all returns for Taxes required to be filed with
respect to the operations of the Schools, and such returns are true and correct.
Seller and/or the Owners, as applicable, have paid all Taxes shown to be due and
payable on such returns to the extent that the same have become due and payable
on or before the Closing.  Neither Seller nor any of the Owners is a party to,
nor expected to become a party to, any pending or threatened action or
proceeding, assessment or collection of Taxes by any governmental authority
relating to the operations of the Schools.

      5.20  Brokers or Finders.  No agent, broker, investment banker or other
firm or person retained by Seller is or will be entitled to any broker's or
finder's fee or any similar commission or fee in connection with any of the
transactions contemplated by this Agreement, except for BCC Capital ("Broker"),
the responsibility for the payment of whose fee shall be solely and exclusively
that of Seller and the Owners. Seller and the Owners, jointly and severally,
agree to defend, indemnify and hold harmless Buyer and its Affiliates from and
against any and all claims arising in connection with its or their discussions
and/or use of the services of Broker or any other finder or broker.

      5.21  Absence of Certain Changes.  Except as contemplated by this
Agreement or as set forth on Schedule 5.21 attached hereto, since November 30,
                             -------------
1999, there has not been, occurred or arisen with respect to the Schools:

               (1) any sale, lease, transfer, abandonment or other disposition
     of any right, title or interest in or to any of the properties or assets of
     Seller used in connection with the operations of the Schools (tangible or
     intangible), except for any single sale, lease, transfer or abandonment of
     any asset or property valued at less than $15,000 which was conducted in
     the ordinary course of business;

               (2) (i) any approval or action to put into effect any increase in
     any compensation or benefits payable to any employee, agent or officer of
     Seller employed or providing services in connection with the operation of
     the Schools or any payment, grant or accrual to or for the benefit of any
     such employee, agent or officer of any bonus, service award, percentage
     compensation or other benefit, (ii) any adoption or amendment of any Plans,
     or any severance agreement or employment contract to which any such
     employee, agent or officer of Seller is a party or (iii) any entering into
     of any employment, deferred compensation or other agreements with respect
     to bonuses, service awards, percentage compensation or other benefits with
     any such employee, agent or officer;

               (3) any materially adverse change in the financial condition,
     assets, liabilities (absolute, accrued, contingent or otherwise), reserves
     or operations of the Schools;

               (4) any damage, destruction or loss to the assets, business or
     operations of the Schools in excess of $25,000 in the aggregate , whether
     or not covered by insurance;

               (5) any change in the business policies or practices of the
     Schools or a failure to operate the business of the Schools in the ordinary
     course with a view to

                                      -15-
<PAGE>

     (i) preserving such business intact, (ii) retaining the services of the
     present officers, employees and agents of Seller employed or providing
     services in connection with the operation of the Schools, and (iii)
     preserving the business relationships of the Schools with, and the goodwill
     of, students, sales representatives, suppliers, accrediting bodies,
     governmental authorities and others;

               (6) any agreement, whether in writing or otherwise, to take any
     action described in this Section 5.21; or

               (7) any withdrawal, revocation or denial of accreditation, or
     order to show cause why accreditation should not be revoked, or any
     revocation, termination or denial of license to operate, or any termination
     or suspension of eligibility to participate in the federal student
     financial aid programs authorized by Title IV, for the Schools, or any
     program offered by the Schools.

          5.22  Delivery of Documents.  True, correct and complete copies of all
documents, instruments, agreements and records of Seller relating to the
Purchased Assets, the Assumed Liabilities, the representations and warranties of
Seller contained in this Agreement and/or the operation of the Schools have been
delivered to Buyer.

          5.23  Program Revenues.  For each of Seller's fiscal years ending on
November 30, 1998, 1997 and 1996, none of the Schools have received greater than
eighty-five percent (85%) of such School's respective revenues from programs
authorized by Title IV or other federal student financial aid funds, and for
Seller's fiscal year ending on November 30, 1999, no greater than ninety percent
(90%), of such School's respective revenues from programs authorized by Title IV
or other federal student financial aid funds, and each of the Schools satisfies
the requirements regarding Title IV program funds established by the DOE as set
forth at 34 C.F.R. Section 600.5. The attached Schedule 5.23 contains a
                                               -------------
correct statement of each School's percentage of revenue from such federal
funding sources.

          5.24  Accrediting Body and Governmental Approvals.  There exist no
facts or circumstances attributable to Seller or the Schools that would cause
the DOE, or any other governmental authority or accrediting body (including
without limitation the BPPVE or ACCSCT) whose authorization, consent or similar
approval is required for the consummation of the transactions contemplated by
this Agreement or the operation of the Schools after the Closing Date, to refuse
to deliver such authorization, consent or similar approval.

          5.25  Capitalization and Voting Rights.  The authorized capital of the
Seller consists of 25,000 shares of common stock, of which 150 shares are issued
and outstanding.  The outstanding shares of common stock are all duly and
validly authorized and issued, fully paid and nonassessable.  The Owners own all
of the issued and outstanding shares of common stock of the Seller, free and
clear of any liens or encumbrances or other rights in favor of any third party
as follows: Dr. Rashed B. Elyas owns seventy-five (75) shares and Ken Boyle owns
seventy-five (75) shares; There are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements, commitments or
letters of intent for the purchase or acquisition from the Seller of any shares
of its capital stock.  Neither the Owners nor the Seller is a party or subject
to any agreement or understanding which affects or relates to the voting or
giving of written consents with respect to any security of the Seller.

