8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): September 2, 2003

Education Management Corporation

(Exact Name of Registrant as Specified in Charter)

Pennsylvania	000-21363	25-1119571
(State or Other Jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

210 Sixth Avenue, Pittsburgh, Pennsylvania	15222
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (412) 562-0900

Item 2. Acquisition or Disposition of Assets.

On September 2, 2003, Education Management Corporation (“EDMC”) announced that it had closed its purchase of all of the outstanding shares (the “Shares”) of American Education Centers, Inc. and its related companies (“AEC”), pursuant to the terms and conditions of a Stock Purchase Agreement dated as of June 24, 2003. The Shares were beneficially owned by certain individuals and trusts. The aggregate cash purchase price for the Shares was $112.5 million (which amount included approximately $70 million paid by EDMC two business days after the closing date); EDMC also assumed $3.5 million of debt. The purchase price for the Shares was determined in arms’ length negotiations.

EDMC funded the stock purchase by borrowings under its credit facility with National City Bank as agent for a syndicate of lenders.

AEC, with approximately 5,800 students currently, offers diploma and associate’s degree programs. AEC is headquartered in a suburb of Cincinnati, Ohio and operates 18 education institutions in eight states. Its academic programs include medical assisting, licensed practical nursing, occupational therapy assisting, physical therapy assisting, business management, accounting, network engineering, computer applications, computer programming, electronics engineering, paralegal studies, criminal justice, audio-video production and computer-aided design. EDMC intends to continue AEC’s programs.

Item 7. Financial Statements and Exhibits

(a)—(b). Financial Statements and Pro Forma Financial Information.

In accordance with the instructions in Item 7(a)(4) and (b)(2), the historical financial statements of AEC and the pro forma financial information required by Item 7 have not been filed herewith, but will be filed not later than 60 days after the initial due date of this report.

(c). Exhibits

Exhibit No.	Description
2.1	Stock Purchase Agreement dated as of June 24, 2003 by and among Education Management Corporation and Russell E. Palmer, Bradley C. Palmer, The Stephen R. Palmer Living Trust, The Russell E. Palmer III Living Trust, The Karen J. Korfmann Living Trust, Michael Masin, Connie Walter, Technology Leaders L.P., Technology Leaders First Corp., J. William Brooks, Gerard Francois, Danny Finuf, The Companies Signatory Thereto and Sellers’ Representative.
4.1	Second Amended and Restated Credit Agreement dated as of August 18, 2003 by and among Education Management Corporation as the Borrower, The Banks Party Thereto as the Banks and National City Bank of Pennsylvania as the Agent and Wachovia Bank,

National Association, as Syndication Agent, Suntrust Bank, as Syndication Agent, Fleet National Bank, as Documentation Agent, and JPMorgan Chase Bank, as Documentation Agent

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EDUCATION MANAGEMENT CORPORATION
By:	/s/    ROBERT T. MCDOWELL
	Robert T. McDowell Executive Vice President and Chief Financial Officer

Dated: September 17, 2003

EXHIBIT INDEX

Exhibit No.	Description
2.1	Stock Purchase Agreement dated as of June 24, 2003 by and among Education Management Corporation and Russell E. Palmer, Bradley C. Palmer, The Stephen R. Palmer Living Trust, The Russell E. Palmer III Living Trust, The Karen J. Korfmann Living Trust, Michael Masin, Connie Walter, Technology Leaders L.P., Technology Leaders First Corp., J. William Brooks, Gerard Francois, Danny Finuf, The Companies Signatory Thereto and Sellers’ Representative.
4.1	Second Amended and Restated Credit Agreement dated as of August 18, 2003 by and among Education Management Corporation as the Borrower, The Banks Party Thereto as the Banks and National City Bank of Pennsylvania as the Agent and Wachovia Bank, National Association, as Syndication Agent, Suntrust Bank, as Syndication Agent, Fleet National Bank, as Documentation Agent, and JPMorgan Chase Bank, as Documentation Agent

EX-2.2

                                                                     EXHIBIT 2.1

                            STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

                        EDUCATION MANAGEMENT CORPORATION,

                               RUSSELL E. PALMER,

                               BRADLEY C. PALMER,

                       THE STEPHEN R. PALMER LIVING TRUST,

                     THE RUSSELL E. PALMER III LIVING TRUST,

                        THE KAREN KORFMANN LIVING TRUST,

                                 MICHAEL MASIN,

                                 CONNIE WALTER,

                            TECHNOLOGY LEADERS L.P.,

                         TECHNOLOGY LEADERS FIRST CORP.,

                               J. WILLIAM BROOKS,

                                GERARD FRANCOIS,

                                  DANNY FINUF,

                         THE COMPANIES SIGNATORY HERETO

                                       AND

                             SELLERS' REPRESENTATIVE

                               as of June 24, 2003



                            STOCK PURCHASE AGREEMENT
                               as of June 24, 2003

     The parties to this Stock Purchase Agreement (this "Agreement") are Russell
E. Palmer ("RPalmer"), Bradley C. Palmer ("BPalmer"), Stephen R. Palmer Living
Trust ("SPalmer Trust"), Russell E. Palmer III Living Trust ("RPalmer III
Trust"), Karen Korfmann Living Trust ("Korfmann Trust"), Michael Masin
("Masin"), Connie Walter, ("Walter" and, together with RPalmer, BPalmer, SPalmer
Trust, RPalmer III Trust, Korfmann Trust and Masin, the "Equity Sellers");
Technology Leaders L.P., a Delaware limited partnership ("Tech Leaders"),
Technology Leaders First Corp., a British Virgin Islands corporation ("TL First
Corp" and, together with Tech Leaders, the "Warrant Sellers"); J. William Brooks
("Brooks"), Gerard Francois ("Francois"), Danny Finuf ("Finuf" and, together
with Brooks and Francois, the "Option Sellers" and, together with the Warrant
Sellers and the Equity Sellers, the "Sellers"); American Education Centers,
Inc., a Delaware corporation ("AEC"), Brown Mackie Education Corporation, a
Delaware corporation ("Brown Mackie"), Commonwealth Business College Education
Corporation, a Delaware corporation ("Commonwealth"), Asher School of Business
Education Corporation, a Delaware corporation ("Asher"), Stautzenberger College
Education Corporation, a Delaware corporation ("Stautzenberger"), and Michiana
College Education Corporation, a Delaware corporation ("Michiana" and, together
with AEC, Brown Mackie, Commonwealth, Asher and Stautzenberger, the "Parent
Companies"); Russell E. Palmer, in his capacity as the Sellers' representative
(the "Sellers' Representative"); and Education Management Corporation, a
Pennsylvania corporation ("Buyer").

     A. The Equity Sellers are the owners of all of the issued and outstanding
common stock of each of the Parent Companies. Southern Ohio College, LLC, a
Delaware limited liability company ("Southern Ohio LLC" and, together with the
Parent Companies, the "Companies") is a wholly owned subsidiary of the Parent
Companies. The Companies own and operate the schools set forth on Exhibit A
hereto (collectively, the "Schools"). The Equity Sellers desire to sell and
Buyer desires to purchase all of the issued and outstanding common stock of each
of the Parent Companies.

     B. The Warrant Sellers are the owners of the warrants and debentures issued
by AEC, Brown Mackie, Commonwealth, Asher, Stautzenberger and Michiana set forth
in Section 1 of the Disclosure Letter (the "TL Warrants and Debentures"). Prior
to the Closing, each Parent Company shall issue promissory notes in exchange for
the TL Warrants and Debentures issued by such Parent Company in the form
attached as Exhibit B hereto.

     C. The Option Sellers are the owners of the options issued by AEC, Brown
Mackie, Commonwealth, Asher, Stautzenberger and Michiana set forth in Section 1
of the Disclosure Letter (the "Options"). Prior to the Closing, each Parent
Company shall issue promissory notes in exchange for the Options issued by such
Parent Company in the form attached as Exhibit B hereto.

     D. RPalmer is the owner of restricted stock issued by each of the Parent
Companies (the "Restricted Stock"), as specifically identified in Section 1 of
the Disclosure Letter. Prior to the Closing, each Parent Company shall issue
promissory notes in exchange for the Restricted Stock issued by such Parent
Company in the form attached as Exhibit B hereto.



     E. Pursuant to a letter agreement dated June 11, 2003 (the "Brooks Letter
Agreement") among Brooks and the Parent Companies, Brooks is entitled to the
greater of the amount of share value to which he is entitled under his option
agreement or five percent (5%) of the Aggregate Purchase Price (as defined
herein). Prior to the Closing, each Parent Company shall issue promissory notes
in an amount equal to the option elected by Brooks in the form attached as
Exhibit B hereto.

     In consideration of the mutual promises, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:

                                   ARTICLE I

                                THE TRANSACTION

     1.1. Sale and Purchase of Sellers' Interests in the Parent Companies; Note
Exchange .

          (a) Purchased Interests. At the Closing referred to in Section 1.4,
upon the terms and subject to the conditions of this Agreement, the Equity
Sellers shall sell to Buyer and Buyer shall purchase from the Equity Sellers:
(i) 521.21301 shares of Class A common stock and 443.42487 shares of Class B
common stock representing all of the issued and outstanding equity securities of
AEC (the "AEC Purchased Shares"), (ii) 331.17685 shares of Class A common stock
and 365 shares of Class B common stock representing all of the issued and
outstanding equity securities of Brown Mackie (the "Brown Mackie Purchased
Shares"), (iii) 331.17685 shares of Class A common stock and 365 shares of Class
B common stock representing all of the issued and outstanding equity securities
of Commonwealth (the "Commonwealth Purchased Shares"), (iv) 331.17685 shares of
Class A common stock and 365 shares of Class B common stock representing all of
the issued and outstanding equity securities of Asher (the "Asher Purchased
Shares"), (v) 331.17685 shares of Class A common stock and 365 shares of Class B
common stock representing all of the issued and outstanding equity securities of
Stautzenberger (the "Stautzenberger Purchased Shares") and (vi) 331.17685 shares
of Class A common stock and 365 shares of Class B common stock representing all
of the issued and outstanding equity securities of Michiana (the "Michiana
Purchased Shares", and together with the AEC Purchased Shares, the Brown Mackie
Purchased Shares, the Commonwealth Purchased Shares, the Asher Purchased Shares,
and the Stautzenberger Purchased Shares, collectively, the "Purchased
Interests") for an aggregate purchase price in the amount of One Hundred and Ten
Million Dollars ($110,000,000) (the "Aggregate Purchase Price") less the Seller
Debt (such difference being, the "Equity Purchase Price"), subject to the
Purchase Price Adjustment set forth in Section 1.3. For purposes hereof, (A)
"Seller Debt" shall be an amount equal to the aggregate principal amount of the
Seller Notes (as defined below) outstanding at the Closing, and (B) the holders
of Seller Debt shall be referred to as the "Note Sellers".

          (b) Warrant Notes. Prior to the Closing, each Warrant Seller shall
deliver its respective TL Warrants and Debentures to the respective Parent
Company in exchange for a promissory note in the form attached hereto as Exhibit
B (each such note, a "Warrant Note"). The aggregate principal amount of each
such Warrant Note shall equal the amount set forth for the respective Warrant
Seller in Section 1.1(b) of the Disclosure Letter. At least twenty (20) days
before issuing the Warrant Notes, the Parent Companies shall deliver to Buyer a
calculation of the amount of Tax required to be withheld with respect to the
issuance of and/or payment

                                       -2-



under each Warrant Note (the "Preliminary Warrant Withholding Tax Amounts").
Buyer shall provide comments on the Preliminary Warrant Withholding Tax Amounts
within ten (10) days after delivery by the Parent Companies and the Preliminary
Warrant Withholding Tax Amounts shall be adjusted to reflect any changes
reasonably requested by Buyer (the "Final Warrant Withholding Tax Amounts").
Payments made pursuant to the Warrant Notes by a Parent Company shall be net of
the relevant Final Warrant Withholding Tax Amounts.

          (c) Option Notes. Prior to the Closing, each Option Seller (other than
Brooks) shall deliver his respective Options to the respective Parent Company in
exchange for a promissory note in the form attached hereto as Exhibit B (each
such note, an "Option Note"). The aggregate principal amount of each such Option
Note shall equal the amount set forth for the respective Option Seller (other
than Brooks) in Section 1.1(c) of the Disclosure Letter. At least twenty (20)
days before issuing the Option Notes, the Parent Companies shall deliver to
Buyer a calculation of the amount of Tax required to be withheld with respect to
the issuance of and/or payment under each Option Note (the "Preliminary Option
Withholding Tax Amounts"). Buyer shall provide comments on the Preliminary
Option Withholding Tax Amounts within ten (10) days after delivery by the Parent
Companies and the Preliminary Option Withholding Tax Amounts shall be adjusted
to reflect any changes reasonably requested by Buyer (the "Final Option
Withholding Tax Amounts"). Payments made pursuant to the Option Notes by a
Parent Company shall be net of the relevant Final Option Withholding Tax
Amounts.

          (d) RPalmer Restricted Stock Notes. Prior to the Closing, RPalmer
shall deliver his Restricted Stock to the respective Parent Company in exchange
for a promissory note in the form attached hereto as Exhibit B (each such note,
a "RPalmer Restricted Stock Note"). The aggregate principal amount of each such
Restricted Stock Note shall equal the amount set forth for RPalmer in Section
1.1(d) of the Disclosure Letter. At least twenty (20) business days before
issuing the Restricted Stock Note, the Parent Companies shall deliver to Buyer a
calculation of the amount of Tax required to be withheld with respect to the
issuance of and/or payment under the Restricted Stock Note (the "Preliminary
RPalmer Restricted Stock Withholding Tax Amounts"). Buyer shall provide comments
on the Preliminary RPalmer Restricted Stock Withholding Tax Amounts within ten
(10) days after delivery by the Parent Companies and the Preliminary RPalmer
Restricted Stock Withholding Tax Amounts shall be adjusted to reflect any
changes requested by Buyer (the amount so determined, the "Final RPalmer
Restricted Stock Withholding Tax Amounts"). Payments made pursuant to the
Restricted Stock Note by a Parent Company shall be net of the relevant Final
RPalmer Restricted Stock Withholding Tax Amounts.

          (e) Brooks Notes. Prior to the Closing, Brooks shall, in accordance
with the Brooks Letter Agreement, receive a promissory note in the form attached
hereto as Exhibit B (each such note, a "Brooks Note" and, together with the
Warrant Notes, the Option Notes and the RPalmer Restricted Stock Notes, the
"Seller Notes"). The aggregate principal amount of each such Brooks Note shall
equal the amount set forth for Brooks in Section 1.1(e) of the Disclosure
Letter. At least twenty (20) days before issuing the Brooks Notes, the Parent
Companies shall deliver to Buyer a calculation of the amount of Tax required to
be withheld with respect to the issuance of and/or payment under the Brooks
Notes (the "Preliminary Brooks Withholding Tax Amounts"). Buyer shall provide
comments on the Preliminary Brooks Withholding Tax Amounts within ten (10) days
after delivery by the Parent Companies and the Preliminary Brooks Withholding
Tax Amounts shall be adjusted to reflect any changes requested by Buyer (the
amount so determined, the "Final Brooks Withholding Tax Amounts" and, together
with the Final Warrant Withholding Tax Amounts, Final Option Withholding Tax

                                       -3-



Amounts and the Final RPalmer Restricted Stock Withholding Amounts, the "Final
Withholding Tax Amounts"). Payments made pursuant to the Brooks Note by a Parent
Company shall be net of the relevant Final Brooks Withholding Tax Amounts.

     1.2. Payment of Aggregate Purchase Price. Subject to adjustment in
accordance with Section 1.3, the Aggregate Purchase Price shall be paid as
follows:

          (a) Equity Purchase Price. The Equity Purchase Price shall be paid by
Buyer at the Closing, as follows:

               (i) Buyer will execute and deliver to the Sellers'
Representative, on behalf of the Equity Sellers, a short term note (the
"Short-Term Note") dated the Closing Date, in a principal amount equal to (A)
Ninety-Nine Million Dollars ($99,000,000), (B) increased by the Reimbursement
Amount (as defined in Section 5.11(h) hereof), and (C) reduced by Thirty Million
Ninety Thousand Eight Hundred Three Dollars and Fifty Eight Cents
($30,090,803.58) (ninety percent (90%) of the aggregate principal amount of the
Seller Debt). The Short-Term Note shall be payable in full on the second
business day after the Closing Date and otherwise in the form of Exhibit C
attached hereto and shall be accompanied by an irrevocable standby letter of
credit satisfying the requirements for such letters of credit under Section 453
of the Code and the Treasury Regulations thereunder that is in the amount of the
Short-Term Note, issued by the Issuing Bank (as defined below) for the benefit
of the Sellers' Representative, payable on sight if the Short-Term Note is not
paid when due and otherwise in a form reasonably satisfactory to the Sellers'
Representative.

               (ii) Buyer will execute and deliver to the Sellers'
Representative, on behalf of all of the Equity Sellers, a note (the "Equity
Sellers Note") in the form attached hereto as Exhibit D, in a principal amount
equal to the difference between (A) Eleven Million Dollars ($11,000,000) and (B)
Three Million Three Hundred Forty Three Thousand Four Hundred Twenty Two Dollars
and Sixty Two Cents ($3,343,422.62) (ten percent (10%) of the aggregate
principal amount of the Seller Debt). The Equity Sellers Note shall be payable
on the first anniversary of the Closing Date, subject to certain obligations of
the Sellers hereunder, and shall be accompanied by an irrevocable standby letter
of credit as more fully described in Section 1.5 hereto.