          5.26  Disclosure.  Neither this Agreement nor any of the schedules,
exhibits, attachments, documents, certificates or other items prepared or
supplied to Buyer by or on behalf of Seller with respect to the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary to make any such other statements not misleading
in light

                                      -16-
<PAGE>

of the circumstances in which such statements were made. There is no fact which
Seller has not disclosed to Buyer in writing and of which Seller or any of the
Owners is aware which has had or is reasonably likely to have a material adverse
effect upon the existing or expected financial condition, operating results,
assets, employee relations, accreditation, reputation or business of the
Schools.

                                   ARTICLE VI
                    REPRESENTATIONS AND WARRANTIES OF BUYER

          As a material inducement to Seller to enter into this Agreement and to
sell the Purchased Assets, Buyer hereby represents and warrants that:

          6.1  Organization and Corporate Power.  Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, the jurisdiction in which it is incorporated.  Buyer has the corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereunder.

          6.2  Capacity; Authorization; Binding Effect.  Buyer has the power,
legal capacity and authority to execute, deliver and perform this Agreement and
each other document being executed in connection herewith to which it is a
party.  All corporate and other proceedings required to be taken by or on the
part of Buyer to authorize Buyer to enter into and carry out this Agreement and
the related documents contemplated herein, have been duly and properly taken.
This Agreement has been duly executed and delivered by Buyer and constitutes
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).

          6.3  No Conflicts.  The execution, delivery and performance of this
Agreement and each other document being executed by Buyer in connection
herewith, and the consummation by Buyer of the transactions contemplated hereby
and thereby will not:  (a) violate any provisions of law applicable to Buyer;
(b) with or without the giving of notice or the passage of time, or both,
conflict with or result in the breach of any provision of the articles of
incorporation or bylaws of Buyer (as heretofore amended), any instrument,
license, agreement or commitment to which Buyer is a party or by which any of
its assets or properties is bound; (c) constitute a violation of any order,
judgment or decree to which Buyer is a party or by which any of its assets or
properties is bound; or (d) require any approval of, or filing or registration
with, any governmental entity or regulatory authority other than those set forth
or described on Schedule 5.4 attached hereto or Schedule 6.3 attached hereto.
                ------------                    ------------

          6.4  Brokers or Finders.  Buyer represents that no agent, broker,
investment banker or other firm or person retained by Buyer is entitled to any
broker's or finder's fee or any similar commission or fee in connection with any
of the transactions contemplated by this Agreement.

                                  ARTICLE VII
                                   COVENANTS

          7.1  Covenants of Seller and Owners Prior to the Closing.  Seller
covenants and agrees with Buyer that, from and after the date hereof and until
the earlier of the Closing Date or the termination of this Agreement pursuant to
Article IV hereof, Seller (i) shall fulfill or satisfy, or cause to be fulfilled
or satisfied, all of the conditions precedent to Seller's and Buyer's
obligations to consummate and complete the sale provided herein and to take all
other steps and do all other things required to consummate this Agreement in
accordance with its terms, (ii) shall not interfere with the

                                      -17-
<PAGE>

performance by Buyer of its obligations under this Agreement, (iii) shall not
fail to pay any Taxes, assessments, governmental charges or levies imposed upon
it or its income, profits or assets or otherwise required to be paid by it, (iv)
shall not make any capital expenditure in excess of $15,000 without Buyer's
prior written consent, (v) shall not engage in any sale or discount of its
Accounts Receivable (whether by discount to the debtors or by sale to any third
party), (vi) shall promptly notify Buyer (A) of any notice from any governmental
or regulatory agency or authority, (B) of any fact or circumstance which would
make any representation or warranty set forth herein untrue or inaccurate as of
the Closing Date, or (C) any planned or threatened labor dispute, organization
efforts, strike or collective work stoppage affecting the employees of Seller
and (vii) shall not take any action that would cause Buyer to be unable to
obtain good and marketable title to the Purchased Assets to be transferred to
Buyer at the Closing (including pledging any of such assets as security for
obligations of Owners or Seller). Until the termination of this Agreement,
Seller and the Owners will not directly or indirectly solicit, respond to or
negotiate with or release any information relative to the Seller or the Schools
to any potential buyer other than Buyer, except in connection with a transaction
related to the "Edutown" assets identified on Schedule 1.2.2.
                                              --------------

          7.2  Covenants of Buyer Prior to the Closing.  Buyer covenants and
agrees with Seller that from and after the date hereof and until the earlier of
the Closing Date or the termination of this Agreement pursuant to Article IV
hereof, Buyer (i) shall use its best efforts to fulfill or satisfy, or to cause
to be fulfilled or satisfied, all of the conditions precedent to Seller's and
Buyer's obligations to consummate and complete the sale provided herein and to
take all other steps and do all other things reasonably required to consummate
this Agreement in accordance with its terms (including, without limitation,
providing to Seller's landlords all financial and other information reasonably
requested by such landlords to effectuate the assignment of Seller's facility
leases), and (ii) shall not interfere with the performance by Seller of its
obligations under this Agreement.

          7.3  Closing and Post-Closing Covenants.

               7.3.1  Further Assurances.  From time to time after the Closing,
(i) Seller and Owners will execute and deliver such instruments of conveyance,
sale or assignment as Buyer may reasonably request, to more effectively vest,
confirm or evidence Buyer's title to or rights in any of the Purchased Assets
and to otherwise carry out the purpose and intent of this Agreement, and (ii)
Buyer will execute and deliver such instruments as Seller may reasonably request
to more effectively assure the assignment to and assumption by Buyer of the
obligations and liabilities of Seller to be assumed by Buyer pursuant to this
Agreement and to otherwise carry out the purpose and intent of this Agreement.