          (b) Payment of Seller Debt. The payment of the Seller Debt shall be
funded at the Closing as follows:

               (i) Buyer will pay Thirty Million Ninety Thousand Eight Hundred
Three Dollars and Fifty Eight Cents ($30,090,803.58) in cash by wire transfer to
the Parent Companies in the amounts set forth in Section 1.2(b) of the
Disclosure Letter, which shall equal ninety percent (90%) of the aggregate
principal amount of the Seller Debt; and

               (ii) Immediately after receipt of the funds set forth in Section
1.2(b)(i), the Parent Companies shall deposit such funds into an escrow account
(the "Note Escrow Account") subject to an escrow agreement in the form attached
hereto as Exhibit E (the "Note Escrow Agreement") for payment of the Seller Debt
and Final Withholding Tax Amounts (as applicable); and

               (iii) Immediately after the Closing, and pursuant to the terms of
the Seller Notes:

                                       -4-



                    (1) the Parent Companies shall direct that funds deposited
in the Note Escrow Account in an amount equal to the difference between (x)
Thirty Million Ninety Thousand Eight Hundred Three Dollars and Fifty Eight Cents
($30,090,803.58), which is an amount equal to ninety percent (90%) of the
aggregate principal amount of the Seller Debt minus (y) the Final Withholding
Tax Amounts, be released to the holders of such debt;

                    (2) the Parent Companies shall direct that funds deposited
in the Note Escrow Account in an amount equal to the Final Withholding Tax
Amounts be paid, on behalf of Brooks and the Option Sellers, to the Internal
Revenue Service and such other governmental authorities as appropriate; and

                    (3) each of the Parent Companies will execute and deliver to
the Sellers' Representative, on behalf of the Note Sellers, notes (each a "Note
Sellers Note" and together with the Equity Sellers Note, the "Indemnification
Notes"), in an aggregate principal amount equal to Three Million Three Hundred
Forty Three Thousand Four Hundred Twenty Two Dollars and Sixty Two Cents
($3,343,422.62), which is ten percent (10%) of the aggregate principal amount of
the Seller Debt of the Parent Companies, payable on the first anniversary of the
Closing Date, subject to certain obligations of the Sellers hereunder, and
otherwise in the form of Exhibit D attached hereto and accompanied by an
irrevocable standby letter of credit as more fully described in Section 1.5
hereto.

     1.3. Purchase Price Adjustment. The Aggregate Purchase Price will be
subject to adjustment (hereinafter referred to as the "Purchase Price
Adjustment") in accordance with the following provisions of this Section 1.3,
which adjustment will be determined as follows:

          (a) It is the expectation of the parties hereto that the aggregate
current assets of the Companies (on a combined basis) (excluding any deferred
initial direct costs, including marketing costs) ("Current Assets") shall be
equal to or exceed the aggregate liabilities of the Companies (on a combined
basis) (excluding (i) deferred rent, except to the extent such deferred rent
exceeds $125,000, (ii) mortgage and asset based indebtedness, except to the
extent such indebtedness exceeds $3,500,000, (iii) the Seller Debt, and (iv) the
Corporate Withholding Taxes) ("Liabilities"), as shown on the individual balance
sheets of each of the Companies (collectively, the "Closing Balance Sheets"), as
of the Closing Date. The difference, if any, between Current Assets and
Liabilities is referred to herein as "Net Current Assets". The determinations
made in this Section 1.3 shall be made on an accrual basis in accordance with
United States generally accepted accounting principles ("GAAP") using the same
accounting methods, policies, practices and procedures with consistent
classification, judgments and estimation methodology as were used by each
Company in preparing their Balance Sheets to the extent such accounting methods,
policies, practices and procedures are in accordance with GAAP. The Closing
Balance Sheets shall be prepared by Sellers' Representative and delivered to
Buyer within seventy-five (75) days after the Closing.

          (b) During the thirty (30) day period following the Buyer's receipt of
the Closing Balance Sheets, the Buyer and its independent accountants shall at
the Buyer's expense be permitted to review, and the Sellers' Representative
shall make available to the Buyer, the supporting schedules, analyses, working
papers and other documentation of the Sellers' Representative relating to the
Closing Balance Sheets and to ask questions, receive answers and request such
other data and information from each of them as shall be reasonable under the
circumstances. The Closing Balance Sheets shall become final and binding upon
the parties on the business day following the thirtieth (30th) day following
delivery thereof, unless the Buyer

                                       -5-



gives written notice of its disagreement with the Closing Balance Sheets (such
notice, a "Notice of Disagreement") to the Sellers' Representative prior to such
date. Any Notice of Disagreement shall specify in reasonable detail the nature
of any disagreement so asserted, and the Buyer shall make available all
supporting schedules, analyses, working papers and other documentation. The
Buyer shall be deemed to have agreed with all items and amounts included in the
calculation of Net Current Assets delivered pursuant to Section 1.3(a) except
such items that are specifically disputed in the Notice of Disagreement.

     During the fifteen (15) day period following the delivery of a Notice of
Disagreement that complies with the preceding paragraph or such longer period as
the Sellers' Representative and the Buyer shall mutually agree, the Sellers'
Representative and the Buyer shall seek in good faith to resolve in writing any
differences that they may have with respect to the matters specified in the
Notice of Disagreement, and in the event the Sellers' Representative and the
Buyer are able to reach such resolution then the Net Current Assets, so agreed
by them in writing shall be deemed to be final. If, at the end of such fifteen
(15) day period (or such longer period as mutually agreed between the Sellers'
Representative and the Buyer), the Sellers' Representative and the Buyer have
not so resolved such differences, the Sellers' Representative and the Buyer
shall submit the dispute for resolution to Pricewaterhouse Coopers LLP (the
"Arbiter"), for review and resolution of any and all matters which remain in
dispute and which were properly included in the Notice of Disagreement in
accordance with this Section 1.3. The Sellers' Representative and the Buyer
shall use reasonable efforts to cause the Arbiter to render a decision resolving
the matters in dispute within thirty (30) days following the submission of such
matters to the Arbiter, or such longer period as the Sellers' Representative and
the Buyer shall mutually agree. The Sellers' Representative and the Buyer agree
that the determination of the Arbiter shall be final and binding upon the
parties and that judgment may be entered upon the determination of the Arbiter
in any court having jurisdiction over the party against which such determination
is to be enforced; provided, that the scope of the disputes to be resolved by
the Arbiter is limited to only such items included in the Closing Balance Sheets
that the Buyer has properly disputed in the Notice of Disagreement. The Arbiter
shall determine, based solely on presentations by the Buyer and the Sellers'
Representative and their respective representatives, and not by independent
review, only those issues in dispute specifically set forth in the Notice of
Disagreement and shall prepare the Final Closing Balance Sheets (as defined in
Section 1.3(c)) and render a written report as to the dispute and the resulting
calculation of Net Current Assets which shall be conclusive and binding upon the
parties. In resolving any disputed item, the Arbiter: (i) shall be bound by the
principles set forth in this Section 1.3, (ii) shall limit its review to matters
specifically set forth in the Notice of Disagreement and (iii) shall not assign
a value to any item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either
party. The fees, costs, and expenses of the Arbiter (x) shall be borne by the
Buyer in the proportion that the aggregate dollar amount of such disputed items
so submitted that are unsuccessfully disputed by the Buyer (as finally
determined by the Arbiter) bears to the aggregate dollar amount of such items so
submitted and (y) shall be borne by the Sellers in the proportion that the
aggregate dollar amount of such disputed items so submitted that are
successfully disputed by the Buyer (as finally determined by the Arbiter) bears
to the aggregate dollar amount of such items so submitted. Whether any dispute
is resolved by agreement among the parties or by the Arbiter, changes to the
Closing Balance Sheets shall be made hereunder only for items as to which the
Buyer has taken exception in the Notice of Disagreement. The fees and expenses
of the Sellers' Representative incurred in connection with the preparation of
the Closing Balance Sheets and review of any Notice of Disagreement shall be
borne by the Sellers, and the fees and expenses of the Buyer's independent
accountants incurred in connection with their review of the Closing Balance
Sheets shall be borne by the Buyer.

                                       -6-



          (c) Upon final determination of the aggregate Net Current Assets of
the Companies as of the close of business on the Closing Date, the Aggregate
Purchase Price shall be adjusted as follows: (i) the Aggregate Purchase Price
shall be decreased dollar for dollar by the amount, if any, by which Current
Assets reflected on the Final Closing Balance Sheets are less than Liabilities
reflected on the Final Closing Balance Sheets and (ii) the Aggregate Purchase
Price shall be increased dollar for dollar by the amount, if any, by which
Current Assets reflected on the Final Closing Balance Sheets are greater than
Liabilities reflected on the Final Closing Balance Sheets. For purposes hereof,
the "Final Closing Balance Sheets" means (x) the Closing Balance Sheets if no
Notice of Disagreement with respect thereto is duly and timely delivered
pursuant to Section 1.3(b) or (y) if such a Notice of Disagreement is so
delivered, the Closing Balance Sheets as agreed by the Sellers' Representative
and Buyer pursuant to Section 1.3(b) or (z) if such Notice of Disagreement is so
delivered and in the absence of such agreement, the Final Closing Balance Sheets
as prepared by the Arbiter pursuant to Section 1.3(b).

          (d) The net adjustment to the Aggregate Purchase Price pursuant to
Section 1.3(c) above, whether positive or negative, is the "Final Adjustment
Amount." Within ten (10) days after the Closing Balance Sheets become final and
binding upon the parties (i) if the net effect pursuant to this Section 1.3 is
an increase in the Aggregate Purchase Price, the Buyer shall deliver to the
Sellers cash equal to the Final Adjustment Amount plus the Adjustment Interest
and (ii) if the net effect pursuant hereto is a decrease in the Purchase Price,
the Sellers shall, pro rata in accordance with such Seller's Indemnity
Percentage (as disclosed on Section 1.3(d) of the Disclosure Letter), deliver to
an account designated in writing by the Buyer, by wire transfer in immediately
available funds, an amount equal to the Final Adjustment Amount plus the
Adjustment Interest. For purposes hereof, "Adjustment Interest" shall mean
interest on the Final Adjustment Amount calculated from the Closing Date to the
date of actual payment at a rate equal to the then current prime rate (as
published by the Wall Street Journal, East Coast Edition or any successor
publication thereto, on the Closing Date).

     1.4. Closing. The closing of the sale and purchase of the Purchased
Interests (the "Closing") shall take place on September 2, 2003 (the "Closing
Date") at the offices of Dechert LLP, 4000 Bell Atlantic Tower, 1717 Arch
Street, Philadelphia, Pennsylvania, or at such other place and time as the
parties may agree upon in writing.

     1.5. Indemnification Notes; Note Escrow Account.

          (a) Issuance of Indemnification Notes.

               (i) At the Closing, Buyer shall issue the Equity Sellers Note and
the Parent Companies shall issue the Note Sellers Notes, each accompanied by an
irrevocable standby letter of credit (such letters of credit as contemplated by
this Section 1.5(a)(i) being the "Irrevocable Standby Letters of Credit") in a
cash amount equal to the face amount of the Indemnification Notes satisfying the
requirements for such letters of credit under Section 453 of the Code and the
Treasury Regulations thereunder that are in the amount of the Equity Sellers
Note and the Note Sellers Notes, respectively, issued for the benefit of the
Sellers' Representative by a bank selected by the Sellers' Representative and
reasonably satisfactory to Buyer (the "Issuing Bank"), payable on the first
anniversary of the Closing Date upon presentation of a certificate of Buyer
stating that there are no outstanding obligations of Sellers under this
Agreement, if the Equity Sellers Note or the Note Sellers Notes (as the case may
be) are not paid when due, except to the extent of the amount that such
Indemnification Note is

                                       -7-



subject to a pending claim for indemnification pursuant to Article VIII hereof.
In furtherance of the foregoing, the Irrevocable Letter of Credit shall remain
in effect until the later of (A) the date on which the face amount of the
Irrevocable Letter of Credit is fully drawn upon by the Sellers' Representative
or (B) the date on which all pending claims made against the Indemnification
Notes have been resolved. The portion of the Equity Sellers Note or a Note
Sellers Note (as the case may be) to which each Seller is entitled shall be in
proportion to the percentages set forth opposite such Seller's name on Schedule
1 to such note (with respect to each Seller, its "Note Percentage"). The Sellers
shall be entitled to the rights and remedies with respect to the Indemnification
Notes as described in each such note; subject at all times to the terms and
conditions of this Agreement, including Article VIII hereof.

               (ii) Claim Procedures. Buyer shall be entitled to reduce the
principal amount of the Indemnification Notes and the face amount of the
Irrevocable Standby Letter of Credit in accordance with the terms of the
Indemnification Notes.

               (iii) Payment of Letter of Credit Fees. The fees charged by the
bank issuing the Irrevocable Standby Letters of Credit shall be paid in an
amount up to Five Thousand Dollars ($5,000) by Buyer and thereafter by the
Sellers pro rata in accordance with such Seller's Indemnity Percentage on the
Closing Date.

          (b) Deposit of Note Escrow Funds into the Note Escrow Account.
Immediately after the Closing, the Parent Companies shall deposit the Note
Escrow Funds pursuant to the terms of the Note Escrow Agreement, which shall be
entered into by and among the Parent Companies, the Sellers' Representative and
the escrow agent named therein, the identity of which escrow agent will be
reasonably acceptable to the Parent Companies and the Sellers' Representative
(the "Note Escrow Agent").

     1.6. Receipt of PPPA. Upon the Closing and in accordance with the terms of
this Agreement, Buyer and the Companies shall use their best efforts to submit
all required documentation and information in order to obtain from the United
States Department of Education (the "Department of Education") a final executed
provisional program participation agreement (a "PPPA") for each of the Schools,
and the Sellers shall reasonably cooperate with Buyer and the Companies in
securing the PPPAs and shall be entitled to participate in the approval process.
In the event that (a) Buyer or a Buyer affiliate does not receive one or more of
the PPPAs within nine (9) months after the Closing, or (b) the Department of
Education notifies a School in writing after the Closing of its determination
that it will not issue a PPPA to the School, and such failure to receive a PPPA
is solely and exclusively due to either (i) any liability of the Sellers or the
Companies for noncompliance with Title IV of the HEA arising prior to the
Closing, or (ii) a breach by Sellers or the Companies of one or more of the
representations and warranties of Sellers or the Parent Companies contained in
Articles II and III, and Sellers have been given a reasonable opportunity to
cure such breach, which opportunity to cure shall not extend beyond (A) the date
ninety (90) days from the date the Sellers' Representative receives notice of
such breach from Buyer (the "Notice Date") in the event that a valid Temporary
Provisional Program Participation Agreement (each, a "Temporary PPPA") remains
in full force and effect for such School, or (B) the date sixty (60) days from
the Notice Date in the event that no Temporary PPPA is then in effect for such
School (the "Cure Period"), each Seller shall return to Buyer that portion of
the Aggregate Purchase Price received by such Seller that is attributable to the
School(s) or School location(s), and the principal amount of the Indemnification
Notes and the Irrevocable Standby Letters of Credit shall be reduced in
accordance with their terms without any further action of the Sellers in the
amount attributable to

                                       -8-



the School(s) or School(s) location(s), each in the amount specified on Exhibit
F attached hereto, for which the denial or non-issuance of a PPPA is at issue,
plus Losses payable by Sellers that have not already been paid in connection
with the applicable breach of such representations and warranties; provided,
however, that in no event shall the total amounts to be returned by the Sellers
exceed the sum of Fifteen Million Dollars ($15,000,000) of the Aggregate
Purchase Price plus the amount of the then outstanding principal amount of the
Indemnification Notes; provided, further, that Buyer shall be entitled to Losses
incurred by Buyer as a result of Buyer's failure to receive a Temporary PPPA
during and prior to the expiration or waiver of the Cure Period and subject to
Buyer providing Sellers with an itemized list of all such Losses; and provided,
further, that, any and all amounts delivered to Buyer in connection with this
Section 1.6 shall reduce the amount of Losses otherwise payable by Sellers in
connection with the applicable breach of such representations and warranties. In
addition to the foregoing, the Sellers, at their sole discretion, upon written
notice to Buyer, may waive the Cure Period at any time during such Cure Period.
In the event that, within twelve (12) months of the expiration or waiver of the
Cure Period, the Buyer or a Buyer affiliate obtains authorization for federal
student financial aid participation by or for any School or any location of a
School for which the Sellers have returned funds pursuant to the foregoing
sentence, including participation as an additional location of another
institution, Buyer shall promptly notify the Sellers and shall pay to the
Sellers, within ten (10) days of the issuance of such authorization, the funds
that the Sellers returned to the Buyer for that School, subject to any pending
claims for Losses (which funds in respect of pending claims for Losses shall
become a portion of the principal of the Indemnification Notes) and less the
amount of any actual losses sustained by Buyer as the direct result of the delay
in issuance of a PPPA for such School. Buyer shall provide to the Sellers'
Representative an itemized list of all such losses and expenses to be deducted.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES
                             OF THE PARENT COMPANIES

     As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, except as set forth in the disclosure letter
delivered by the Sellers and the Parent Companies on the date hereof, as may be
amended or supplemented from time to time in accordance with this Agreement (the
"Disclosure Letter"), each of the Parent Companies hereby represents and
warrants to Buyer as follows:

     2.1. Organization; Qualification. Each of AEC, Brown Mackie, Commonwealth,
Asher, Stautzenberger and Michiana is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Southern Ohio LLC is a limited liability company duly formed,
validly existing and in good standing under the laws of its jurisdiction of
formation. Each of AEC, Brown Mackie, Commonwealth, Asher, Stautzenberger,
Michiana, and Southern Ohio LLC has the corporate or limited liability company
power and authority, as applicable, to operate, own and lease its properties,
and carry on its business as now conducted. Each of AEC, Brown Mackie,
Commonwealth, Asher, Stautzenberger, Michiana, and Southern Ohio LLC is duly
qualified and in good standing as a foreign corporation or limited liability
company, as applicable, and is duly authorized to transact business in each
jurisdiction where the character of the properties owned or leased by it or the
nature of the activities conducted by it make such qualification and good
standing necessary, except where the failure to be so qualified, individually or
in the aggregate, would not have a Material Adverse Effect. For purposes hereof,
"Material Adverse Effect" or "Material Adverse Change" means any

                                       -9-



material adverse effect or change upon the business, assets, prospects,
financial condition or results of operations of any of the Companies or the
Schools, taken individually or as a whole, or any material adverse effect or
change that impairs the ability of the Sellers or the Companies to consummate
the transactions contemplated by this Agreement other than with respect to any
adverse changes which relate to or result from (i) public or industry knowledge
relating to the transactions contemplated under this Agreement (including any
action or inaction by such person's employees, customers or vendors), or (ii)
general economic or political conditions or other conditions affecting the
industry in which the Companies compete, or (iii) changes in laws or regulations
applicable to the Companies after the date hereof.

     2.2. Authorization and Enforceability. Each of the Parent Companies has the
full power and authority to enter into and perform this Agreement in accordance
with its terms, and the execution, delivery and performance of this Agreement by
each of the Parent Companies has been duly authorized by all necessary corporate
action of each of the Parent Companies. This Agreement has been duly executed
and delivered by each Parent Company, and, assuming the due authorization,
execution and delivery by the other parties hereto, constitutes, and each other
agreement to which the Parent Companies are party and which is executed at the
Closing pursuant to this Agreement when executed and delivered by the Parent
Companies shall constitute, the legal, valid and binding obligations of the
Parent Companies, enforceable against each of them in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.

     2.3. No Violation of Laws or Agreements. None of the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby or
the compliance with or fulfillment of the terms, conditions and provisions
hereof or thereof by the Companies will (a) contravene any provision of the
certificate of incorporation or bylaws or operating agreement or certificate of
formation, as applicable, of the Companies, (b) conflict with, result in a
breach of or constitute a default or an event of default (or an event that
might, with the passage of time or the giving of notice or both, constitute a
default) under any of the terms of or result in the termination or loss of any
right (or give others the right to cause such a termination or loss) under, any
license, indenture, mortgage or any other contract, agreement or instrument to
which any of the Companies are a party or by which any of the Companies or any
of their respective assets may be bound or affected, with the exception of or
subject to receipt of the consents set forth in Section 2.3(b) of the Disclosure
Letter, (c) violate any law or violate any judgment or order of any governmental
body to which the Companies are subject, (d) result in the creation or
imposition of any mortgages, claims, pledges, liens, charges, security
interests, limitations, restrictions or other encumbrances (collectively, the
"Encumbrances") upon any of the assets of the Companies or give to others any
interests or rights therein, or (e) result in the maturation or acceleration of
any liability or obligation of any of the Companies (or give others the right to
cause such a maturation or acceleration).

     2.4. Ownership of Schools. The Schools are owned and operated by the
Companies directly, and no other individual, corporation, partnership, joint
venture, trust, unincorporated association or government or any agency or
political subdivisions ("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 ownership interest in the Schools or the
Companies.

                                      -10-



     2.5. Shares; Capitalization.

          (a) AEC. The authorized capital stock of AEC consists solely of (i)
1,000 shares of Class A common stock, $.01 par value per share, of which
605.9742 shares are issued and outstanding and 178.78699 shares are held in its
treasury and (ii) 1,000 shares of Class B common stock, $.01 par value per
share, of which 443.42487 shares are issued and outstanding and 256.57513 shares
are held in its treasury. The AEC Purchased Shares constitute all of the issued
and outstanding capital stock of AEC.

          (b) Brown Mackie. The authorized capital stock of Brown Mackie
consists solely of (i) 1,000 shares of Class A common stock, $.01 par value per
share, of which 394.80089 shares are issued and outstanding and 168.82315 shares
are held in its treasury and (ii) 1,000 shares of Class B common stock, $.01 par
value per share, of which 365 shares are issued and outstanding and 135 shares
are held in its treasury. The Brown Mackie Purchased Shares constitute all of
the issued and outstanding capital stock of Brown Mackie.

          (c) Commonwealth. The authorized capital stock of Commonwealth
consists solely of (i) 1,000 shares of Class A common stock, $.01 par value per
share, of which 394.80089 shares are issued and outstanding and 168.82315 shares
are held in its treasury and (ii) 1,000 shares of Class B common stock, $.01 par
value per share, of which 365 shares are issued and outstanding and 135 shares
are held in its treasury. The Commonwealth Purchased Shares constitute all of
the issued and outstanding capital stock of Commonwealth.

          (d) Stautzenberger. The authorized capital stock of Stautzenberger
consists solely of (i) 1,000 shares of Class A common stock, $.01 par value per
share, of which 394.80089 shares are issued and outstanding and 168.82315 shares
are held in its treasury and (ii) 1,000 shares of Class B common stock, $.01 par
value per share, of which 365 shares are issued and outstanding and 135 shares
are held in its treasury. The Stautzenberger Purchased Shares constitute all of
the issued and outstanding capital stock of Stautzenberger.

          (e) Asher. The authorized capital stock of Asher consists solely of
(i) 1,000 shares of Class A common stock, $.01 par value per share, of which
394.80089 shares are issued and outstanding and 168.82315 shares are held in its
treasury and (ii) 1,000 shares of Class B common stock, $.01 par value per
share, of which 365 shares are issued and outstanding and 135 shares are held in
its treasury. The Asher Purchased Shares constitute all of the issued and
outstanding capital stock of Asher.

          (f) Michiana. The authorized capital stock of Michiana consists solely
of (i) 1,000 shares of Class A common stock, $.01 par value per share, of which
394.80089 shares are issued and outstanding and 168.82315 shares are held in its
treasury and (ii) 1,000 shares of Class B common stock, $.01 par value per
share, of which 365 shares are issued and outstanding and 135 shares are held in
its treasury. The Michiana Purchased Shares constitute all of the issued and
outstanding capital stock of Michiana.

          (g) Southern Ohio LLC. The membership interests in Southern Ohio LLC
consist solely of those interests owned by AEC, Brown Mackie, Commonwealth,
Stautzenberger, Asher and Michiana and are owned of record, legally and
beneficially by such Parent Companies.

          (h) Purchased Interests. Except as set forth in Section 2.5(h) of the
Disclosure Letter, there are no outstanding subscriptions, options, warrants,
preemptive rights, exercise

                                      -11-



rights, exchange rights, appreciation, phantom stock or other rights to acquire
from the Companies any of the Purchased Interests or any other shares of capital
stock or membership interests, as applicable, of the Companies. The Purchased
Interests are validly issued, fully paid and nonassessable. The Purchased
Interests were issued in compliance with all applicable federal and state
securities laws and regulations.

     2.6. Financial Statements. Included in Section 2.6 of the Disclosure Letter
are the following financial statements (the "Financial Statements"):

               (i) the audited balance sheets for each of AEC, Brown Mackie,
Commonwealth, Asher, Stautzenberger and Michiana for the fiscal years ended
December 31, 2001 and 2002, along with income statements and statements of cash
flows for the years then ended;

               (ii) the audited balance sheets for Southern Ohio LLC for the
fiscal year ended December 31, 2002, along with income statements and statements
of cash flows for the year then ended; and

               (iii) unaudited combined and combining statements of income,
retained earnings and cash flows of the Companies for the four-months ended
April 30, 2003 and combined and combining balance sheets of the Companies as at
such date.

          The Financial Statements have been prepared in accordance with the
books of account and records of each of the Companies, except with respect to
such modifications required by GAAP. The Financial Statements have been prepared
in accordance with GAAP on a consistent basis throughout the indicated periods,
and fairly present, in all material respects, the financial position of each of
the Companies and the results of operations and cash flows of each of the
Companies at the dates and for the relevant periods indicated except for, in the
case of the unaudited statements, (A) normal recurring audit adjustments and (B)
the absence of footnotes. Except as otherwise set forth in Section 1.3, all
references in this Agreement to "Balance Sheets" shall mean collectively, each
of the Companies' balance sheets dated April 30, 2003 (collectively, the
"Companies' Balance Sheets") and "Balance Sheet Date" shall mean April 30, 2003.
As of the Closing, all books and records described in this Section 2.6 will be
in the possession of the Companies.

     2.7. Liabilities in Connection with Share Repurchases. Except as disclosed
in Section 2.7 of the Disclosure Letter, none of the Companies has any liability
or obligation of any nature whatsoever with respect to the repurchase of the
shares of capital stock or membership interests, as applicable, held by any
shareholder or former shareholder or member or former member, as applicable, of
any of the Companies.

     2.8. Undisclosed Liabilities. None of the Companies has any debts,
obligations or liabilities, absolute, fixed, contingent or otherwise, of any
nature whatsoever, whether due or to become due (including unasserted claims),
whether incurred directly or by any predecessor thereto, and whether arising out
of any act, omission, transaction, circumstance, sale of goods or services,
state of facts or other condition that occurred or existed on or before the
Balance Sheet Date, whether or not then known, due or payable, except: (a) those
reflected or reserved against on the Companies' Balance Sheets in the amounts
shown thereon, (b) those disclosed in Section 2.8(b) of the Disclosure Letter,
(c) those of the same nature as those set forth on the Companies' Balance Sheets
that have arisen in the ordinary course of business of the Companies after the

                                      -12-



Balance Sheet Date through the date hereof, all of which have been consistent in
amount and character with past practice and experience, and none of which,
individually or in the aggregate, has or will be reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the foregoing, as of
the Closing, the Companies shall each be free of any non-current liabilities
(except (i) deferred rent in an amount not to exceed $125,000, and (ii) mortgage
and asset based indebtedness in an amount equal to $3,500,000, each as more
particularly set forth in Section 2.8 of the Disclosure Letter).

     2.9. Condition of Assets; Business; Personal Property.

          (a) The Companies are engaged in the operation of the Schools and no
other business. Except as disclosed in Section 2.9(a) of the Disclosure Letter,
the furniture, machinery, equipment, tools, and other tangible personal property
owned by the Companies or used in connection with the operation of the Schools,
including those items reflected on the Balance Sheets (collectively, the "Owned
Personal Property"), (i) are in good operating condition and repair, and (ii)
are suitable for the purposes for which they are used in the business, including
the operation of the Schools.

          (b) The Companies have good, marketable and exclusive title to (i) the
Owned Personal Property, (ii) the leased personal property of the Companies (the
"Leased Personal Property") and (iii) the licensed intellectual property of the
Companies (the "Licensed IP" and, together with the Owned Personal Property and
the Leased Personal Property, the "Personal Property"), as applicable, except
for such Personal Property identified in Section 2.9(b) of the Disclosure Letter
and except for such Personal Property disposed of in the ordinary course of
business since the Balance Sheet Date. The Companies have no Personal Property
that is subject to any Encumbrance or impairment other than Permitted
Encumbrances (as defined in Section 2.10(b).

          (c) Each of the Companies owns all assets that are necessary or
appropriate for use in connection with the operation of its business, including
the operation of the Schools, except for the Leased Personal Property and the
Licensed IP described in Section 2.9(c) of the Disclosure Letter, which is
leased or licensed by the Companies set forth on Section 2.9(c) of the
Disclosure Letter. None of the Companies has received written notice that the
use of the Leased Personal Property or Licensed IP violates any covenants,
conditions, or restrictions that encumber such property, or that any such
property is subject to any restriction for which any permit or authorization is
necessary to the current use thereof. To the knowledge of the Companies, there
are no rights, leases, licenses, concessions or other agreements granting to any
person other than Buyer the right of use of any portion of the Leased Personal
Property other than rights, leases, licenses, concessions or agreements that are
disclosed in Section 2.9(c) of the Disclosure Letter.

     2.10. Real Property.

          (a) Section 2.10(a) of the Disclosure Letter contains a list of all
(i) real property owned by the Companies, including all owned land, buildings,
structures, classrooms, other educational sites, fixtures, other improvements
and appurtenances (the "Owned Real Property") and (ii) real property leased by
the Companies, including all leased land, buildings, structures, classrooms,
other educational sites, fixtures, other improvements and appurtenances (the
"Leased Real Property") and, together with the Owned Real Property, the "Real
Property").

                                      -13-



          (b) The Companies have good, marketable and exclusive title to (i) the
Owned Real Property, and (ii) the leasehold interests in the Leased Real
Property, free and clear of all Encumbrances or impairments other than Permitted
Encumbrances. Except as disclosed in Section 2.10(b) of the Disclosure Letter,
the Companies have the exclusive right to occupy, sell, lease or sublease all of
the Real Property or any portion thereof. There are no rights, leases, licenses,
concessions or other agreements granting to any person other than Buyer the
right of use or occupancy of any portion of the Real Property other than rights,
leases, licenses, concessions or agreements that are disclosed in Section
2.10(b) of the Disclosure Letter. For purposes hereof, "Permitted Encumbrances"
means (A) Encumbrances for current Taxes or assessments or other governmental
charges or levies which are not yet due and payable, or are being contested in
good faith by appropriate proceedings and which are set forth in Section 2.10(b)
of the Disclosure Letter; (B) minor imperfections of title, conditions,
easements and reservations of rights, including easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, encroachments, covenants and
restrictions, if any, none of which, individually or in the aggregate,
materially detract from the value of the affected Real Property or impair the
use of such Real Property or the conduct of the business thereon as it is
currently being used and conducted and as it has been used and conducted
consistent with past practice; (C) statutory Encumbrances of landlords and
Encumbrances of carriers, warehousemen, mechanics, materialmen and other similar
Persons imposed by applicable laws incurred in the ordinary course of business
for sums not yet delinquent or being contested in good faith; provided that any
such Encumbrances currently being contested are listed in Section 2.10(b) of the
Disclosure Letter; and (D) Encumbrances listed in Section 2.10(b) of the
Disclosure Letter, none of which, individually or in the aggregate, materially
detract from the value of the affected Real Property or impair the use of such
Real Property or the conduct of the business thereon as it is currently being
used and conducted and as it has been used and conducted consistent with past
practice.

          (c) All leases for Leased Real Property used by the Companies in
connection with the operation of the Schools (i) are valid and in full force and
effect, and (ii) are enforceable in accordance with their terms. No lease for
Leased Real Property or any right, liability or obligation under any such lease
has been assigned or subleased by the Companies in whole or in part. Neither the
Companies nor, to the knowledge of the Companies, the respective landlords are
in default under any such lease, and no event, act or omission has occurred
which would result in a default by any of the Companies or the respective
landlords under any such lease, except for those defaults disclosed in Section
2.10(c) of the Disclosure Letter.

          (d) (i) All buildings, structures, classrooms, other educational
sites, fixtures and other improvements, situated on the Real Property are
supplied with utilities and other services necessary for the operation of the
Schools located thereon (including gas, electricity, water, telephone, sanitary
and storm sewers and vehicular access through existing driveways to public
roads), (ii) the land of the Owned Real Property does not serve any adjoining
property for any purpose inconsistent in any material respect with the use of
the Owned Real Property, and, to the knowledge of the Companies, none of the
Real Property is located within any flood plain or is otherwise subject to any
similar type restriction requiring any permits or licenses, which are necessary
to the use of such Real Property, where such permits or licenses have not been
obtained and such failure to obtain such permit or license would have a Material
Adverse Effect, (iii) except as disclosed in Section 2.10(d) of the Disclosure
Letter, no Person is in possession of the Owned Real Property, and (iv) all
buildings, structures, classrooms, other educational sites, fixtures and other
improvements, situated on the Real Property have no known material structural
defects or material air quality or mold conditions.

                                      -14-



          (e) Except as set forth in Section 2.10(e) of the Disclosure Letter,
the buildings, structures, classrooms, other educational sites, fixtures and
other improvements situated on the Real Property (i) have all agreements,
easements or other rights which are reasonably necessary to permit their lawful
use and operation in all material respects, or which are reasonably necessary to
permit lawful egress and ingress to and from any of the foregoing in all
material respects, and such agreements, easements or other rights remain in full
force and effect, and (ii) have received all approvals of governmental
authorities (including certificates of occupancy, permits and licenses) required
in connection with the operation thereof and have been operated and maintained
in accordance with all applicable legal requirements and are not in material
violation of any applicable zoning, building code, subdivision, health, fire, or
safety ordinances, regulations, laws, orders or covenants, conditions or
restrictions that encumber the Real Property. None of the Companies has received
written notice that the use or occupancy of the Real Property violates any
covenants, conditions or restrictions that encumber such property or that any
such property is subject to any restriction for which any permit or
authorization is necessary to the current use thereof.

     2.11. No Pending Litigation or Proceedings.

          (a) Except as disclosed in Section 2.11(a) of the Disclosure Letter,
there are no actions, suits, claims, proceedings, internal investigations or, to
the knowledge of the Companies, third-party investigations of any nature or kind
whatsoever ("Litigation") pending or, to the knowledge of the Companies,
threatened against or affecting the Companies, the Schools, any of the
Companies' material assets, the Purchased Interests or the transactions
contemplated by this Agreement, at law or in equity, including any Litigation by
or before the Department of Education or any other applicable accrediting
agency, guarantee agency or any federal, state or local governmental body. None
of the Companies have been party to any other Litigation since January 1, 2002.

          (b) There are presently no outstanding judgments, decrees or orders of
any accrediting agency, guarantee agency or federal, state or local governmental
body against or affecting the Companies, the Schools, any of the Purchased
Interests or the Companies' material assets or the transactions contemplated by
this Agreement.

          (c) Except as disclosed in Section 2.11(c) of the Disclosure Letter,
none of the Companies has commenced or has any pending Litigation against any
third party.

     2.12. Contracts; Compliance. Each of the contracts to which any of the
Companies is a party is presently in effect and there has been no breach by any
of the Companies and, to the knowledge of the Companies, no breach by any other
party to any of those agreements or any of the provisions of any of those
agreements, except as set forth in Section 2.12 of the Disclosure Letter and
except for such breaches which, individually or in the aggregate, do not have a
Material Adverse Effect. Section 2.12 of the Disclosure Letter sets forth, as of
the date hereof, a complete list of: (a) all notes and agreements relating to
any indebtedness of any of the Companies for borrowed money; (b) all leases or
other rental agreements relating to any of the Companies under which such
Company is either lessor or lessee; (c) all employment agreements for employees
of each of the Companies; and (d) all other agreements, commitments and
understandings (written or oral) to which any of the Companies are a party or by
which they are bound which (i) require payment by such Company of more than
Fifty Thousand Dollars ($50,000), (ii) cannot be terminated on less than sixty
(60) days notice without liability, or (iii) require the consent of a third
party for assignment to Buyer (such contracts being the

                                      -15-



"Contracts"). True and complete copies of all of the Contracts have been made
available to Buyer.

     2.13. Labor. The employees of each of the Companies are not represented by
any union or other collective bargaining group with respect to their employment
with the Companies. None of the Companies is a party to any collective
bargaining or other labor agreement with respect to its employees. None of the
Companies is a party to, involved in, or, to the Companies' knowledge,
threatened by, any labor dispute or unfair labor practice charge. Each of the
Companies has complied in all material respects with all legal requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, and occupational safety and health, or any
other applicable employment legislation. There have not been (i) any
proceedings, complaints, claims or charges outstanding or, to the Companies'
knowledge, threatened, nor are there any orders, decisions, directions or
convictions currently registered or outstanding, against or affecting any of the
Companies relating to the alleged violation of any legal requirement pertaining
to labor relations or employment matters, including any charge or complaint
filed by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable governmental authority, or
any organizational activity, or other labor or employment dispute against or
affecting any of the Companies, or (ii) any application for certification of a
collective bargaining agent.