               7.3.2  Mutual Cooperation.  The parties shall use reasonable
efforts to cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken to consummate the
transactions contemplated hereby and transition management and ownership of the
Schools from Seller to Buyer.  Before and after the Closing, Seller shall use
its best efforts to assist Buyer in obtaining any required accreditation
reasonably necessary for Buyer's operation of the Schools, including furnishing
Buyer such information and assistance as Buyer may request in connection with
its preparation of filings, submissions or accreditation applications to any
governmental agency in connection with the transactions contemplated hereby;
provided, however, that if Buyer requests the assistance of Owners or the
-----------------
Seller's employees in excess of twenty-five (25) hours after the Closing, Buyer
shall pay a reasonable hourly wage to compensate the Owners or Seller's
employees for such efforts.

               7.3.3  Access to Employees.  From and after the Closing, each of
Buyer and Seller (the "Requested Party") shall afford to the other party (the
"Requesting Party"), its officers,

                                      -18-
<PAGE>

counsel, accountants and other authorized representatives reasonable access to
the Requested Party's employees who formerly were or currently are employed by
the Requested Party, without cost to the Requesting Party (other than payment of
out-of-pocket costs not including personnel costs) and as reasonably required by
the Requesting Party in connection with (i) any claim, action, litigation or
other proceeding involving Seller, Buyer or the Schools, and (ii) the
preparation of the Post-Closing Audit. Each party shall use its best efforts to
cause such employees to cooperate with and assist the Requesting Party in its
prosecution or defense of such claims, actions, litigation and other
proceedings, which cooperation shall include, without limitation, preparing and
providing written and oral discovery and attending and testifying at
depositions, hearings, motions and trials, all as necessary in the reasonable
opinion of the Requesting Party or its counsel. Any such access shall take place
only during normal business hours in such a manner as not to interfere
unreasonably with the operation of the business of the other party.

               7.3.4  Certification.  Seller hereby acknowledges and agrees that
the transactions contemplated hereby are subject to the usual and customary
conditions relating to a change of ownership resulting in a change of control of
a postsecondary educational institution certified as eligible to participate in
the student financial assistance programs authorized under Title IV, including
the following:  (1) approval by the BPPVE in the State of California; (2)
approval by all accrediting agencies that accredit the Schools, including but
not limited to ACCSCT; (3) the issuance by the DOE of a temporary Provisional
Program Participation Agreement extending the Schools' certification to
participate in Title IV funding programs immediately following the Closing; and
(4) the issuance of a new Provisional Program Participation Agreement permitting
the Schools to resume participation in Title IV funding under the new ownership.
Prior to and after the Closing, Seller and Buyer shall provide to the DOE and to
all state regulatory agencies and accrediting bodies all information required or
reasonably requested by any of them, and shall use their reasonable efforts to
satisfy all requirements and demands of the DOE or any such agency or body
requisite to obtaining certification of the Schools as eligible to participate
in the Title IV programs after the Closing.  Seller and the Owners shall
cooperate with Buyer to ensure that a materially complete application for
recertification and provisional extension of certificate (the "Application") for
the Schools is filed with the DOE no later than ten (10) business days following
the Closing.  For purposes of this Agreement, a materially complete Application
consists of a completed application for approval to participate in federal
student financial aid programs and the following:  (i) a copy of the Schools'
state licenses or other equivalent document currently authorizing the Schools to
provide a program of postsecondary education in the State of California; (ii)
copies of documentation from the Schools' accrediting agency demonstrating that
the Schools currently are accredited and that the accrediting agency has
approved or accredited all programs offered by the Schools; (iii) audited
financial statements of the Seller's two most recently completed fiscal years
that are prepared in accordance with GAAP published by the Financial Accounting
Standards Board and audited in accordance with GAGAS published by the
Governmental Accounting Standards Board; and (iv) audited financial statements
of the Buyer's two most recently completed fiscal years that are prepared in
accordance with GAAP and audited in accordance with GAGAS, or acceptable
equivalent information.  Seller shall further cooperate with Buyer to ensure
that the following are filed with the DOE by the last day of the month following
the month in which the Closing occurred: (i) a balance sheet showing the
financial position of the Seller and Schools, as of the date of the Closing,
that is prepared in accordance with GAAP and audited in accordance with GAGAS;
(ii) approval of the change of ownership from the State of California; (iii)
approval of the change of ownership from the Schools' accrediting agency; and
(iv), if necessary, a default management plan.  At Buyer's option, as soon as
practicable after the date of this Agreement, Buyer and Seller shall provide the
DOE with all information necessary to obtain a pre-Closing review of the
Application.  If, on the basis of the pre-Closing submission to the DOE, Buyer
determines or is informed that it will not be able to obtain certification of
the Schools subsequent to the Closing at any time, in a timely manner, or
without being

                                      -19-
<PAGE>

subject to material adverse conditions, then notwithstanding any other provision
hereof, Buyer may elect to terminate this Agreement pursuant to Section 4.1(4)
of this Agreement. Buyer may withdraw its election if, subsequent to the giving
of notice, Buyer is satisfied that the basis cited in the notice has been
satisfactorily resolved. Buyer's determination, in its sole and absolute
discretion, shall be dispositive.

               7.3.5  Satisfaction and Payment of the Excluded Liabilities.
Seller and Owners shall pay and satisfy, or cause to be paid and satisfied, all
debts of Seller incurred prior to the Closing Date relating to the Schools that
constitute the Excluded Liabilities.

          7.4  Excise and Property Taxes.  Seller shall pay all Taxes arising
out of the transfer of the Purchased Assets; provided, however, that, upon
                                             -----------------
receipt of reasonably satisfactory written evidence that Seller has actually
paid sales tax in connection with the transfer to Buyer of the tangible assets
conveyed hereunder, Buyer shall, within ten (10) business days, by check or wire
transfer of same day funds, pay to Seller an amount equal to one-half (1/2) of
the sales tax so paid.  Each of Buyer and Seller shall pay its respective
portion, prorated as of the Closing, of state and local real and personal
property taxes of the business of the Schools.