     2.14. Transactions with Related Parties. Except as set forth in Section
2.14 of the Disclosure Letter, since January 1, 2002, no current director,
officer or member of the Companies or any Seller or any Seller's spouse or
children or any officer or director of any Seller, or any other entity in which
any Seller is a shareholder, partner, member, owner, principal, officer or
director is presently, or during the twelve month period ending on the date
hereof has been, a party to any transactions with the Companies, except for any
transactions no less favorable to the Companies than on an arms-length basis.

     2.15. Curriculum.

          (a) The term "Curriculum," 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 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, (i)
all copyrights, copyright applications, copyright registrations and trade
secrets relating to the above-listed items and (ii) all periodic updates or
revisions to the Curriculum as developed.

          (b) Except as disclosed in Section 2.15(b) of the Disclosure Letter,
the Companies own outright, and have good and marketable title or other rights
to, the Curriculum used in the Schools free and clear of all Encumbrances. No
employee or affiliate of any Company or any other Person owns or has any
interest, directly or indirectly, in any material part of the Curriculum. The
Companies do not use any part of the Curriculum by consent of any other Person
and are not required to and do not make any payments to others with respect
thereto. To the knowledge of the Companies, no component of the Curriculum
infringes or violates any copyright, patent, trade secret, trademark, service
mark, registration or other

                                      -16-



proprietary right of any other Person and the Companies' past and current use of
any part of the Curriculum does not infringe upon or violate any such right.

     2.16. Intellectual Property. Section 2.16 of the Disclosure Letter sets
forth a complete list of all of the registered trademarks, trademark
registrations, applications for trademark registration, registered trade names,
patents and registered copyrights owned by each of the Companies all of which
are owned by the Companies free and clear of any Encumbrances. To the knowledge
of the Companies, none of the Companies, in any material respect, is infringing
any patent, copyright or trademark of any third party or otherwise violating, in
any material respect, the intellectual property rights of any third party nor
has any claim been made or, to the knowledge of the Companies, threatened
against any of the Companies alleging any such violation. To the knowledge of
the Companies, there has been no violation by others of any right of any Company
in any trademark or copyright. None of the Companies is a party to or bound by
any license or other agreement requiring the payment by it of any royalty or
similar payment in connection with its operations, except for commercially
available software.

     2.17. No Changes. Except as disclosed in Section 2.17 of the Disclosure
Letter, since the Balance Sheet Date, the Companies have conducted their
businesses and operated the Schools only in the ordinary course. Without
limiting the generality of the foregoing sentence, since the Balance Sheet Date,
except as disclosed in Section 2.17 of the Disclosure Letter, there has not been
any: (a) Material Adverse Change; (b) damage or destruction to any of the
material properties of the Schools or the Companies in excess of Fifty Thousand
Dollars ($50,000); (c) strike or other collective bargaining activity at the
Schools or the Companies; (d) creation of any Encumbrances on any of the
properties of the Schools or the Companies; (e) except in connection with the
issuance of the Seller Notes, declaration or payment of any dividend or other
payment or distribution or redemption of any shares of equity securities or
membership interests, as applicable, in the Companies; (f) increases in the
salaries or bonuses of any employee of any of the Schools or the Companies
(except normal annual merit increases and bonuses made in the ordinary course of
business); (g) except as set forth on the Companies' capital expenditure plan
provided to the Buyer, a copy of which is attached hereto as Exhibit G (the
"Capital Plan"), capital expenditures or other asset acquisition or expenditure
in excess of Fifty Thousand Dollars ($50,000) individually or Two Hundred
Thousand Dollars ($200,000) in the aggregate; (h) material change in any Company
Plan (as defined in Section 2.18); (i) disposition of any asset, except (A)
assets disposed of in the ordinary course of business or (B) assets disposed of
for less than Fifty Thousand Dollars ($50,000) individually or Two Hundred
Thousand Dollars ($200,000) in the aggregate; (j) payment, prepayment or
discharge of any material liability other than in the ordinary course of
business; (k) adverse change or threat thereof to any relations or contracts
with, or any loss of, any material suppliers of the Schools or the Companies;
(l) write-offs or write-downs of any assets of the Schools or the Companies in
excess of Five Thousand Dollars ($5,000) in the aggregate; (m) change in the
board of directors or management of the Companies or the Schools; (n) creation
or termination of any material Contract, material right or liability of any of
the Schools or the Companies not in the ordinary course of business; or (o)
agreement or commitment to do any of the foregoing.

     2.18. Employee Benefits.

          (a) Benefit Plans. Section 2.18(a) of the Disclosure Letter sets forth
and identifies a complete and correct list of all Benefit Plans (as hereinafter
defined) maintained or sponsored by the Companies or with respect to which the
Companies could reasonably be expected to have liability or to have any
obligation to contribute, for or with respect to any of the

                                      -17-



current or former employees of the Companies or their beneficiaries, whether or
not funded and whether or not terminated (hereinafter individually referred to
as a "Company Plan" and collectively referred to as the "Company Plans"). As
used in this Agreement, the term "Benefit Plans" shall mean all written and
unwritten "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other written and unwritten profit sharing, pension, savings, deferred
compensation, fringe benefit; insurance, medical, medical reimbursement; life;
disability; accident; post-retirement health or welfare benefit, stock option,
stock purchase, sick pay, vacation, employment, severance, termination or other
plan, agreement, contract, policy, trust fund or arrangement.

          (b) Compliance. Each of the Company Plans and, to the Companies'
knowledge, all related trusts, insurance contracts and funds, have been created,
maintained, funded and administered in compliance in all material respects with
all applicable laws and in compliance in all material respects with the plan
document, trust agreement, insurance policy or other writing creating the same
or applicable thereto. Other than routine claims for benefits submitted by
participants or beneficiaries, there is no litigation, legal action,
investigation, claim, or proceeding pending or threatened against any Company
Plan or against or affecting any fiduciary thereof or the assets of any trust
or, to the Companies' knowledge, insurance contract thereunder, at law or in
equity, by or before any court or governmental department, agency or
instrumentality, and, to the knowledge of the Companies, there is no basis for
any such action, suit, investigation or proceeding. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency against or affecting the Company Plans, any fiduciaries
thereof or the assets of any trust or, to the Companies' knowledge, insurance
contract thereunder other than qualified domestic relations or medical support
orders.

          (c) Qualified Plans. Section 2.18(c) of the Disclosure Letter
discloses each Company Plan that purports to be a qualified plan under Section
401(a) of the Code and exempt from United States federal income tax under
Section 501(a) of the Code (a "Qualified Plan"). With respect to each Qualified
Plan, a determination letter (or opinion or notification letter, if applicable)
has been received from the IRS that such plan is qualified under Section 401(a)
of the Code and exempt from federal income tax under Section 501(a) of the Code.
No Qualified Plan has been amended since the date of the most recent such letter
in any manner that could reasonably be expected to adversely affect such Plan's
qualified status. No member of the Company Group, nor, to the Companies'
knowledge, any fiduciary of any Qualified Plan nor any agent of any of the
foregoing, has done anything that could reasonably be expected to adversely
affect the qualified status of a Qualified Plan or the qualified status of any
related trust. No partial termination (as defined under Section 411(d)(3) of the
Code) of any Qualified Plan has occurred.

          (d) No Title IV Plans. No Company Plan is or, at any time for which
any relevant statute of limitations remains open, has been either (i) a defined
benefit plan within the meaning of Section 3(35) of ERISA, or (ii) a
multiemployer plan within the meaning of Section 3(37) or Section 4001(a)(3) of
ERISA (a "Multiemployer Plan").

          (e) No Withdrawal or Other Title IV Liabilities. None of the Companies
nor any other employer that, together with any of the Companies would be
considered a single employer under Sections 414(b), (c), (m) or (o) of the Code
(the "Company Group") has withdrawn from any Multiemployer Plan or incurred any
withdrawal liability to or under any

                                      -18-



Multiemployer Plan. None of the Companies nor any member of the Company Group
has incurred or, to the knowledge of the Companies, is reasonably likely to
incur any other liability under Title IV of ERISA that could reasonably be
expected to result in a Material Adverse Effect.

          (f) No Foreign Plans. No Company Plan covers any employees of any
member of the Company Group in any foreign country or territory.

          (g) No Acceleration of Liabilities. Neither the execution of this
Agreement nor the consummation of the transactions contemplated hereunder will
(i) result in an increase in the amount of compensation or benefits or the
acceleration of the vesting or timing of payment of any compensation or benefits
payable to or in respect of any Participant; (ii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Section 280G(b) of the Code; or (iii) constitute or involve a prohibited
transaction as defined under ERISA or the Code, or a breach of fiduciary duty
under Title I of ERISA.

          (h) Prohibited Transactions; Fiduciary Duties; Post-Retirement
Benefits. No prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) with respect to any Company Plan exists or has
occurred that could subject any of the Companies to any liability or Tax under
Part 5 of Title I of ERISA or Section 4975 of the Code that could result in a
Material Adverse Effect. No breach of fiduciary duty under Title I of ERISA has
occurred with respect to any Company Plan that could reasonably be expected to
result in a Material Adverse Effect. With the exception of the requirements of
Section 4980B of the Code, no post-retirement benefits are provided under any
Company Plan that is a welfare benefit plan as described in ERISA Section 3(1).

          (i) Copies of Certain Documents. For each Company Plan, to the extent
applicable to each such Company Plan, true and complete copies of the following
have been delivered to Buyer: (A) the documents embodying the Company Plans,
including, but not limited to, the plan documents, all amendments thereto and
the related trust or funding agreements, and, in the case of any unwritten
Company Plans, written descriptions thereof; (B) annual reports including
without limitation Forms 5500 and all schedules thereto for the last three (3)
years; (C) financial statements for the last three (3) years; (D) actuarial
valuations, if applicable, for the last three (3) years; and (E) each
communication to employees regarding changes or amendments to the Company Plans
not yet made to such Company Plan. The Company has also furnished to Buyer a
copy of the current summary plan description and each summary of material
modification prepared in the last three (3) years for each Company Plan, and all
employee manuals, handbooks, policy statements and other written materials given
to employees relating to any Company Plans. To the Companies' knowledge, no oral
or written representations or commitments inconsistent with such written
materials have been made to any employee of the Companies by any employee or
agent of the Companies.

     2.19. Tax Matters.

          (a) Except as set forth in Section 2.19(a) of the Disclosure Letter,
each of the Companies has (i) timely filed all Tax Returns required to be filed
by the Companies; and (ii) paid in full all material Taxes that it was required
to pay (whether or not shown on any Tax Return), and any interest or penalties
with respect thereto. All such Tax Returns are correct and complete in all
material respects. Except as set forth in Section 2.19(a) of the Disclosure
Letter,

                                      -19-



none of the Companies is currently the beneficiary of any extension of time
within which to file any Tax Return. No claim, or notice of a claim, has ever
been made by an authority in a jurisdiction where any of the Companies does not
file Tax Returns that any of such entities is or may be subject to taxation by
that jurisdiction. There are no liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of the Companies. For purposes of this
Agreement, the term "Tax" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs, duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind, whatever, including any interest,
penalty, or addition thereto, whether disputed or not and including any
obligations to indemnify or otherwise assume or succeed to the Tax liability of
any other entity or person. For purposes of this Agreement, the term "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.

          (b) Except as set forth in Section 2.19(b) of the Disclosure Letter,
none of the Companies is a party to any claim, dispute, pending action or
proceeding, nor is any such claim, dispute, action or proceeding threatened in
writing by any governmental authority, for the assessment or collection of any
Taxes, and no claim for the assessment or collection of any Taxes has been
asserted in writing against any of the Companies which has not been settled with
all amounts due having been paid. None of the Companies has knowledge that any
governmental authority will propose or assess any additional Taxes with respect
to any of the Companies.

          (c) Each of the Companies has withheld and paid proper and accurate
amounts of Taxes from its employees, independent contractors, creditors,
stockholders and other third parties, in compliance in all material respects
with all withholding and similar provisions of any and all applicable federal,
foreign, state, and local laws, statutes, codes, ordinances, rules and
regulations.

          (d) Section 2.19(d) of the Disclosure Letter contains a list of all
federal, state, local and foreign income Tax Returns filed with respect to each
of the Companies for taxable periods ended on or after December 31, 1998,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Companies have made
available to Buyer correct and complete copies of all federal, state, local and
foreign income Tax Returns of each of the Companies, examination reports
relating to the Companies, and statements of deficiencies assessed against or
agreed to by each of the Companies all since December 31, 1998. Except as set
forth in Section 2.19(d) of the Disclosure Letter, since December 31, 1999, the
Companies have not received in writing from any foreign, federal, state or local
taxing authority any (i) notice indicating an intent to open an audit or other
review (except with respect to completed or ongoing audits), (ii) request for
information related to Tax matters (except with respect to completed or ongoing
audits), or (iii) notice of deficiency or proposed adjustment for any amount of
Tax proposed, asserted, or assessed by any taxing authority against any of the
Companies.

          (e) Except as set forth in Section 2.19(e) of the Disclosure Letter,
the Companies have not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.

                                      -20-



          (f) The Companies have not filed consents under Code Section 341(f)
concerning collapsible corporations. None of the Companies is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any "excess parachute
payment" within the meaning of Code Section 280G (or any corresponding provision
of state, local or foreign Tax law), or (ii) any amount that will not be fully
deductible as a result of Code Section 162(m) (or any corresponding provision of
state, local or foreign Tax law). The Companies have not been United States real
property holding corporations within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). None of
the Companies is a party to or bound by any Tax allocation or sharing agreement.
None of the Companies (i) has been a member of an affiliated group filing a
consolidated federal income Tax Return, or (ii) has any liability for Taxes of
any entity or person under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.

          (g) None of the Companies will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any:
(A) change in method of accounting for a taxable period ending on or prior to
the Closing Date, (B) "closing agreement" as described in Code Section 7121 (or
any corresponding or similar provision of state, local or foreign Tax law); (C)
intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding provision of state,
local or foreign Tax law); (D) installment sale or open transaction disposition
made on or prior to the Closing Date; or (E) prepaid amount received on or prior
to the Closing Date.

          (h) AEC, Brown Mackie, Commonwealth, Asher, Stautzenberger and
Michiana (and any predecessor of such entities) have been validly electing S
corporations (as defined in Code Section 1361(a)(1)) at all times during their
respective existences.

          (i) None of AEC, Brown Mackie, Commonwealth, Asher, Stautzenberger and
Michiana will be liable for any Tax under Code Section 1374 in connection with
the deemed sale of their assets caused by the Section 338(h)(10) Election.

          (j) The representations and warranties in this Section 2.19 hereof are
the sole and exclusive representations and warranties given by the Companies
relating to Taxes, Tax Returns, or other Tax matters.

     2.20. Insurance. Section 2.20 of the Disclosure Letter sets forth all of
the current insurance policies with respect to which any Company is the owner,
insured or beneficiary, including a list of all policies or binders of property
and casualty, general and vehicular liability, fidelity and fiduciary liability,
umbrella, workers' compensation, key-man life and other similar insurance, and
all binders for insurance to be purchased on or before the Closing Date in order
to replace policies expiring prior to the Closing Date. To the knowledge of the
Companies, the Companies will not have any liability after the Closing Date for
retrospective or retroactive premium adjustments, or insurance deductibles
arising from the operation of the Schools or otherwise in connection with the
operation of the business of the Companies prior to the Closing Date. Except as
set forth in Section 2.20 of the Disclosure Letter, all insurance policies
covering general liability maintained by or for the benefit of the Companies are
"occurrence" policies and not "claims made" policies. Neither the execution,
delivery and performance of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in the loss to the Companies of
any of the insurance policies listed in Section 2.20 of the Disclosure Letter,
or

                                      -21-



have a Material Adverse Effect on the rights of the Companies with respect to
liabilities arising in connection with the operations of the Companies prior to
the Closing Date. Within two (2) years prior to the date hereof, the Companies
have not been denied insurance, or been offered insurance only at a commercially
prohibitive premium.

     2.21. Environmental Matters. Except as set forth in Section 2.21 of the
Disclosure Letter:

          (a) The Companies and the Schools are and have been in compliance with
applicable federal, state or local laws, rules, regulations, ordinances and
directives relating to the protection of the environment as existing at the
Closing Date ("Environmental Laws"), except where such failure to comply would
not have a Material Adverse Effect.

          (b) None of the Companies or the Schools has received any written
notices or claims alleging that the Companies or the Schools are in violation of
any Environmental Laws.

          (c) To the knowledge of the Companies, none of the Companies or any of
the Schools has transported, arranged for transportation, stored, treated,
disposed or arranged for disposal of, any material defined as a hazardous
substance or waste under Environmental Laws ("Hazardous Substance") at or to any
location other than a site lawfully permitted to receive such Hazardous
Substance for such purposes. For purposes of this Agreement, the term "Hazardous
Substance" shall include petroleum and petroleum-based substances.

          (d) None of the Companies or any of the Schools has received any
written communication, including any request for information, notice of claim,
demand, order, PRP notice, or other notification, from any governmental
authority or third party that it is or may be potentially responsible with
respect to any material investigation, abatement or cleanup of any threatened or
actual release, spill, leak, discharge, disposal or dumping (a "Release") of any
Hazardous Substance.

          (e) There is no pending or, to the knowledge of the Companies,
contemplated claim or action against any of the Companies or the Schools under
Environmental Laws alleging that the Companies or any of the Schools has
adversely impacted the Real Property or any other property in proximity to the
Real Property.

          (f) None of the Companies or any of the Schools has entered into any
agreement with any person or governmental agency obligating it to perform
material remediation under any Environmental Law.

          (g) Except for small quantities of Hazardous Substances used in
connection with the operations of the Companies or the Schools (including
cleaning and maintenance supplies), none of the Real Property is used to treat,
store or dispose of Hazardous Substances in violation of Environmental Laws or
in a manner which requires a permit or other approval of a governmental
authority under Environmental Laws.

          (h) To the knowledge of the Companies, no Hazardous Substance has been
disposed, deposited, or Released into, on or at the Real Property which will
require material investigative or remedial action by any of the Companies.

          (i) To the knowledge of the Companies, no polychlorinated biphenyls
("PCBs") or friable or damaged asbestos-containing materials ("ACMs") are
present at any of

                                      -22-



the Real Property, nor were PCBs or ACMs removed from or remediated at the Real
Property, except in compliance with Environmental Laws.

          (j) To the knowledge of the Companies, there are no underground
storage tanks containing Hazardous Substances located at the Real Property and
no such underground storage tanks have been closed or removed at the Real
Property, except in compliance with Environmental Laws.

          (k) The representations and warranties in this Section 2.21 are the
sole and exclusive representations and warranties given by the Companies
relating to Environmental Laws or environmental matters.

     2.22. Finder's Fees. None of the Sellers, the Companies nor any of the
officers, directors, members, managers, agents or employees of either of the
foregoing has employed any finder or investment banker or incurred any liability
for any commissions or broker's or finder's fees in connection with the
transactions contemplated herein.

     2.23. Compliance with Law; Education Agency Compliance.

          (a) Since July 1, 1999 (the "Compliance Date"), except as set forth in
Section 2.23(a) of the Disclosure Letter, the Schools have been operated in
conformity in all material respects with all applicable federal, state and local
laws and regulations, including those laws and regulations pertaining to
immigration and non-U.S. citizens. Except as set forth in Section 2.23(a) of the
Disclosure Letter, the Companies and each of the Schools currently maintain and,
since the Compliance Date, have maintained without interruption all licenses,
permits, approvals, clearances, consents, certificates and other evidences of
approval or authority of Sellers, the Companies or the Schools which are
necessary or appropriate to the conduct of the business of the Companies or any
of the Schools to the full extent as now conducted (collectively, the
"Educational Approvals") issued by any person, entity or organization, whether
governmental, government chartered, private, or quasi-private, that engages in
granting or withholding Educational Approvals for such Schools, regulates
post-secondary schools, their agents, or employees in accordance with standards
relating to the performance, operation, financial condition, or academic
standards of such schools, or the provision of financial assistance by and to
such schools ("Education Agencies"). Section 2.23(a) of the Disclosure Letter
contains a complete listing of all Educational Approvals currently in effect for
each of the Schools to the extent that such Educational Approvals (i) are
required for Title IV participation or (ii) constitute programmatic
accreditations issued by an accrediting agency for the purpose of accrediting
specific educational programs offered at the Schools. Each of the Companies and
each of the Schools are and, since the Compliance Date, have been in compliance
in all material respects with the terms and conditions of all such Educational
Approvals, and have timely notified and obtained all required approvals from,
all applicable Education Agencies or each substantive change in the Companies or
the Schools since the Compliance Date, including any changes in ownership or
control. Except as reflected in Section 2.23(a) of the Disclosure Letter, there
are no proceedings pending to revoke, suspend, limit, condition, restrict or
withdraw any Educational Approval, and there are, to the knowledge of the
Companies, no facts, circumstances or omissions concerning the Companies or the
Schools that would be reasonably likely to result in such a proceeding. Except
as disclosed in Section 2.23(a) of the Disclosure Letter, since the Compliance
Date, neither any of the Companies, nor any of the Schools has received written
or, to the knowledge of the Companies, oral notice that any of the Companies or
any of the Schools is or was in violation of any of the terms or conditions of
any Educational Approval or alleging

                                      -23-



the failure to hold or obtain any Educational Approval. Except as disclosed in
Section 2.23(a) of the Disclosure Letter, since the Compliance Date, neither any
of the Companies, nor any of the Schools has received written or, to the
knowledge of the Companies, oral notice that any of the Educational Approvals
will not be renewed and, to the knowledge of the Companies, there are no facts,
circumstances or omissions concerning the Companies or the Schools that would be
reasonably likely to result in a non-renewal. In addition, and without limiting
the foregoing:

          (1) Each of the Companies, and each of the Schools possess, and since
the Compliance Date, have possessed, all requisite Educational Approvals for
each educational program the Schools have offered and for each campus, location,
or facility where the Schools have offered all or any portion of an educational
program.

          (2) Each of the Companies, and each of the Schools possess, and since
the Compliance Date, have possessed, all requisite Educational Approvals to
operate each such School in each jurisdiction in which such School is located or
conducts any operations, including providing educational services, student
marketing or recruiting, and all requisite approvals from such jurisdictions for
the educational programs currently offered.

          (3) Each of the Schools is fully or provisionally certified by the
Department of Education to participate in the student financial aid programs
(the "Title IV Programs") administered by the Department of Education under
Title IV of the Higher Education Act of 1965, as amended ("HEA"), and are each a
party to, and, except as disclosed in Section 2.23(a)(3) of the Disclosure
Letter, in compliance in all material respects with, a valid and effective
Program Participation Agreement with the Department of Education that is in full
force and effect. Except as set forth in Section 2.23(a)(3) of the Disclosure
Letter, neither the Companies, nor any of the Schools is subject to, nor, to the
knowledge of the Companies, has either been threatened with, any fine,
limitation, suspension or termination proceeding, or subject to any other action
or proceeding by the Department of Education that could reasonably be expected
to result in the suspension, limitation, conditioning, or termination of
certification or eligibility, or a liability or fine.

          (4) Except as disclosed in Section 2.23(a)(4) of the Disclosure
Letter, the Companies and the Schools are, and since the Compliance Date, have
been, in compliance in all material respects with all applicable rules,
regulations and requirements pertaining to the Schools' participation in the
Title IV Programs. Without limiting the foregoing:

               (i) Since the Compliance Date, each education program offered by
the Schools was and is an eligible program in accordance with all applicable
rules, regulations and requirements, including the requirements of 34 C.F.R.
668.8.

               (ii) Since the Compliance Date, each School is and has been duly
qualified as, and is and has been in full compliance with, the Department of
Education definition of "proprietary institution of higher education."

               (iii) For each fiscal year ending on or after the Compliance
Date, each of the Schools has complied with the limitation on the receipt of
Title IV Program funding under the "90/10 Rule" codified at 34 C.F.R.
600.5(a)(8), (d) (as amended by Section 101(a) of Public Law No. 105-244 (Higher
Education Amendments of 1998)).

               (iv) For each fiscal year ending on or after the Compliance Date,
each of the Schools and each of the Companies has satisfied the standards of
financial responsibility

                                      -24-



in accordance with 34 C.F.R. 668.15 and 34 C.F.R. 668.171-175, as applicable.
Except as disclosed in Section 2.23(a)(4)(iv) of the Disclosure Letter, since
the Compliance Date, none of the Companies nor any School has lacked financial
responsibility or has been required by notice or law to post a letter of credit
or other form of surety for any reason.

               (v) Since the Compliance Date, except as disclosed in Section
2.23(a)(4)(v) of the Disclosure Letter, neither the Companies nor any of the
Schools have been subject to the reimbursement or cash monitoring payment method
as described at 34 C.F.R. 668.162 or any predecessor regulation.

               (vi) Since the Compliance Date, each of the Schools and each of
the Companies has timely filed with the Department of Education all required
compliance audits and audited financial statements, including those required by
34 C.F.R. 668.23 or any predecessor regulation.

               (vii) Since the Compliance Date, except as disclosed in Section
2.23(a)(4)(vii) of the Disclosure Letter, each School has calculated and paid
refunds and calculated dates of withdrawal and leaves of absence in accordance
in all material respects with all applicable rules, regulations and
requirements, including the requirements of 34 C.F.R. 668.22, 34 C.F.R. 682.605
and any predecessor regulations.

               (viii) Since the Compliance Date, except as disclosed in Section
2.23(a)(4)(viii) of the Disclosure Letter, each School has disbursed and
processed Title IV Program funds in accordance in all material respects with all
applicable rules, regulations and requirements, including without limitation the
requirements of 34 C.F.R. 668.164, 34 C.F.R. 682.604 and any predecessor
regulations.

               (ix) Since the Compliance Date, except as disclosed in Section
2.23(a)(4)(ix) of the Disclosure Letter, the Schools have properly determined
students' eligibility to obtain Title IV Program funds for which they are
eligible prior to disbursing, and has disbursed, all Title IV Program funds in
accordance in all material respects with all applicable rules, regulations and
requirements, including the requirements of 34 C.F.R. 682.201, 34 C.F.R. 668,
Subpart C, and any predecessor regulations.

               (x) Since the Compliance Date, each School has at all times
complied with the limitations in 34 C.F.R. 600.7 on the number of courses that
each School may offer by correspondence or telecommunications and the number of
students who may enroll in such courses.

          (5) Section 2.23(a)(5) of the Disclosure Letter contains a list of all
Department of Education program reviews or surveys, final audit determinations,
Department of Education Office of Inspector General audits and investigations,
and Department of Justice investigations conducted at each of the Schools since
the Compliance Date. No program review or survey, audit determination,
Department of Education Office of Inspector General audit or investigation, or
Department of Justice investigation remains pending or unresolved except as
disclosed in Section 2.23(a)(5) of the Disclosure Letter.

          (6) Except as disclosed in Section 2.23(a)(6) of the Disclosure
Letter, none of the Schools is on probation, monitoring or warning status with
any Education Agency, including any accrediting body or any state regulatory
agency or guaranty agency, nor since the Compliance Date has any School been
subject to any adverse action by any Education Agency

                                      -25-



(including being directed to show cause why accreditation or other Educational
Approval should not be revoked, withdrawn, conditioned, suspended or limited) to
revoke, withdraw, deny, suspend, condition or limit accreditation.

          (7) Since the Compliance Date, except as disclosed on Section
2.23(a)(7) of the Disclosure Letter, the Companies, and the Schools have
complied with all stipulations, conditions and other requirements imposed by any
accrediting body, state regulatory agency or other Education Agency at the time
of, or since, the last issuance of the Educational Approval, including but not
limited to the timely filing of all required reports and responses.

          (8) Each of the Companies, and each of the Schools do not, and since
the Compliance Date, has not, provided, or contracted with any entity that
provides, any commission, bonus or other incentive payment based directly or
indirectly on success in securing enrollments or awarding financial aid to any
persons or entities engaged in any student recruiting or admissions activities
or in making decisions regarding the awarding of student financial aid.

          (9) Since the Compliance Date, except as disclosed in Section
2.23(a)(9) of the Disclosure Letter, all student financial aid grants and loans,
disbursements and record keeping relating thereto have been completed in
compliance in all material respects with all federal and state requirements, and
there are no material deficiencies in respect thereto. Except as disclosed in
Section 2.23(a)(9) of the Disclosure Letter, students have been funded in all
material respects in a timely manner with respect to the date for which they
were eligible for funding and for the amounts they were eligible to receive, and
such students' records conform in form and substance in all material respects to
all relevant regulatory requirements.

          (10) Neither any of the Companies, nor any of the Schools, nor any
person or entity that exercises substantial control over any of the Schools or
any of the Companies (as the term "substantial control" is defined in 34 C.F.R.
668.174(c)(3)), or member of such person's family (as the term "family" is
defined in 34 C.F.R. 668.174(c)(4)), alone or together, (i) exercises or
exercised substantial control over another school or third-party servicer (as
that term is defined in 34 C.F.R. 668.2) that owes a liability for a violation
of a Title IV Program requirement or (ii) owes a liability for a Title IV
Program violation.

          (11) Neither any of the Companies, nor any of the Schools, nor any
person or entity that exercises substantial control over any of the Schools or
any of the Companies, or member of such person's family, has filed for relief in
bankruptcy or had entered against it an order for relief in bankruptcy.

          (12) Neither any of the Companies, nor any of the Schools, nor any of
their employees has pled guilty to, pled nolo contendere to, or been found
guilty of, a crime involving the acquisition, use or expenditure of funds under
the Title IV Programs or been judicially determined to have committed fraud
involving funds under the Title IV Programs.

          (13) Neither any of the Companies nor any of the Schools has employed
in a capacity involving administration of funds under the Title IV Programs or
the receipt of funds under those programs, any individual who has been convicted
of, or has pled nolo contendere or guilty to, a crime involving the acquisition,
use or expenditure of federal, state or local government funds, or has been
administratively or judicially determined to have committed fraud or any other
material violation of law involving federal, state or local government funds.

                                      -26-



          (14) Except as disclosed in Section 2.23(a)(14) of the Disclosure
Letter, none of the Companies, or any of the Schools contracts with a
third-party servicer (as such term is defined in 34 C.F.R. 668.2) to provide any
services in connection with the processing or administration of the Schools'
administration of the Title IV Programs.

          (15) Neither any of the Companies, nor any of the Schools provides, or
since the Compliance Date, has provided, any educational instruction on behalf
of any other institution or organization of any sort. No other institution or
organization of any sort provides, or since the Compliance Date, has provided,
any educational instruction on behalf of the Schools.

          (16) True and complete copies of all policy manuals and other
statements of procedures or instruction relating to recruitment of students,
including procedures for assisting in the application by prospective students
for direct or indirect state or federal financial assistance; admissions
procedures, including any descriptions of procedures for ensuring compliance
with state or federal or other appropriate standards or tests of eligibility;
procedures for encouraging and verifying attendance, minimum required attendance
policies, and other relevant criteria relating to course completion and
certification (collectively referred to as the "Policy Guidelines") have been
made available to Buyer. Since the Compliance Date, the Companies' operations
have been conducted in all material respects in accordance with the Policy
Guidelines.

          (17) Since the Compliance Date, complete and accurate books and
records for all present and past students attending the Schools have been
maintained in accordance in all material respects with all applicable federal
and state laws and regulations, and are true and correct in all material
respects.

          (18) Sellers and each of the Companies have made available to Buyer
true, correct and complete copies of all documentation referenced in Section
2.23 of the Disclosure Letter. In addition, Section 2.23(a)(18) of the
Disclosure Letter lists all written notices (excluding general correspondence
routinely received from the Department of Education or any Educational Agency by
Schools participating in Title IV Programs or approve by such Education Agency)
received from the Department of Education, any accrediting agency, any state
licensing agency, any guaranty agency, the Office of Inspector General of the
Department of Education or the Department of Justice to the extent that such
notice or notification is not listed elsewhere in the Disclosure Letter and to
the extent that such notice or notification (1) (a) other than with respect to
Southern Ohio LLC, was sent or received on or after July 1, 1998, or (b) with
respect to Southern Ohio LLC, was sent or received on or after June 13, 2002, or
is known to the Sellers or the Companies and was sent or received on or after
July 1, 1998, and (2) contains (A) any notice that any Educational Approval is
or was not in full force and effect; (B) any written notice or report of a
program review, investigation, survey or Office of Inspector General audit,
investigation or survey alleging that any Company or School has violated or is
violating any legal requirement or any Educational Agency requirement, or that
any Company or School has failed to maintain and retain in full force and effect
any and all Educational Approvals, or, to the extent that a written report has
not been issued to the Company or the School in connection with such program
review, audit, survey, or investigation, giving notice that a program review,
audit, survey or investigation will be conducted; (C) any notice of an intent to
limit, suspend, terminate, revoke, cancel, not renew, condition or place on show
cause any Educational Approval; (D) any notice of an intent or threatened intent
to condition the provision of Title IV program funds to any Company or School or
the posting of a letter of credit or other surety in favor of the Department of
Education; (E) any notice of an intent to provisionally certify the eligibility
of any School to participate in the Title IV Programs; or (F) notice of the
placement or removal of any

                                      -27-



School on or from the reimbursement or cash monitoring method of payment under
the Title IV Programs. Notwithstanding anything to the contrary contained in
this Section 2.23(a)(18), neither Sellers nor any of the Companies make any
representation, warranty, or covenant, or undertake any obligation, with respect
to any notice or notification within the scope of any of subparagraphs (A)
through (F) of Section 2.23(a)(18) and sent or received prior to the Compliance
Date.

          (b) Notwithstanding anything to the contrary contained in this Section
2.23, in the event of a dispute between the Sellers and Buyer regarding the
actual timing of any fact or circumstance occurring during the period from
January 1, 1999 to December 31, 1999 and giving rise to a breach of any
representation and warranty contained in this Section 2.23, the Sellers shall
not be liable for any such breach unless Buyer establishes based upon clear and
convincing evidence that the fact or circumstance causing such representation or
warranty to be untrue occurred during the period from July 1, 1999 to December
31, 1999; provided, however, that this Section 2.23(b) shall only apply to those
representations or warranties contained in this Section 2.23 that relate to the
Compliance Date.

          (c) None of the Schools has accepted any foreign students since
February 15, 2003. A list of all foreign students currently enrolled at each of
the Schools is set forth in Section 2.23(c) of the Disclosure Letter, and each
such student's enrollment will end prior to August 1, 2003 to the extent
required by applicable law.

     2.24. Compliance with Laws. The Companies and each of the Schools are in
compliance in all material respects with all applicable laws (including any
statute, rule, regulation, code, plan, injunction, judgment, order, decree,
ordinance, writ, ruling, or charge) of any federal, state, local and foreign
governments (and all agencies thereof).

                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE SELLERS

     As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, except as set forth in the Disclosure Letter,
each of the Sellers hereby, severally (and not jointly) and in each case in
respect of himself, herself or itself only, represents and warrants to Buyer as
follows:

     3.1. Existence. Each such Seller that is an entity is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to operate, own or lease
its properties and assets as now owned or leased and to carry on its business as
and where now being conducted. If such Seller is a trust, such Seller has been
duly created and is validly existing under the laws of the jurisdiction of its
creation.

     3.2. Ownership.

          (a) Each such Equity Seller owns, of record, legally, beneficially and
exclusively, all of the Purchased Interests set forth opposite such Seller's
name in Section 3.2(a) of the Disclosure Letter attached hereto, in each case,
free and clear of all Encumbrances. Except as set forth in Section 3.2(a) of the
Disclosure Letter, there are no shareholder, voting trust, or other agreements
or understandings to which such Equity Seller is a party or to which it is bound
relating to the voting of any of the Purchased Interests and each such Equity
Seller

                                      -28-



holds the exclusive right and power to vote their Purchased Interests. There are
no outstanding subscriptions, options, warrants, preemptive rights, exercise
rights, exchange rights, appreciation, phantom stock or other rights to acquire
from such Equity Seller any of the Purchased Interests or any other shares of
capital stock or membership interests, as applicable, of the Companies. Upon
delivery of the Purchased Interests under this Agreement, Buyer will acquire
good and valid legal and exclusive title to the Purchased Interests, free and
clear of any Encumbrances except for such Encumbrances created by the Buyer.