          7.5  Administration in Accordance with Accreditations.  From and after
the date of this Agreement through the Closing Date, Seller, at Seller's sole
cost and expense, shall administer and operate the Schools in accordance with
all federal and state laws, statutes, rules and regulations and in accordance
with all permits, accreditations, authorizations and agreements issued by or
entered into with any federal, state or local governmental or quasi-governmental
entity in any way regulating or otherwise relating to the administration and
operation of the Schools.  Subject to the terms and provisions of this
Agreement, Buyer and Seller shall work together cooperatively and in good faith
to obtain any and all approvals from the DOE, any state education regulatory
authority and any other governmental or quasi-governmental entity that may be
necessary or appropriate to vest in Buyer at the Closing the right and authority
in all material respects to administer and operate the Schools and to release
Seller from further liability or obligations in connection with the
administration or operation of the Schools.

          7.6  Access and Maintenance of Records.  From and after the Closing,
each of Buyer and Seller (the "Requested Party") shall afford to the other party
(the "Requesting Party"), its officers, counsel, accountants and other
authorized representatives and regulatory authorities access to its properties,
books and records, including those maintained by its accountants, at any time
and from time to time upon reasonable notice from the Requesting Party, as
reasonably required by the Requesting Party in connection with (i) performance
by the Requesting Party of any of its obligations under the terms and conditions
of this Agreement, including, without limitation, any liability or obligation of
Seller not assumed by Buyer pursuant to this Agreement, (ii) any claim, action,
litigation or other proceeding involving the Requesting Party or the Schools,
(iii) the Requesting Party's preparation of its financial statements and Tax
returns, (iv) any other essential business purpose of the Requesting Party.  In
addition, the Requesting Party, at its expense, may make copies of any such
records as may be necessary or appropriate for the Requesting Party's use.  Each
party shall maintain all such records in accordance with, and subject to all
restrictions imposed by, all laws, rules and regulations.  Any such access shall
take place only during normal business hours in such a manner as not to
interfere unreasonably with the operation of the business of the other party.

          7.7  Employment Matters.

          Buyer and Seller agree that Buyer has not assumed and shall not assume
any obligations to (or regarding the employment of) any Persons previously or
currently employed by Seller.  As of the

                                      -20-
<PAGE>

close of business on the day prior to the Closing Date, Seller shall terminate
all of its employees employed at the Schools in accordance with all applicable
laws and, prior to the Closing, shall provide any required notices in a timely
manner in connection therewith. All of Seller's obligations for compensation,
wages, bonuses, severance pay, vacation time, pay in lieu of vacation, sickness
and accident benefits, leaves of absence, and similar employee benefits accrued
as of the Closing shall be paid by Seller as of the day prior to the Closing
Date.

          7.7.1  Buyer may, at its option and in its sole and absolute
discretion (and consistent with its standard hiring and employment practices of
hiring employees pursuant to a ninety-day probationary period), offer employment
to any current or former employee of Seller on such terms and conditions as may
be mutually agreed upon by Buyer and such employees; provided however, that the
                                                     ----------------
group of Persons employed by Seller as of the day prior to the Closing Date to
whom Buyer does not offer employment (on terms reasonably consistent with such
Persons' prior employment with Seller) will not exceed twenty-five (25) Persons.
Seller shall use its best efforts to assist Buyer in hiring any such employees
with respect to whom Buyer elects to offer employment.  Seller shall not take
any action, directly or indirectly, to prevent or discourage any such employee
from being employed by Buyer after the Closing Date and shall not solicit,
invite, induce or entice any such employee to remain in the employ of Seller or
otherwise attempt to retain the services of any such employee, except with the
prior written consent of Buyer.  Buyer shall use its reasonable best efforts to
provide to Seller, at least twelve (12) business days after the date hereof, a
list of all employees of Seller to whom Buyer has offered, or expects to offer,
employment as of the Closing Date.

          7.7.2  Notwithstanding any possible inferences to the contrary,
neither Seller nor Buyer intends for this Section 7.7 to create any rights or
obligations except as between Seller and Buyer, and no past, present or future
employees of Seller or Buyer shall be treated as third-party beneficiaries of
this Section 7.7.

                                  ARTICLE VIII
                             CONDITIONS TO CLOSING

      8.1  Conditions Precedent to Obligations of Buyer.  The obligation of
Buyer to complete the purchase of Purchased Assets as provided for herein is
subject to the fulfillment or satisfaction on or before the Closing Date of each
of the conditions set forth below, any of which may be waived by Buyer in
writing.

          (1) All representations and warranties of Seller contained in
     this Agreement or in any certificate or other document delivered to Buyer
     pursuant hereto shall be accurate, complete, true and correct as of the
     Closing Date with the same effect as though made at and as of the Closing
     Date (except to the extent such representations and warranties speak as of
     a particular date), and Buyer shall have received a certificate signed by a
     duly authorized officer of Seller to such effect;

          (2) There shall have been no material adverse change in the condition
     (financial or otherwise), assets, liabilities (absolute, accrued,
     contingent or otherwise), prospects, earning power, commercial
     relationships, reserves, business or operations of the Seller or any of the
     Schools from and after the date of this Agreement;

          (3) Seller shall have performed all of the obligations, covenants and
     agreements contained in this Agreement to be performed by Seller on or
     before the Closing Date, and Buyer shall have received a certificate signed
     by a duly authorized officer of Seller to such effect;

                                      -21-
<PAGE>

          (4) All instruments and documents required on Seller's part to
     effectuate and consummate the transactions contemplated hereby as of the
     Closing, including those described in Section 3.2, shall be delivered by
     Seller and shall be in form and substance reasonably satisfactory to Buyer
     and its counsel;

          (5) No law or order shall have been enacted, entered, issued,
     promulgated or entered by any governmental entity which prohibits or
     restricts the transactions contemplated hereby, and there shall not have
     been threatened, nor shall there be pending, any action or proceeding by or
     before any court or governmental agency or other regulatory or
     administrative agency or commission, challenging any of the transactions
     contemplated by this Agreement or seeking monetary relief by reason of the
     consummation of such transactions;

          (6) Seller and Buyer shall have obtained all required regulatory
     approvals that are capable of being obtained prior to Closing, including,
     but not limited to, all registrations, licenses, permits and approvals
     required by any governmental entity or agency or other regulatory body to
     operate the Schools in the State of California and all local jurisdictions
     contained therein (including, without limitation, the BPPVE);

          (7) Buyer shall be reasonably satisfied that, with respect to all
     required regulatory approvals that are not capable of being obtained prior
     to Closing, Buyer will be able to obtain all such other required regulatory
     approvals within a reasonable time period after the Closing Date without
     material expense or undue burden;

          (8) The Schools shall have received all required accreditation
     approvals and shall not have received from any accrediting agency or body
     (including, without limitation, ACCSCT) any "show cause" letter or other
     notice which would tend to call into question the validity of such
     accreditation or the ability of the Schools to maintain such accreditation
     in good standing at any time after the Closing Date;

          (9) All third party consents required by the transactions
     contemplated hereby shall have been obtained (including, without
     limitation, all necessary consents of other parties to the Assumed
     Contracts);

          (10) Buyer shall have received satisfactory evidence that all
     liens (other than the Permitted Exceptions) on the Purchased Assets have
     been terminated and completely released of record; and

          (11) Buyer shall have received from the landlords of the
     Facilities executed estoppel certificates and consents to the Lease
     Assignments.

      8.2  Conditions Precedent to Obligations of Seller.  The obligation of
Seller to complete the sale of Purchased Assets as provided for herein are
subject to the fulfillment or satisfaction on or before the Closing Date of each
of the conditions set forth below, any of which may be waived by Seller in
writing.

          (1) All representations and warranties of Buyer contained in this
     Agreement or in any certificate or other document delivered to Seller
     pursuant hereto shall be complete, true and correct in all material
     respects as of the Closing Date, and Seller shall have received a
     certificate signed by a duly authorized officer of Buyer to such effect;

                                      -22-
<PAGE>

          (2) Buyer shall have performed all of the obligations, covenants
     and agreements contained in this Agreement to be performed by Buyer on or
     before the Closing Date, and Seller shall have received a certificate
     signed by a duly authorized officer of Buyer to such effect;

          (3) All instruments and documents reasonably required on Buyer's
     part to effectuate and consummate the transactions contemplated hereby,
     including those described in Section 3.3, shall be delivered by Buyer; and

          (4) No law or order shall have been enacted, entered, issued,
     promulgated or entered by any governmental entity which prohibits or
     restricts the transactions contemplated hereby, and there shall not have
     been threatened, nor shall there be pending, any action or proceeding by or
     before any court or governmental agency or other regulatory or
     administrative agency or commission, challenging any of the transactions
     contemplated by this Agreement or seeking monetary relief by reason of the
     consummation of such transactions.

                                  ARTICLE IX
                                 MISCELLANEOUS

      9.1  Binding Effect.  All terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.  Neither
this Agreement, nor the obligations of any party hereunder, shall be assignable
or transferable by any such party without the prior written consent of all
parties hereto, except that Buyer may assign its rights and obligations
hereunder to an Affiliate.  No assignment of any right or delegation of any duty
shall relieve the assignor or delegator of any liabilities hereunder, except to
the extent, if any, so provided in a writing signed by the obligee(s).

      9.2  Notices.  All notices or other communications required or
permitted hereunder shall be in writing and shall be given or made (a) by
personal delivery, (b) by a nationally recognized courier service for overnight
delivery, charges prepaid, or (c) by registered or certified mail, postage
prepaid, return receipt requested, in each case addressed

               if to Buyer, at:

                    Corinthian Schools, Inc.
                    6 Hutton Centre Drive, Suite 400
                    Santa Ana, California 92707
                    Attention:  David Moore and Stan A. Mortensen, Esq.

               with each such notice to Buyer, a copy to:

                    O'Melveny & Myers LLP
                    610 Newport Center Drive, Suite 1700
                    Newport Beach, California 92660
                    Attention:  David A. Krinsky, Esq.
                    Facsimile:  (949) 823-6994

               if to Seller, at:

                    Educorp, Inc.
                    c/o Dr. Rashed B. Elyas

                                      -23-
<PAGE>

                    3289 Edith Street
                    Los Angeles, CA 90064

               if to Owners, at:

                    Dr. Rashed B. Elyas
                    3289 Edith Street
                    Los Angeles, CA 90064

                    Ken Boyle
                    5318 Encino Avenue
                    Encino, CA 91316

               with each such notice to Seller and/or Owners, a copy to:

                    The Law Offices of Scott Lee Shabel
                    12400 Wilshire Blvd
                    Suite 1300
                    Los Angeles, CA 90025-1030
                    Facsimile:     (310) 447-3288
                    Attention:     Scott Lee Shabel, Esq.

or at such other place as the party to whom such notice of communication is to
be addressed may have designated to the other parties by notice conforming to
this Section 9.2.  Notices shall be deemed effective and received (i) on the
actual receipt in the case of hand delivery, (ii) on the next business day after
deposit in the case of notices by nationally recognized overnight courier
services, or (iii) on the third business day after the date of mailing in the
manner set forth herein.  As used herein, notice to a party shall include
concurrent notice to that party's counsel as set forth herein.