          (b) As of the date hereof, each such Note Seller holds the TL Warrants
and Debentures, Options and Restricted Stock set forth opposite such Note
Seller's name in Section 3.2(b) of the Disclosure Letter, in each case, free and
clear of all Encumbrances.

     3.3. Authority. Such Seller has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate, limited partnership or trust action, as the case may be, on the part
of each such Seller that is a corporation, limited partnership or trust, and no
further action is required on the part of such Seller to authorize the Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by such Seller, and assuming the due authorization, execution and
delivery by the other parties hereto, constitutes, and each other agreement to
which such Seller is a party and which is executed at the Closing pursuant to
this Agreement when executed and delivered by such Seller shall constitute, the
legal, valid and binding obligations of such Seller, enforceable against such
Seller in accordance with its terms, except as may be limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.

     3.4. No Pending Litigation or Proceedings.

          (a) Except as disclosed in Section 3.4(a) of the Disclosure Letter,
there is no Litigation pending or, to the knowledge of such Seller, threatened
against or affecting such Seller with respect to such Seller's Purchased
Interests, the TL Warrants and Debentures, the Options or the Restricted Stock,
at law or in equity, including any Litigation by or before the Department of
Education or any other applicable accrediting agency, guarantee agency or any
federal, state or local governmental body.

          (b) There are presently no outstanding judgments, decrees or orders of
any accrediting agency, guarantee agency or federal, state or local governmental
body against or affecting such Seller with respect to such Seller's Purchased
Interests, TL Warrants and Debentures, Options or Restricted Stock.

          (c) Except as disclosed in Section 3.4(c) of the Disclosure Letter, no
such Seller has commenced or has any pending Litigation against any third party
with respect to such Seller's Purchased Interests, TL Warrants and Debentures,
Options or Restricted Stock.

                                   ARTICLE IV

                     REPRESENTATIONS AND WARRANTIES OF BUYER

     As an inducement to Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer represents and warrants to Sellers as
follows:

                                      -29-



     4.1. Organization; Corporate Power and Authority; Authorization. Buyer is a
corporation duly organized, validly existing and subsisting under the laws of
the Commonwealth of Pennsylvania. Buyer has full legal right, power and
authority to make, execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by Buyer have been duly authorized by
all necessary action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer, and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes, and each other agreement to
which Buyer is a party and which is executed at the Closing pursuant to this
Agreement when executed and delivered by Buyer shall constitute, the legal,
valid and binding obligations of Buyer, enforceable against Buyer in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.

     4.2. No Violation of Laws or Agreements. None of the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby or
the compliance with or fulfillment of the terms, conditions and provisions
hereof or thereof by Buyer will: (a) contravene any provision of the charter or
bylaws of Buyer, (b) conflict with, or result in a breach of, or constitute a
default or an event of default (or an event that might, with the passage of time
or the giving of notice or both, constitute a default) under any of the terms,
conditions or provisions of any license, franchise, indenture, mortgage, loan or
credit agreement or any other agreement or instrument to which Buyer is a party
or by which its assets may be bound or affected, or (c) violate any law or
violate any judgment or order of any governmental body to which Buyer is
subject.

     4.3. Absence of Proceedings; Finder's Fee. No action or proceeding has been
instituted against Buyer before any court or other governmental body by any
person seeking to restrain or prohibit the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. Buyer has
not made any arrangement or taken any other action that might cause Sellers to
become liable for a finder's fee or commission as a result of the transactions
contemplated hereunder.

     4.4. Consents. Except as required under the HSR Act (as hereinafter
defined) or as otherwise contemplated by this Agreement, no consent, approval or
authorization of, or registration or filing with, any person, including any
governmental authority or other regulatory agency, is required to be obtained or
made by Buyer in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.

     4.5. Compliance with Educational Laws. To the knowledge of Buyer, neither
the Buyer nor any of its affiliates or employees have been nor are the subject
of any actions, suits proceedings, investigations, audits, program reviews or
claims that would reasonably be expected to prevent or delay the approval of the
change in ownership of any Company or School by the Department of Education or
by any Education Agency in connection with any Educational Approval required for
issuance of a PPPA or a Temporary PPPA. To the knowledge of Buyer, there are no
circumstances involving the Buyer or its affiliates that would prevent or delay
the approval of the change in ownership of any Company or School by the
Department of Education or by any Education Agency in connection with any
Educational Approval required for issuance of a PPPA or a Temporary PPPA as
contemplated by this Agreement.

                                      -30-



                                    ARTICLE V

                                CERTAIN COVENANTS

     5.1. Conduct of Business Pending Closing. From and after the date hereof
through and including the Closing Date, unless Buyer shall otherwise consent in
writing, the Companies shall, and, as applicable, the Sellers shall cause the
Companies to, continue to conduct the operations and administer the affairs of
the Companies and the Schools as follows:

          (a) Ordinary Course; Compliance. Except as disclosed in Section 5.1(a)
of the Disclosure Letter or as contemplated by this Agreement, each of the
Companies shall conduct its operations and business, and administer its affairs,
only in the ordinary course and consistent with past practice. The Companies
shall take reasonable actions to maintain the property, equipment and other
assets of the Companies, in substantially the same condition as such assets
existed on the date of this Agreement and consistent with past practice and,
subject to available resources, to comply in a timely fashion with the
provisions of all their agreements and commitments. The Companies shall use
their reasonable efforts to keep their respective business organizations intact,
maintain all licenses and accreditation, keep available the services of their
present employees and preserve the goodwill of their employees, students,
suppliers, and others having relations with them. The Companies shall maintain
in full force and effect the policies of insurance listed in Section 2.20 of the
Disclosure Letter, subject only to variations required by the ordinary
operations of the Companies or else shall obtain or cause to be obtained, prior
to the lapse of any such policy, substantially similar coverage with insurers of
recognized standing. Without limiting the generality of the foregoing, the
Companies shall maintain current levels of advertising and other student
recruitment efforts and student enrollment standards, to maintain the Schools'
curricula and academic programs, and shall comply with regulatory and
accreditation requirements.

          (b) Transactions. Except as contemplated by this Agreement, Sellers
shall not: (i) permit the Companies to amend their charter documents or bylaws
or operating agreement or certificate of formation, as applicable; (ii) permit
any of the Companies to enter into any contract or commitment the performance of
which may extend beyond the Closing Date, except those made in the ordinary
course of business, the terms of which are reasonable and consistent with past
practice; (iii) permit any of the Companies to enter into any employment or
consulting contract or arrangement that is not terminable at will and without
penalty or continuing obligation; (iv) permit any of the Companies to fail to
pay any taxes or any other liability or charge of the Companies when due (other
than charges contested in good faith by appropriate proceedings); (v) permit the
Companies to make, change or revoke any tax election or make any agreement or
settlement with any taxing authority; or (vi) permit any of the Companies to
declare or pay any dividend or make any other distribution in respect of the
equity securities or membership interests, as applicable, in the Companies.
Buyer acknowledges that the Companies may enter into compensation arrangements
with members of management and Tech Leaders prior to Closing; provided, however,
that any such compensation arrangements will not have an adverse impact on any
of the Companies after the Closing Date.

          (c) Certain Specific Commitments. Prior to the Closing, Sellers shall
not, nor shall they permit the Companies to, (i) except as provided in the
Capital Plan provided to Buyer, make any capital expenditures, in the aggregate,
in excess of Fifty Thousand Dollars ($50,000) outside the ordinary course of
business of the Schools (unless such expenditure is identified in the current
business plan of the Schools) without the prior written consent of Buyer, or
(ii) cause

                                      -31-



the Schools or the Companies to incur additional debt through the Closing Date
(other than debt incurred and paid or settled prior to the Closing and letters
of credit issued by any of the Companies to the Department of Education) without
the prior written consent of Buyer.

          (d) Dividends and Transfers. Notwithstanding anything else in this
Section 5.1 to the contrary, during the period prior to the Closing, each of the
Companies may dividend or otherwise transfer any available cash, cash
equivalents and marketable securities of the Companies to Sellers; provided,
that any such dividend or payment would not cause the Net Current Assets of the
Companies to be less than zero at any time on or before the Closing Date. In
addition to the foregoing, each Parent Company shall, prior to the Closing,
issue Seller Notes in accordance with this Agreement.

          (e) Access, Information and Documents. The Sellers shall give to Buyer
and to Buyer's employees and representatives (including accountants, actuaries,
attorneys, environmental consultants and engineers), upon authorization by the
Sellers' Representative, reasonable access during normal business hours to all
of the properties, books, tax returns, contracts, commitments, records
(including financial aid, accreditation, regulatory compliance and Educational
Approval records), officers, personnel and accountants (including independent
public accountants) of the Companies and the Schools and shall furnish to Buyer
all such documents and copies of documents and all information with respect to
the properties, liabilities and affairs of the Companies and the Schools as
Buyer may reasonably request. Without limiting the foregoing, to the extent
Buyer wishes to conduct Phase I environmental site assessments of the Real
Property, the Sellers shall give Buyer's environmental consultant access to
conduct such Phase I environmental site assessments of the Real Property,
provided Buyer uses an environmental consultant reasonably satisfactory to the
Sellers' Representative, consultant agrees to allow the Sellers to rely on the
reports to the same extent as Buyer may rely, and the Sellers' Representative
reasonably approves of the scope and format of the Phase I. Buyer may not
perform any environmental investigations beyond that which is described in the
preceding sentence without the advance written approval of the Sellers'
Representative.

          (f) Amendment of Schedules. At any time prior to two (2) business days
before the Closing Date, the Sellers and the Parent Companies may supplement or
amend the Disclosure Letter with respect to any matter arising after the date
hereof that, if existing or occurring at or prior to the date of this Agreement,
would have been required to be set forth or described in the Disclosure Letter
or would have been necessary to make any information in any representation or
warranty of the Parent Companies or the Sellers contained in this Agreement
complete or correct as of the Closing Date. For purposes of determining the
conditions precedent set forth in Section 6.1(a), no such amendment or
supplement shall be given any effect whatsoever; for all other purposes,
including Section 8.2, each such amendment or supplement shall be given effect.

     5.2. Regulatory and Other Approvals

          (a) The Sellers and the Buyer will (i) within a reasonable period of
time after execution of this Agreement take any reasonable actions necessary to
file notifications under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act"), (ii)
comply within a reasonable period of time with any binding request for
additional information received from the Federal Trade Commission or Antitrust
Division of the Department of Justice pursuant to the HSR Act, and (iii) to the
extent

                                      -32-



mutually agreed among Buyer and the Sellers' Representative, request early
termination of the applicable waiting period.

          (b) Promptly after the execution of this Agreement, Buyer and Sellers
shall cooperate to (i) file pre-acquisition review applications with the
Department of Education with respect to each of the Schools owned by the
Companies and (ii) seek any and all required approvals of all state and regional
educational regulatory authorities and accrediting agencies which are necessary
for the consummation of the transactions contemplated hereby. In addition:

               (i) Buyer shall, and the Sellers shall use all commercially
reasonable efforts to assist Buyer to, file, not later than June 24, 2003, a
pre-acquisition review application for each School with the Department of
Education in order to obtain letters from the Department of Education stating
that, for each School upon notice of the completion of the sale contemplated
hereby, the Department of Education will issue to the School a Temporary PPPA to
continue the School's participation in the Title IV Programs following the
Closing, provided, that such letters shall not include any condition that would
reasonably be expected to have a material adverse effect on the issuance of any
Temporary PPPA ("Pre-acquisition Review Letters").

               (ii) The parties will cause their representatives to promptly and
regularly advise each other concerning the occurrence and status of any
discussions or other communications, whether oral or written, with any state
education regulating body, accrediting agency or governmental authority or other
third party with respect to any consent, the Temporary PPPAs or the PPPAs,
including any difficulties or delays experienced in obtaining any consent, and
of any conditions proposed, considered, or requested in connection with any
consent, the Temporary PPPAs or the PPPAs.

               (iii) The Sellers will cooperate fully with Buyer in its efforts
to obtain any consents, the Temporary PPPAs and the PPPAs. Buyer shall use
commercially reasonable efforts to timely file all applications and other
documents (including applications and other documents filed prior to the
Closing) necessary to obtain any consent, the Temporary PPPAs or the PPPAs,
including the filings described in 34 C.F.R. (S) 600.20(g)(1), (g)(2) and
(h)(3); provided that any and all submissions required to obtain or maintain the
Temporary PPPAs and PPPAs shall be made timely in accordance with Department of
Education requirements.

               (iv) Buyer will allow the Sellers' and the Companies' agents and
representatives to participate in any meetings or telephone calls with any state
education regulatory body, accrediting agency or governmental authority to
discuss the status of any consent, the Temporary PPPAs or the PPPAs; provided,
however, that the Sellers, the Companies and their agents will confer in advance
with Buyer to agree on the issues to be discussed in such meeting or telephone
call and will not introduce any issues that are not agreed to in advance and
will not respond to any compliance issues first introduced in such meeting or
telephone call by the state education regulatory body, accrediting agency or
governmental authority.

               (v) The Sellers will use all commercially reasonable efforts to
cause each Company to ensure that its appropriate officers and employees shall
be available to attend, as any governmental authority may reasonably request,
any scheduled hearings or meetings in connection with obtaining any consent, any
Temporary PPPA or any PPPA.

          (c) Buyer and Sellers shall use all commercially reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act

                                      -33-



as promptly as commercially reasonable after the date of this Agreement. The
obligations of Buyer and Sellers under this Section 5.2 with respect to the HSR
Act shall not require Buyer or Sellers to obtain or attempt to obtain any such
waiver, permit, consent, approval or authorization if obtaining such waiver,
permit, consent, approval or authorization would require disposition of any
assets of Buyer or Sellers or any affiliate of either.

     5.3. Costs and Expenses. Buyer and Sellers shall each pay all their own
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including all accounting, legal and appraisal
fees and settlement charges. Notwithstanding the foregoing, (a) the Buyer shall
pay the HSR filing fees, and (b) the Sellers (collectively, on a several basis)
and the Buyer shall each pay one-half (1/2) of any sales tax or any Transfer
Taxes applicable to the transactions contemplated hereby. "Transfer Taxes"
means, other than sales tax, all transfer, documenting, stamp or registration
Taxes applicable to the purchase of the Purchased Interests contemplated hereby.

     5.4. Fulfillment of Agreements. Each party to this Agreement shall use
commercially reasonable efforts to cause all of the conditions to the
obligations of the others under Article VI to be satisfied on or prior to the
Closing and shall use commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement. Each party shall promptly notify the others of any action, suit,
claim, proceeding or investigation that may be threatened, brought, asserted or
commenced after the date hereof against such party or any facts or circumstances
as to which it obtains knowledge that would prevent the satisfaction of any of
the conditions set forth in Article VI.

     5.5. Publicity; Disclosure. Prior to the issuance of any press release or
the making of any other public announcements by Buyer or any of the Sellers,
including any announcement to employees and current or prospective students,
with respect to this Agreement or the transactions contemplated hereby (except
to the respective directors and officers of the Companies and Buyer), each of
Buyer and the Sellers' Representative (on behalf of the Sellers) shall provide
not less than two (2) business days prior notice and consult with the other
party with respect to such press release or public announcement, and shall not
issue any such press release or make any such public announcement prior to such
consultation and written consent of such other party, except as required by law
or regulation. Notwithstanding the foregoing, Buyer and the Companies may make
any necessary and appropriate disclosure of the terms of this Agreement to such
government authorities and any other accrediting agencies or other third parties
whose consent or approval may be required prior to the Closing.

     The terms of that certain Confidentiality Agreement, dated as of February
12, 2003, attached hereto as Exhibit H, are hereby incorporated herein by
reference and shall remain in effect until the Closing.

     5.6. Further Assurances. From time to time, as and when requested by any
party hereto, the other parties, without further consideration, shall take or
cause to be taken such actions and execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further or other actions as such
other party may reasonably deem necessary or desirable to consummate the
transactions contemplated hereby.

                                      -34-



     5.7. Educational Approvals. Sellers shall provide such additional
assistance and cooperation to Buyer as Buyer shall reasonably request in
connection with the transfer of any Educational Approval, accreditation,
authorization or approval to Buyer hereunder.

     5.8. No Control. Between the date of this Agreement and the Closing Date,
Buyer shall not, directly or indirectly, control, supervise or direct, or
attempt to control, supervise or direct, the operations of the Companies, but
such operations shall be the sole responsibility and, subject to Section 5.1, in
the complete discretion of the Companies.

     5.9. Exclusivity. Until the earlier of the Closing Date or such date as
this Agreement is terminated, Sellers will not, directly or indirectly,
communicate with any party other than Buyer or any of the Sellers' attorneys,
accountants, representatives or other advisors, concerning the sale or other
disposition of the Purchased Interests or any material portion of the assets of
the Companies by merger, consolidation, operation of law or otherwise.

     5.10. Consent; Assignment of Agreements. Sellers shall use their
commercially reasonable efforts prior to, and if necessary after, the Closing,
to obtain at the earliest practicable date any consent to the transactions
contemplated hereby required by any agreement which requires consent to
assignment, without any conditions adverse to Buyer.

     5.11. Tax Matters.

          (a) Sellers severally (and not jointly) shall indemnify each of the
Companies, Buyer and any affiliate of Buyer and hold them harmless from and
against any loss, claim, liability expense, or other damage attributable to (i)
all Taxes (or the non-payment thereof) of the Companies for all taxable periods
ending on or before the Closing Date and the portion of the taxable period
through the end of the Closing Date for any taxable period that includes (but
does not end on) the Closing Date ("Pre-Closing Tax Period"), (ii) all Taxes of
any member of an affiliated, consolidated, combined or unitary group of which
the Companies (or any predecessor of any of the foregoing) is or was a member on
or prior to the Closing Date, including pursuant to Treasury Regulations Section
1.1502-6 or any analogous or similar state, local, or foreign law or regulation,
and (iii) any and all Taxes of any person (other than the Companies) imposed on
any Company as a transferee or successor, by contract or pursuant to any law,
rule, or regulation, which Taxes relate to an event or transaction occurring
before the Closing; provided, however, that Sellers shall be liable only to the
extent that all such Taxes described in this Section 5.11(a) exceed the amount,
if any, reserved for such Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) on the
Final Closing Balance Sheets that is taken into account in determining Net
Current Assets. Sellers shall reimburse Buyer for any Taxes of the Companies
which are the responsibility of Sellers pursuant to this Section 5.11(a) within
fifteen (15) business days after payment of such Taxes by Buyer or the
Companies.