      9.3  Entire Agreement.  This Agreement and the documents referred to
herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations,
representations, warranties and discussions of the parties, whether oral or
written; and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein or therein.  No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

      9.4  Nature and Survival of Representations.  The representations,
warranties, covenants and agreements of Buyer, Seller and Owners contained in
this Agreement, and all statements contained in this Agreement or any Exhibit or
Schedule hereto or any certificate or financial statement delivered pursuant to
this Agreement, shall be deemed to constitute representations, warranties,
covenants and agreements of the respective party delivering the same.  All such
representations, warranties, covenants and agreements shall survive the Closing
until August 31, 2002.

                                      -24-
<PAGE>

      9.5  Risk of Loss or Damage; Insurance.  It is understood and agreed
that all right, title and interest in and to the Purchased Assets and all risk
of loss or damage thereto shall not pass from Seller to Buyer unless and until
the Closing occurs whereupon all risk of loss or damage shall pass to Buyer.  In
the event of a casualty or condemnation in respect of any of the Purchased
Assets prior to the Closing, Buyer shall have the right, at its sole option, to
elect either (a) to terminate this Agreement or (b) to accept the insurance
proceeds in respect of such casualty or condemnation and proceed to close
otherwise in accordance with the terms and conditions of this Agreement.  Seller
agrees to maintain the insurance currently carried with respect to the Purchased
Assets until the Closing Date.

      9.6  Waiver.  No waiver shall be deemed to have been made by any party
of any of its rights hereunder unless the same shall be in writing and shall be
signed by the waiving party.  Such a waiver, if any, shall be a waiver only in
respect to the specific instance involved and shall in no way impair the rights
of the waiving party or the obligations of any other party in any other respect
at any other time.

      9.7  Governing Law.  This Agreement shall be construed and interpreted
according to the substantive laws of the State of California without giving
effect to the principles of conflicts of law thereof.

      9.8  Headings.  The headings of the articles and sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.

      9.9  Counterparts.  This Agreement may be executed by the parties in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

      9.10  Severability.  In the event that any one or more terms or
provisions hereof shall be held void or unenforceable by any court or
arbitrator, all remaining terms and provisions hereof shall remain in full force
and effect.

      9.11  Time is of the Essence.  Seller and Buyer agree that time is of
the essence in connection with the implementation and performance by the parties
of all terms, conditions and obligations of this Agreement.

      9.12  Indemnification by Seller and the Owners.  Seller and the
Owners, jointly and severally, hereby agree to indemnify, defend and hold
harmless Buyer and its Affiliates and their respective officers, directors,
stockholders, employees, agents, successors and assigns from and against any and
all claims, liabilities, obligations, losses, costs, expenses (including,
without limitation, interest, penalties and attorneys' fees), fines, or damages
of any kind or nature (collectively "Losses", and individually a "Loss"), as a
result of, or based upon or arising out of:

            (1) any breach of, or any inaccuracy or misrepresentation in, any
     of the representations or warranties made by Seller or Owners in this
     Agreement or any other agreement, statement or certificate delivered
     pursuant hereto;

            (2) any breach of or violation by Seller or Owners of any of the
     covenants made by Seller and/or the Owners in this Agreement or any other
     agreement, statement or certificate delivered pursuant hereto;

                                      -25-
<PAGE>

               (3)  any claim related to or arising out of Seller's operation of
     the Schools prior to the Closing Date that are asserted with respect to any
     liabilities that are not Assumed Liabilities;

               (4)  any of the Excluded Liabilities (and/or Seller's or the
     Owners' failure or refusal to discharge any obligation related to the
     Excluded Liabilities);

               (5)  any of the matters disclosed on Schedule 5.14 and Schedule
                                                    -------------     --------
     5.19;
     ----

               (6)  any determination by the DOE or any accrediting agency that
     the Seller and/or Schools have not demonstrated compliance with 34 CFR
     668.15 (Factors of Financial Responsibility) and 34 CFR 668.16 (Standards
     of Administrative Capability) for dates and periods prior to Closing Date;
     and

               (7)  any actions, judgments, costs and expenses (including
     reasonable attorneys' fees, expert witness fees and all other expenses
     incurred in investigating, preparing or defending any litigation or
     proceeding, commenced or threatened) incident to any of the foregoing or
     the enforcement of this Section 9.12.

Seller and the Owners shall not be liable to Buyer for any Loss under Subsection
9.12(1) unless such individual Loss (any single event or occurrence, or series
of related events or occurrences, that may constitute a breach of one or more
representation and warranty provisions set forth in Article V hereof shall
constitute an individual loss) in each instance exceeds five thousand dollars
($5,000) and until the aggregate amount of Losses resulting to Buyer thereunder
shall equal or exceed one hundred thousand dollars ($100,000.00) (the
"Threshold"); if Buyer's Losses under Section 9.12(1) exceed the Threshold,
Seller and the Owners shall jointly and severally indemnify Buyer for all such
Losses without regard to the Threshold. The limitations set forth in the
preceding sentence shall not apply to Losses of Buyer arising out of (i) fraud,
or (ii) the breach of any representation or warranty contained herein if such
representation or warranty was made with (x) actual knowledge that it contained
an untrue statement of fact or (y) an intention to mislead by omitting to state
a fact necessary to make the other statement of facts contained therein not
misleading.