          (b) In the case of any taxable period that includes (but does not end
on) the Closing Date (a "Straddle Period"), the amount of any Taxes based on or
measured by income or receipts of the Companies for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date (and for such purpose, the Taxable period of any
partnership or other pass-through entity in which any of the Companies hold a
beneficial interest shall be deemed to terminate at such time) and the amount of
other Taxes of the Companies for a Straddle Period which relate to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the
entire Straddle Period multiplied by a

                                      -35-



fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the total number of
days in the Straddle Period.

          (c) Buyer shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns of the Companies for any Straddle Period. Buyer shall
provide a copy of each such Straddle Period Tax Return to the Sellers'
Representative for his review and comment not later than thirty (30) days prior
to the deadline for filing each such Tax Return, and shall make all changes to
each such Tax Return reasonably requested by the Sellers' Representative;
provided, that Sellers' Representative provides such comments to Buyer at least
ten (10) days prior to the deadline for filing such Tax Return. The Sellers'
Representative shall prepare or cause to be prepared and file or cause to be
filed (i) all income Tax Returns of the Companies and (ii) Forms W-2 and 1099
that are required to be issued to the Option Sellers and RPalmer, in each case,
for all periods that end on or before the Closing Date. For the avoidance of
doubt, the parties agree that the Companies shall claim compensation expense
deductions on account of the compensation income to the Option Sellers and
RPalmer attributable to the issuance of the Option Notes and the Restricted
Stock Notes, respectively, in the final S corporation return for each Parent
Company, and such Seller shall include such amounts in the appropriate Forms W-2
and 1099; provided, however, that the amount of aggregate compensation expense
deduction claimed by the Companies and included on the appropriate Forms W-2 and
1099 shall not exceed the aggregate amount of compensation agreed to by the
parties with respect to RPalmer and the Option Sellers for purposes of
determining the Final Withholding Tax Amounts. Sellers shall provide a copy of
each such Tax Return or Tax filing to Buyer for its review not later than thirty
(30) days prior to the deadline for filing each such Tax Return or Tax filing,
and Sellers' Representative shall make all changes to each such Tax Return
reasonably requested by Buyer; provided, that Buyer provides such comments to
Sellers' Representative at least ten (10) days prior to the deadline for filing
such Tax Return or Tax filing. After the Sellers' Representative has made any
changes reasonably requested by Buyer, Buyer shall cause appropriate officers of
the Companies to sign all such Tax Returns or Tax filings promptly upon the
request of the Sellers. To the extent required or permitted by applicable law,
each Seller shall include any income, gain, loss, deduction or other tax items
for such periods on his, her or its Tax Return in a manner consistent with the
Schedule K-1's furnished by the Companies for such periods.

          (d) (i) Notwithstanding the provisions of Section 8.4 hereof, if,
after the Closing Date, any Buyer Indemnitee receives any notice, letter,
correspondence, claim or decree relating to Taxes from any taxing authority
("Tax Notice") and, upon receipt of such Tax Notice, believes it has suffered or
potentially could suffer any Losses relating to Taxes, Buyer shall, and shall
cause the Companies to, promptly deliver such Tax Notice to the Sellers'
Representative; provided, however, that the failure of Buyer to provide the Tax
Notice to the Sellers' Representative shall not affect the indemnification
rights of Buyer, the Companies or any affiliate of Buyer pursuant to Section
5.11(a) and Article VIII hereof, except to the extent that Sellers are
prejudiced by Buyer's failure to deliver such Tax Notice. Notwithstanding the
provisions of Section 8.9 and except with respect to potential Losses resulting
from the invalidity of the Section 338(h)(10) Election described in Section
8.2(b) hereof, the Sellers' Representative shall have the right to handle,
defend, conduct and control any Tax audit or other proceeding involving the
Companies that relates to such Tax Notice (except to the extent that such Tax
Notice, Tax audit or other proceeding relates to a period other than a
Pre-Closing Tax Period, and except to the extent that Sellers would have no
indemnification obligations pursuant to Section 5.11(a) or Article VIII hereof),
but Buyer shall have the right to participate in such Tax audit or proceeding at
its own expense. The Sellers' Representative shall also have the right to
compromise or settle any such Tax audit or other proceeding that it has the
authority to control

                                      -36-



pursuant to the preceding sentence subject to Buyer's consent, which consent
shall not be unreasonably withheld. If the Sellers' Representative fails within
a reasonable time after notice to defend any such Tax Notice or the resulting
audit or proceeding as provided herein, Sellers shall be bound by the results
obtained by Buyer in connection therewith. Sellers shall pay to Buyer, pro rata
in accordance with such Sellers' Indemnity Percentages, the amount of any Losses
incurred by Buyer within fifteen (15) days after a Final Determination of such
Losses. For purposes of this Agreement, a "Final Determination" shall have the
meaning given to the term "determination" by Code Section 1313 and the Treasury
Regulations thereunder with respect to United States federal Tax matters; and
with respect to foreign, state and local Tax matters Final Determination shall
mean any final settlement with a relevant Taxing authority that does not provide
a right to appeal or any final decision by a court with respect to which no
timely appeal is pending and as to which the time for filing such appeal has
expired. For the avoidance of doubt, a Final Determination with respect to
United States federal Tax matters shall include any formal or informal
settlement entered with the Internal Revenue Service with respect to which the
taxpayer has no right to appeal.

               (ii) Notwithstanding the provisions of Section 5.11(d)(i) hereof,
if, after the Closing Date, any Buyer Indemnitee receives any Tax Notice and,
upon receipt of such Tax Notice, believes it has suffered or potentially could
suffer any Losses resulting from the invalidity of the Section 338(h)(10)
Election described in Section 8.2(b) hereof, Buyer shall, and shall cause the
Companies to, promptly deliver such Tax Notice to the Seller's Representative;
provided, however, that the failure of Buyer to provide the Tax Notice to
Seller's Representative shall not affect the indemnification rights of Buyer,
the Companies or any affiliate of Buyer pursuant to Section 5.11(a) and Article
VIII hereof, except to the extent that Sellers are prejudiced by Buyer's failure
to deliver such Tax Notice. Notwithstanding the provisions of Section 8.9, Buyer
shall have the right to handle, defend, conduct and control any Tax audit or
other proceeding involving the Companies that relates to a Tax Notice described
in this Section 5.11(d)(ii), but Sellers shall have the right to participate in
any such Tax audit or proceeding at their own expense. Buyer also shall have the
right to compromise and settle any such Tax audit or proceeding that it has
authority to control pursuant to this Section 5.11(d)(ii), subject to Sellers'
consent, which shall not be unreasonably withheld. Sellers shall pay to Buyer,
pro rata in accordance with such Sellers' Indemnity Percentages, the amount of
any Losses incurred by Buyer within fifteen (15) days after a Final
Determination of such Losses.

          (e) Buyer and Sellers shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section 5.11 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Companies and Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Companies relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Companies or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records. Buyer and Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be

                                      -37-



necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including with respect to the transactions contemplated hereby).

          (f) All Tax sharing agreements and similar arrangements with respect
to or involving any of the Companies shall be terminated as of the Closing Date
and, after the Closing Date, the Companies shall not be bound thereby or have
any liability thereunder.

          (g) Sellers and the Companies shall not revoke any Company's election
to be taxed as an S corporation within the meaning of Code Sections 1361 and
1362. Except for the sale of the Purchased Interests described in Article I
hereto, the Sellers and the Companies shall not take any action that would
result in the termination of any Company's status as a validly electing S
corporation within the meaning of Code Sections 1361 and 1362.

          (h) (i) At Buyer's option, the Equity Sellers shall join with Buyer in
making an election under Code Section 338(h)(10) (and any corresponding election
under state, local and foreign tax law) with respect to the purchase and sale of
the Purchased Interests hereunder (collectively, a "Section 338(h)(10)
Election") and shall cooperate fully with Buyer in securing the Section
338(h)(10) Election. The Equity Sellers shall each include any income, gain,
loss, deduction or other tax item resulting from the Section 338(h)(10) Election
on his, her or its Tax Return to the extent required by applicable law and in
accordance with an allocation of the Aggregate Purchase Price to be mutually
agreed upon by the parties consistent with the Allocation Schedule. Buyer shall
reimburse the Equity Sellers for certain incremental costs associated with the
Section 338(h)(10) Election in an aggregate amount equal to the difference
between: (A) $2,250,000 and (B) the amount of any Tax required to be paid by the
Companies on behalf of the Equity Sellers with respect to the sale of Purchased
Interests and Section 338(h)(10) Elections (such Taxes, the "Corporate
Withholding Taxes," to be determined in a manner consistent with the methodology
and assumptions used by the parties to determine the amount in Section
5.11(h)(i)(A) hereof) (the "Reimbursement Amount"). Buyer shall pay the
Reimbursement Amount to the Equity Sellers in the manner described in Section
1.2(a)(i) hereof and shall cause the Companies to pay the Corporate Withholding
Taxes to the relevant governmental authorities.

               (ii) In the event that the Sellers' Representative reasonably
determines that that the Equity Sellers are required to file their Tax Returns
(including, for this purpose, any corporate Tax Returns reflecting any Corporate
Withholding Taxes) in a manner that would increase the Taxes attributable to a
Section 338(h)(10) Election over the amount of Taxes reflected in the
Reimbursement Amount (for this purpose, determined without subtraction of the
Corporate Withholding Taxes) and any Additional Reimbursement Amounts with
respect to such Taxes, then the Sellers' Representative shall so notify Buyer
not later than thirty (30) days prior to the deadline to file any such Tax
Return (not including any extensions thereof); provided, however, that the
increase in the relevant Equity Sellers' Taxes must relate either to (i) the
treatment of the sale of Purchased Interests as an "installment sale" (as that
term is defined in Code Section 453) for state income tax purposes or (ii) the
credit by Pennsylvania of Taxes paid to another state (such additional Taxes
shall be referred to herein as the "Additional Taxes"). Buyer shall have ten
days from receipt of Sellers' Representative's notice to comment. If Sellers'
Representative reasonably disagrees with Buyer's comments, or if Buyer does not
provide comments within the applicable ten-day period, Buyer shall, not later
than ten (10) days prior to the deadline for filing the relevant Seller Tax
Return: (A) provide a Tax opinion issued by a law firm or accounting firm
reasonably acceptable to Sellers' Representative, in form and substance
satisfactory to Sellers' Representative, that provides the requisite standard of
support

                                      -38-



for the disputed legal positions in the relevant jurisdiction that would enable
the Equity Seller to file its return based on such legal positions and avoid the
assessment of penalties; or (B) pay to the Sellers' Representative, on a fully
grossed-up basis, an amount equal to the lesser of: (i) the Additional Taxes
incurred by the Equity Seller and (ii) the Additional Reimbursement Amount (as
defined herein). The Additional Reimbursement Amount shall be an amount equal to
the difference between: (i) $1,250,000 and (ii) any payments previously made by
Buyer to the Sellers Representative for Additional Taxes pursuant to this
Section 5.11(h)(ii) or 5.11(h)(iii) hereof.

               (iii) If, after the Closing Date, any Equity Seller receives any
Tax Notice and, upon receipt of such Tax Notice, believes it has incurred or
could incur any Additional Taxes, the Equity Seller shall promptly deliver such
Tax Notice to Buyer provided, however, that the failure of an Equity Seller to
provide the Tax Notice to Buyer shall not affect the indemnification rights of
such Equity Seller, pursuant to this Section 5.11(h), except to the extent that
Buyer is prejudiced by such Equity Seller's failure to deliver such Tax Notice.
Notwithstanding any other provision of this Agreement, the Equity Sellers shall
have the right to handle, defend, conduct and control any Tax audit or other
proceeding that relates to the Additional Taxes, provided that Buyer shall have
the right to participate in any such Tax audit or proceeding at its own expense.
The Equity Sellers also shall have the right to compromise and settle any such
Tax audit or proceeding that they have authority to control pursuant to this
Section 5.11(h)(iii), subject to Buyer's consent, which shall not be
unreasonably withheld. If a Final Determination is made that an Equity Seller
owes Additional Taxes, Buyer shall pay to the Sellers' Representative an amount
equal to the lesser of (i) the Additional Taxes assessed against such Equity
Seller and (ii) the Additional Reimbursement Amount.

               (iv) Notwithstanding any other provision of this Agreement,
Equity Sellers shall not be entitled to any indemnification with respect to
Taxes and any other costs relating to the Section 338(h)(10) Election except as
provided in this Section 5.11. Buyer shall not be required to pay the Equity
Sellers under this Section 5.11(h) an aggregate amount in excess of the sum of
(A) the Reimbursement Amount and (B) $1,250,000. Equity Sellers agree that
Buyer's obligation to pay an Additional Reimbursement Amount shall be satisfied
completely upon Buyer's delivery of that Additional Reimbursement Amount to
Sellers' Representative and Equity Sellers shall have no further claim or rights
against Buyer and shall hold Buyer harmless with respect to that Additional
Reimbursement Amount.

          (i) The Equity Purchase Price and the principal amount of the Seller
Notes shall be allocated among the Purchased Interests with respect to each of
the Parent Companies as shown on the Allocation Schedule attached as Exhibit I
hereto. The "Aggregate Deemed Sale Price" for each Parent Company (as described
in Treasury Regulation Section 1.338-4) shall be allocated for income tax
purposes, among the assets of the Parent Companies as shown on the Allocation
Schedule attached hereto. The Sellers and the Buyer agree to cooperate in the
preparation and filing of all Forms 8023 (and any comparable state or local
forms) with respect to the sale of the Companies. The Sellers and the Buyer
agree to prepare and file all Tax Returns in a manner consistent with the
Allocation Schedule, and shall take no position and shall not cause their
Affiliates to take any position inconsistent with the Allocation for Tax
purposes, except to the extent required to do so by applicable law or
regulations.

     5.12. Release of Liens. On or before the Closing Date, the Companies shall
cause the liens listed in Section 2.10 of the Disclosure Letter and set forth on
a letter to be delivered to the Sellers' Representative not later than July 1,
2003 to be released to the extent such liens do not

                                      -39-



secure obligations properly included on the Final Closing Balance Sheets as
contemplated by Section 1.3 hereof.

     5.13. International Students. The Companies covenant that none of the
Schools shall have any foreign students enrolled on or after August 1, 2003 to
the extent required by applicable law, and that each School shall properly
notify each of its foreign students with respect to the expiration of any visa
and any applicable requirement that such student leave the country. Subject to
the limitations contained in Article VIII of this Agreement, the Sellers shall
indemnify Buyer with respect to any claim brought by a foreign student arising
from termination of such student's enrollment with any School or any
non-compliance by the Companies with any immigration laws prior to Closing.

     5.14. Additional Matter. Subject to the limitations contained in Article
VIII of this Agreement, the Sellers shall indemnify Buyer with respect to any
claim arising out of the matters referenced in item 54 in Section 2.23(a) of the
Disclosure Letter.

                                   ARTICLE VI

                         CONDITIONS PRECEDENT TO CLOSING

     6.1. Conditions Precedent to the Obligations of Buyer. The obligations of
Buyer under this Agreement are subject to the fulfillment, prior to the Closing,
of each of the following conditions (any one or more of which may be waived in
whole or in part by Buyer at Buyer's sole option and which conditions are set
out herein for the exclusive benefit of Buyer):

          (a) Updating of Representations and Warranties; Covenants. Each of the
representations and warranties of the Companies and the Sellers under this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and shall be true and correct in all material respects at and as
of the Closing Date, as though made on and as of the Closing Date; provided that
(i) those representations and warranties that address matters only as of a
particular date shall be true and correct as of that date and (ii) those
representations and warranties given as of the Closing Date that contain any
materiality, Material Adverse Effect or Material Adverse Change qualifications
shall be true and correct in all respects. Sellers shall have performed and
complied in all material respects with all obligations, covenants and conditions
required by this Agreement to be performed or complied with by them prior to or
on the Closing Date; provided, that for purposes of determining satisfaction of
the conditions set forth in this Section 6.1(a), all Material Adverse Effect and
Material Adverse Change qualifiers used in any representations or warranties of
the Companies or the Sellers shall be substituted with the following definition:
Material Adverse Effect or Material Adverse Change means any material adverse
effect or material adverse change upon the business, assets, prospects,
financial condition or results of operations of any of the Companies or the
Schools, taken as a whole, or any material adverse change that impairs the
ability of the Sellers or the Companies to consummate the transactions
contemplated by this Agreement other than with respect to any adverse changes
which relate to or result from (i) public or industry knowledge relating to the
transactions contemplated under this Agreement (including any action or inaction
by such person's employees, customers or vendors), or (ii) general economic or
political conditions or other conditions affecting the industry in which the
Companies compete, or (iii) changes in laws or regulations applicable to the
Companies after the date hereof.

                                      -40-



          (b) Educational Agency Approvals. All Educational Approvals listed in
Section 6.1(b) of the Disclosure Letter shall have been issued. In addition,
Pre-acquisition Review Letters shall have been received by Buyer for each of the
Schools that is presently party to a Program Participation Agreement with the
Department of Education.

          (c) Clearances. The expiration of all applicable waiting periods in
connection with the HSR Act shall have occurred.

          (d) Consents and Other Approvals. Sellers and the Companies shall have
duly received, without any condition adverse to Buyer, all of the consents and
other approvals specified in Section 6.1(d) of the Disclosure Letter.

          (e) Litigation. No statute, regulation, injunction or order of any
court of competent jurisdiction, administrative agency or other governmental
body shall be in effect as of the Closing which restrains or prohibits this
Agreement or any of the transactions contemplated hereby or that would limit or
adversely affect Buyer's ownership of the Purchased Interests or control of the
Companies. There shall not have been threatened, nor shall there be pending, any
Litigation by or before any governmental body challenging the lawfulness of or
seeking to prevent or delay any aspect of these transactions or seeking monetary
or other relief by reason of the consummation of any of such transactions.