          9.13  Indemnification by Buyer.  Buyer hereby agrees to indemnify and
hold harmless Seller and its Affiliates from and against any and all Losses
arising out of or resulting from:

               (1)  any breach of, or any inaccuracy or misrepresentation in,
     any of the representations or warranties made by Buyer in this Agreement or
     any other agreement, statement or certificate delivered pursuant hereto;

               (2)  any breach of or violation by Buyer of any of the covenants
     made by Buyer in this Agreement or any other agreement, statement or
     certificate delivered pursuant hereto;

               (3)  all Losses arising out of or resulting from any claim or
     arising out of operation of the Schools on or after the Closing Date;

               (4)  all Losses arising out of or resulting from the Assumed
     Liabilities; and

                                      -26-
<PAGE>

               (5)  any actions, judgments, costs and expenses (including
     reasonable attorneys' fees, expert witness fees and all other expenses
     incurred in investigating, preparing or defending any litigation or
     proceeding, commenced or threatened) incident to any of the foregoing or
     the enforcement of this Section 9.13.

          9.14 Indemnification of Claims; Right to Set-Off.  (a) The provisions
of this Section 9.14 shall govern any claim for indemnification of Buyer,
pursuant to Section 9.12, or Seller, pursuant to Section 9.13 (each such party
an "Indemnitee"), against the party agreeing to provide indemnification
hereunder (the "Indemnitor"). The Indemnitee shall promptly give notice
hereunder to the Indemnitor (and in no event more than thirty (30) days), after
obtaining notice of any claim as to which recovery may be sought against the
Indemnitor because of the indemnity in Section 9.12 or 9.13, and the amount, if
reasonably determinable, of such claim for indemnification, or, if not
reasonably determinable, such party's reasonable best estimate of the maximum
amount of such liability at such time. If such indemnity shall arise from the
claim of a third party, the Indemnitee shall consent to the Indemnitor assuming
the defense of any such claim; provided that the Indemnitee shall not be
                               --------
required to permit the Indemnitor to assume the defense of any third party claim
(x) which, if not first paid, discharged or otherwise complied with, would
result in a material interruption or cessation of the conduct of the business of
the Indemnitee, or (y) if the Indemnitee reasonably concludes that there may be
a conflict of interest between the Indemnitor, on the one hand, and the
Indemnitee, on the other hand, in the conduct of the defense of such action.
Failure by the Indemnitor to notify the Indemnitee of its election to defend any
such claim or action within 14 days of the date of notice from the Indemnitee
shall be deemed to constitute its consent to the Indemnitee's assumption of such
defense. If the Indemnitor assumes the defense of such claim or litigation
resulting therefrom, the obligations of the Indemnitor hereunder as to such
claim shall include taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom including the retention of counsel,
which counsel must be to the Indemnitee's reasonable satisfaction, and holding
the Indemnitee harmless from and against any and all Losses resulting from,
arising out of, or incurred with respect to any settlement approved by the
Indemnitor or any judgment in connection with such claim or litigation resulting
therefrom. The Indemnitor shall not, in the defense of such claim or litigation,
(i) consent to the entry of any judgment (other than a judgment of dismissal on
the merits without costs) except with the written consent of the Indemnitee,
which consent shall not be unreasonably withheld, or (ii) enter into any
settlement (except with the written consent of the Indemnitee, which consent
shall not be unreasonably withheld), unless the Indemnitee is released and held
harmless from and against any and all Losses resulting from, arising out of or
incurred with respect to such judgment or settlement. If the Indemnitor does not
assume the defense of any such claim by a third party or litigation resulting
therefrom, the Indemnitee may defend against such claim or litigation in such
manner as it deems appropriate, and the Indemnitee may settle such claim or
litigation on such terms as it may deem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of such settlement and for all
Losses incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation.

          (b)  Upon notice to Seller (which notice shall be as soon as
reasonably practicable after Buyer becomes aware the facts giving rise to a
claim), Buyer is hereby authorized at any time, and from time to time, to set-
off and apply any and all amounts owing by Buyer to Seller, whether under this
Agreement or otherwise, against any and all of the obligations of Seller and/or
Owners to Buyer hereunder, including without limitation Seller's and Owners'
obligations pursuant to Section 9.12 hereunder.

          (c)  Buyer, Seller, and each of the Owners shall instruct the Escrow
Agent in writing to disburse (i) on or before December 31, 2001, that portion of
the Deferred Payment, if any (together

                                      -27-
<PAGE>

with a pro rata share of earnings through the date of such instruction), for
which Buyer has not given prior written notice of a claim for indemnification of
a Loss or Losses pursuant to Section 9.12 and this Section 9.14, and (ii) on the
date of final determination of Seller's and/or the Owners' liability pursuant to
Section 9.15 (or the date of Buyer's, Seller's and the Owners' agreement on the
amount of such liability), the amount of such Loss or Losses (together with a
pro rata share of earnings through the date of such instruction).
Notwithstanding any provision of this Agreement to the contrary, if any of
Buyer, Seller or the Owners fail to give any written instruction required by
this paragraph, the other party or parties shall have the right to petition a
court of competent jurisdiction to compel such written instruction.

          9.15 Dispute Resolution and Arbitration.

               9.15.1  Negotiation Between Parties.  The parties shall attempt
in good faith to resolve any dispute arising out of or relating to this
Agreement promptly by negotiation between executives who have authority to
settle the controversy and who are at a higher level of management (if any) than
the persons with direct responsibility for administration of this Agreement. Any
party may give the other party written notice of any dispute not resolved in the
normal course of business. Within 15 days after delivery of the notice the
receiving party shall submit to the other a written response. The notice and the
response shall include (i) a statement of each party's position and a summary of
arguments supporting that position, and (ii) the name and title of the executive
who represents that party and of any other person who will accompany the
executive. Within 10 days after delivery of the disputing party's notice, the
executives of both parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to attempt to resolve
the dispute. All reasonable requests for information made by one party to the
other shall be honored. If the matter has not been resolved within 45 days of
the disputing party's notice, or if the parties fail to meet within 10 days,
either party may initiate arbitration of the controversy or claim as provided
hereinafter. All negotiations pursuant to this clause are confidential and shall
be treated as compromise and settlement negotiations for purposes of all
applicable rules of evidence.

               9.15.2  Arbitration.  Any dispute arising out of or relating to
this Agreement or the breach, termination or the validity hereof, which has not
been resolved by the nonbinding meet and confer provisions provided in Section
9.15.1 within 90 days of the initiation of such procedure, shall be settled by
arbitration in accordance with the then-current Judicial Arbitration and
Mediation Services (JAMS) rules for arbitration of business disputes by a sole
arbitrator who shall be a former superior court or appellate court judge or
justice with significant experience in resolving business disputes. If
available, the arbitrator should have familiarity or experience in Title IV
funding matters. The arbitration shall be governed by the rules of civil
procedure (including the rules of discovery permitted by such rules) in the
jurisdiction in which such arbitration proceeding is initiated, and the parties
intend this procedure to be specifically enforceable in accordance with such
provisions. Judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. The place of arbitration shall be Los
Angeles County, California. The arbitrator may award equitable relief in those
circumstances where monetary damages would be inadequate. The arbitrator shall
be required to follow the applicable law as set forth in the governing law
section of this Agreement.

          9.16 Third Party Beneficiaries.  This Agreement shall be binding
upon, be enforceable against, and inure to the benefit of the parties and their
respective successors and permitted assigns; otherwise, this Agreement shall
not, and shall not be deemed to, inure to the benefit of or be enforceable by
any third party.

                                      -28-
<PAGE>

          9.17 Expenses.  Each party hereto shall bear its own expenses relating
to the transactions contemplated by this Agreement.

          9.18 Representation by Counsel.  EACH PARTY HERETO REPRESENTS AND
AGREES WITH EACH OTHER THAT IT HAS BEEN REPRESENTED BY, OR HAD THE OPPORTUNITY
TO BE REPRESENTED BY, INDEPENDENT COUNSEL OF ITS OWN CHOOSING, AND THAT IT HAS
HAD THE FULL RIGHT AND OPPORTUNITY TO CONSULT WITH ITS RESPECTIVE ATTORNEY(S),
THAT TO THE EXTENT, IF ANY, THAT IT DESIRED, IT AVAILED ITSELF OF THIS RIGHT AND
OPPORTUNITY, THAT IT OR ITS AUTHORIZED OFFICERS (AS THE CASE MAY BE) HAVE
CAREFULLY READ AND FULLY UNDERSTAND THIS AGREEMENT IN ITS ENTIRETY AND HAVE HAD
IT FULLY EXPLAINED TO THEM BY SUCH PARTY'S RESPECTIVE COUNSEL, THAT EACH IS
FULLY AWARE OF THE CONTENTS THEREOF AND ITS MEANING, INTENT AND LEGAL EFFECT,
AND THAT IT OR ITS AUTHORIZED OFFICER (AS THE CASE MAY BE) IS COMPETENT TO
EXECUTE THIS AGREEMENT AND HAS EXECUTED THIS AGREEMENT FREE FROM COERCION,
DURESS OR UNDUE INFLUENCE. THIS AGREEMENT IS THE PRODUCT OF NEGOTIATIONS BETWEEN
THE PARTIES HERETO REPRESENTED BY COUNSEL AND ANY RULES OF CONSTRUCTION RELATING
TO INTERPRETATION AGAINST THE DRAFTER OF AN AGREEMENT SHALL NOT APPLY TO THIS
AGREEMENT AND ARE EXPRESSLY WAIVED. THE PROVISIONS OF THIS AGREEMENT SHALL BE
INTERPRETED IN A REASONABLE MANNER TO EFFECT THE INTENTIONS OF THE PARTIES TO
THIS AGREEMENT.

                        [SIGNATURES ON FOLLOWING PAGE]

                                      -29-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first above written.

                                        "BUYER"

                                        CORINTHIAN SCHOOLS, INC.,
                                        a Delaware corporation

                                        By:    /s/ Nolan A. Miura
                                           ----------------------------
                                        Name:  Nolan A. Miura
                                              -------------------------
                                        Title: Vice President
                                              -------------------------

                                        "SELLER"

                                        EDUCORP, INC.
                                        a California corporation

                                        By:    /s/ Dr. Rashed Elyas
                                           ----------------------------
                                        Name:  Dr. Rashed Elyas
                                              -------------------------
                                        Title: CEO
                                              -------------------------

                                        "OWNERS"

                                               /s/ Dr. Rashed B. Elyas
                                        -------------------------------
                                               Dr. Rashed B. Elyas

                                               /s/ Ken Boyle
                                        -------------------------------
                                               Ken Boyle

                                 S-1                  (Asset Purchase Agreement)

<PAGE>

                           ASSET PURCHASE AGREEMENT

                              Corinthian/Educorp

                               LIST OF EXHIBITS
                               ----------------

        Exhibit Designation          Exhibit Contents
        -------------------          ----------------

              A.                     Form of Escrow Agreement

              B.                     Form of Assignment and Assumption Agreement

              C.                     Form of Bill of Sale

              D.                     Form of License Agreement

              E.                     Form of Non-Competition Agreement

                                 A-1                  (Asset Purchase Agreement)

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