          (f) Closing Certificates. Sellers shall have executed and delivered,
or caused the Companies to execute or deliver, a certificate, dated on the
Closing Date, certifying to the fulfillment of the conditions set forth in
clauses (a) through (d) of this Section 6.1.

          (g) No Material Adverse Change. There shall be no material adverse
change, from and after the date hereof through the Closing Date, upon the
business, assets, prospects, financial condition or results of operations of any
of the Companies or the Schools, taken as a whole, or any material adverse
change that impairs the ability of the Sellers or the Companies to consummate
the transactions contemplated by this Agreement other than with respect to any
adverse changes which relate to or result from (i) public or industry knowledge
relating to the transactions contemplated under this Agreement (including any
action or inaction by such person's employees, customers or vendors), or (ii)
general economic or political conditions or other conditions affecting the
industry in which the Companies compete, or (iii) changes in laws or regulations
applicable to the Companies after the date hereof.

          (h) Opinion. Buyer shall have received an opinion of counsel to
Sellers and the Companies in the form attached hereto as Exhibit J.

          (i) Note Escrow Agreement. The Sellers' Representative and the Note
Escrow Agent shall have executed and delivered the Note Escrow Agreement.

          (j) Financial Status. All related party receivables and intercompany
accounts of each of the Companies shall have been paid or otherwise settled at
or before the Closing (except (i) related party receivables and intercompany
accounts solely among the Companies; provided, that such related party
receivables and intercompany accounts net to zero as of the Closing, and (ii)
such other receivables and accounts approved by Buyer).

          (k) Withholding Tax Calculation. Parent Companies shall have delivered
to Buyer the preliminary withholding Tax calculations required by Sections
1.1(b), 1.1(c), 1.1(d) and 1.1(e) hereof and shall have made any amendments to
such calculations requested by Buyer.

                                      -41-



          (l) 338(h)(10) Election Forms. The Equity Sellers shall have provided
to Buyer an Internal Revenue Service Form 8023 executed by each of the Equity
Sellers and in a form reasonably satisfactory to Buyer, along with any
equivalent forms required under state, local or foreign Tax law requested by
Buyer and in a form reasonably satisfactory to Buyer.

          (m) Allocation Schedule. The Equity Sellers and Buyer shall have
agreed to the Allocation Schedule in accordance with Exhibit I hereof.

     6.2. Conditions Precedent to the Obligations of Sellers. The obligations of
Sellers to proceed with the Closing hereunder are subject to the fulfillment
prior to or at the Closing of the following conditions (any one or more of which
may be waived in whole or in part by Sellers at their sole option and which
conditions are set out herein for the exclusive benefit of Sellers).

          (a) Updating of Representations and Warranties. Each of the
representations and warranties of the Buyer under this Agreement shall be true
and correct in all material respects as of the date of this Agreement and shall
be true and correct in all material respects at and as of the Closing Date, as
though made on and as of the Closing Date; provided that (i) those
representations and warranties that address matters only as of a particular date
shall be true and correct as of that date and (ii) those representations and
warranties given as of the Closing Date that contain any materiality, material
adverse effect or material adverse change qualifications shall be true and
correct in all respects. Buyer shall have performed and complied in all material
respects with all obligations, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date.

          (b) Clearances. The expiration of all applicable waiting periods in
connection with the HSR Act shall have occurred.

          (c) Litigation. No statute, regulation, injunction or order of any
court of competent jurisdiction, administrative agency or other governmental
body shall be in effect as of the Closing which restrains or prohibits this
Agreement or any of the transactions contemplated hereby or that would limit or
adversely affect the purchase and sale of the Purchased Interests, the Seller
Notes, the Indemnification Notes or the Irrevocable Letters of Credit. There
shall not have been threatened, nor shall there be pending, any Litigation by or
before any governmental body challenging the lawfulness of or seeking to prevent
or delay any aspect of these transactions or seeking monetary or other relief by
reason of the consummation of any of such transactions.

          (d) Closing Certificate. Buyer shall have furnished to Sellers a
certificate of one of its officers, dated on the Closing Date, certifying to the
fulfillment of the conditions set forth in clauses (a) through (c) of this
Section 6.2.

          (e) Note Escrow Agreement. Buyer, the Parent Companies and the Note
Escrow Agent, as applicable, shall have executed and delivered the Note Escrow
Agreement.

          (f) Indemnification Notes. The Sellers' Representative shall have
received the Indemnification Notes, duly executed by Buyer, each accompanied by
the Irrevocable Standby Letters of Credit.

          (g) Allocation Schedule. The Equity Sellers and Buyer shall have
agreed to the Allocation Schedule in accordance with Exhibit I hereof.

                                      -42-



                                  ARTICLE VII

                   COVENANT AGAINST COMPETITION AND DISCLOSURE

     7.1. Non-Competition by Russell E. Palmer. To accord to Buyer the full
value of its purchase hereunder, RPalmer shall not, during the period from the
Closing Date until the date three (3) years thereafter, directly or indirectly
(a) engage or have a financial interest in (as owner, stockholder, partner or
otherwise) the operation of any business which owns, operates, administers,
supports, manages or establishes any post-secondary proprietary program or
institution offering two (2) year programs resulting in a degree or diploma that
competes with Buyer, the Schools, or any of the Companies within any state of
the United States in which a School operates as of the date hereof, (b) disclose
to anyone, or use in competition with Buyer, the Companies or the Schools any
information with respect to any confidential or secret aspect of the operations
of the Companies or the Schools, (c) solicit, directly or indirectly, interfere
with, or attempt to divert or entice away any person or entity who at any time
is an employee, (d) solicit, directly or indirectly, interfere with, or attempt
to divert or entice away any person or entity who at any time is a student or
prospective student of the Schools for any other business which owns, operates,
administers, supports, manages or establishes any post-secondary proprietary
program or institution offering two (2) year programs resulting in a degree or
diploma that competes with Buyer, the Schools, or any of the Companies within
any state of the United States in which a School operates as of the date hereof,
or (e) contact any current employees or persons who, during the preceding six
(6) months, were employees of the Schools where the purpose of such contact is
to recruit students or prospective students for any other schools. Nothing in
this Section 7.1 shall be construed so as to preclude RPalmer or any of his
affiliates from investing in any public company, provided that RPalmer's or his
affiliates' beneficial ownership of any class of such company's securities does
not exceed five (5%) percent of the outstanding securities of such class.

     7.2. Remedies. RPalmer hereby acknowledges that the remedy at law for
breach of the provisions of Section 7.1 will be inadequate and that, in addition
to any other remedy Buyer and the Companies may have, Buyer and the Companies
will be entitled to an injunction restraining any such breach or threatened
breach, without any bond or other security being required.

     7.3. Blue Pencil. If any court construes the covenant in Section 7.1, or
any part thereof, to be unenforceable because of its duration or the area
covered thereby, the court shall have the power to reduce the duration or area
to the extent necessary so that the provision is enforceable, and such
provision, as reduced, shall then be enforceable.

                                  ARTICLE VIII

                  SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

     8.1. Survival of Representations. The representations and warranties set
forth in Articles II, III and IV are considered to be cumulative, and any
limitation or qualification set forth in any one representation and warranty
therein shall not limit or qualify any other representation and warranty
therein. All representations, warranties and agreements made by any party in
this Agreement or pursuant hereto shall survive until the expiration of the one
(1) year period following the Closing Date (the "Survival Period") and no action
or claim for

                                      -43-



Losses (as hereinafter defined) resulting from any misrepresentation or breach
of any warranty or covenant shall be brought or made after the Survival Period,
except that such time limitation shall not apply to any remedies of the Buyer
Indemnitees with respect to:

          (a) claims for misrepresentations and breach of warranties relating to
Sections 2.1, 2.2, 2.4 and 2.5 hereof and Sections 3.1, 3.2 and 3.3 hereof,
which may be asserted without limitation; and

          (b) except as provided in Section 8.1(c) hereof with respect to
certain claims for misrepresentations and breach of warranties relating to
Section 2.19(h) hereof, claims for misrepresentations and breach of warranties
relating to Section 2.19 hereof and claims for breach of covenants under Section
5.11 hereof, which may be asserted until the later of: (i) the two (2) year
anniversary of the Closing Date, and (ii) September 16, 2005.

          (c) claims for misrepresentations and breach of warranties relating to
Section 2.19(h) hereof that relate to potential Losses with respect to the
invalidity of the Section 338(h)(10) Election, which may be asserted until the
three (3) year anniversary of the date on which Buyer files its federal income
Tax return for its tax year that includes the Closing Date;

          (d) claims relating to noncompliance with Title IV of the HEA, which
may be asserted until the three (3) year anniversary of the Closing Date; and

          (e) claims for breaches of covenants relating to Sections 1.3, 5.6,
5.10 and 7.1 which may be asserted until the three (3) year anniversary of the
Closing Date; and

          (f) claims arising from fraud or knowing misrepresentations with
intent to deceive, which may be asserted without limitation; and

Further, the Survival Period shall not apply to any remedies of the Buyer
Indemnitees or the Sellers for any claims for misrepresentations or breach of
warranties, which have been asserted and which are the subject of a written
notice from Buyer to the Sellers' Representative prior to the expiration of the
Survival Period, which notice specifies in reasonable detail the nature of the
claim.

     8.2. Indemnification by the Companies and the Sellers.

          (a) Prior to the Closing, the Companies hereby jointly and severally
agree to indemnify, defend, save and hold Buyer and its officers, directors,
employees, agents and affiliates (collectively, the "Buyer Indemnitees"; which
defined term, from and after the Closing Date, shall include the Companies)
harmless from and against all demands, claims, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses,
including reasonable attorneys' fees, interest, penalties, and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
(excluding, in any event, punitive, consequential and special damages, other
than punitive, consequential and special damages payable to third parties)
(collectively, the "Losses") asserted against, imposed upon, resulting to or
incurred by any Buyer Indemnitees, directly or indirectly, in connection with,
or arising out of, or resulting from (i) a breach of any of the representations
and warranties made by any Company or any Seller in this Agreement, or in any
certificate furnished pursuant hereto by the Companies or any Seller and (ii) a
breach or non-fulfillment of any of the covenants or agreements made by any of
the Companies or any Seller in or pursuant to this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the Sellers shall not be

                                      -44-



responsible for the failure or non-fulfillment of any pre-Closing covenant of
the Companies contained in this Agreement that requires performance prior to
Closing until the Closing has occurred and shall in no event be responsible for
the performance or non-performance of any post-Closing covenant of the Companies
contained in this Agreement.

          (b) After the Closing, the Sellers hereby severally (and not jointly)
agree to indemnify, defend, save and hold the Buyer Indemnitees harmless from
and against all Losses asserted against, imposed upon, resulting to or incurred
by any Buyer Indemnitees, directly or indirectly, in connection with, or arising
out of, or resulting from (i) a breach of any of the representations and
warranties made by any of the Parent Companies or any Seller in this Agreement,
or in any certificate furnished pursuant hereto by the Companies or any Seller,
including any breach of the representations and warranties in Article II and
Article III of this Agreement, provided, that, for purposes of determining the
first Three Hundred Thirty-Seven Thousand Five Hundred Dollars ($337,500) (the
"Initial Threshold") of Loss arising from or otherwise related to a breach of
any such representations and warranties, all references to material,
materiality, material adverse effect or material adverse change shall be
disregarded, provided that in no event shall such references be disregarded to
the extent Losses exceed the Initial Threshold, and (ii) a breach or
non-fulfillment of any of the covenants or agreements made by any of the
Companies or any Seller in or pursuant to this Agreement. Notwithstanding the
foregoing, nothing in this Agreement shall be interpreted as imposing upon any
individual Seller any obligations of the other Sellers as a group that arise
under this Agreement or pursuant to the transactions contemplated hereby, and in
no event shall any Seller be deemed to be responsible for the representations,
warranties or covenants in this Agreement of any other Seller, but shall only be
responsible for such Seller's own representations, warranties and covenants. For
purposes of this Agreement, Losses with respect to the invalidity of the Section
338(h)(10) Election resulting from any misrepresentation or breach of warranties
relating to Section 2.19(h) hereof shall be: (i) the present value of the
additional Tax basis ("Tax Basis") that would have been available to such Buyer
Indemnitees if the representation and warranty provided by Sellers in Section
2.19(h) hereof had been true and correct; and (ii) the Reimbursement Amount and
any Additional Reimbursement Amounts paid by Buyer to Sellers pursuant to
Section 5.11(h) hereof. For purposes of the preceding sentence, the present
value of Tax Basis shall be determined by multiplying the Tax Basis by the
highest applicable federal corporate tax rate in the year in which notice is
served to Sellers of a potential indemnification claim and discounting the
resulting amount by the current prime rate as published by the Wall Street
Journal, East Coast Edition (or any successor publication thereto) on the date
on which notice is served to the Sellers of a potential indemnification claim
relating to such Tax Basis.

     8.3. Indemnification by Buyer. Buyer hereby agrees to indemnify, defend,
save and hold Sellers and, prior to the Closing, the Companies and the
respective heirs, officers, directors, employees, affiliates, members, managers
and agents of each of the foregoing (collectively, the "Seller Indemnitees")
harmless from and against any and all Losses asserted against, imposed upon,
resulting to or incurred by any Seller Indemnitees, directly or indirectly, in
connection with, or arising out of, or resulting from (i) a breach of any of the
representations and warranties made by Buyer in this Agreement or in any
certificate or document furnished pursuant hereto by Buyer, provided, that, for
purposes of determining the Initial Threshold of Loss arising from or otherwise
related to a breach of any such representations and warranties, all references
to material, materiality, Material Adverse Effect or Material Adverse Change
shall be disregarded, provided that in no event shall such references be
disregarded to the extent Losses exceed the Initial Threshold, or (ii) a breach
or non-fulfillment of any of the covenants or agreements made by Buyer in or
pursuant to this Agreement.

                                      -45-



     8.4. Notice of Claims. If any Buyer Indemnitee or Seller Indemnitee (an
"Indemnified Party") believes that it has suffered or incurred any Losses, as
the case may be, for which it is entitled to indemnification under this Article
VIII, such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "Indemnifying Parties") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Losses, such Indemnified Party shall promptly notify the Indemnifying Parties of
such action or suit. Any such notification must be in writing, must state in
reasonable detail the nature and basis of the claim, action or Loss and a
reference to this Agreement and Section. At the option of the Indemnified Party,
such notice must be either be accompanied by any available information and
documentation supporting and verifying the actual or anticipated claim, action
or Loss that may be subject to indemnification hereunder, or an invitation to
(and granting of access to) review any such information or documentation at the
executive offices of the Indemnified Party. The failure of an Indemnified Party
to give any notice required by this Section 8.4 or Section 8.11 shall not affect
any of such party's rights under this Article VIII except and to the extent that
such failure is actually prejudicial to the rights or obligations of the
Indemnifying Party.

     8.5. Limitations of Liability; Acknowledgements.

          (a) Deductible.

               (i) The Companies and the Sellers shall not be obligated to
provide any such indemnification or reimbursement for Losses unless the
aggregate amount that the Buyer is entitled to recover in respect of all such
claims exceeds Six Hundred Seventy-Five Thousand Dollars ($675,000) (the "Seller
Deductible") and then only for amounts in excess of the Seller Deductible.

               (ii) The Buyer shall not be obligated to provide any such
indemnification or reimbursement for Losses unless the aggregate amount that the
Companies (prior to the Closing) and the Sellers are entitled to recover in
respect of all such claims exceeds Six Hundred Seventy-Five Thousand Dollars
($675,000) (the "Buyer Deductible") and then only for amounts in excess of the
Buyer Deductible.

          (b) Maximum Amount. In the event the Closing does not occur, the
maximum aggregate obligations of the Companies in respect of Losses shall be
$11,000,000. Except as otherwise set forth in Sections 8.5(c) through (h), the
maximum aggregate obligations of the Sellers in respect of Losses shall not
exceed the principal amount of the Indemnification Notes; provided, that, prior
to the Closing, or in the event that the Closing does not occur, the Sellers
shall have no obligation or liability to the Buyer Indemnitees pursuant to
Section 8.2(b)(i) and (ii). From and after the Closing, the Sellers will be
responsible for any and all Losses (subject to the limitations set forth in
Sections 8.1 and 8.5 hereof) arising from a breach by the Companies of the
representations and warranties of the Companies contained in this Agreement, and
that the Companies will not be responsible for any Losses after the Closing.

          (c) Notwithstanding the foregoing, the limitations in Sections 8.5(a)
and (b) shall not apply in respect of claims for misrepresentations and breach
of warranties relating to Sections 2.1, 2.2, 2.4 and 2.5 hereof and Sections
3.1, 3.2 and 3.3 hereof, which may be asserted without limitation as to amount.

                                      -46-



          (d) Notwithstanding the foregoing, the limitations in Section 8.5(b)
shall not apply in respect of claims for misrepresentations and breach of
warranties relating to Section 2.21 ("Environmental Claims"). The aggregate
obligation for Losses in respect of misrepresentations and breach of warranties
relating to Section 2.21 shall not exceed $20,000,000 (less the amount of any
and all Losses previously recovered from reductions in, or set offs against the
principal amount of the Indemnification Notes);

          (e) Notwithstanding the foregoing, the limitations in Sections 8.5(a)
and (b) shall not apply in respect of claims for misrepresentations and breach
of warranties relating to Sections 2.19 and 5.11. The aggregate obligation for
Losses in respect of misrepresentations and breach of warranties relating to
Section 2.19 hereof (except for Losses with respect to the invalidity of the
Section 338(h)(10) Election resulting from any misrepresentations or breach of
warranties relating to Section 2.19(h), which are subject to the provisions of
Section 8.5(f) hereof) shall not exceed $10,000,000 (less the amount of any and
all Losses previously recovered from reductions in, or set offs against the
principal amount of the Indemnification Notes);

          (f) Notwithstanding the foregoing, the limitations in Sections 8.5(a)
and (b) shall not apply in respect of claims for misrepresentations and breach
of warranties relating to Section 2.19(h) hereof to the extent that such claims
relate to Losses with respect to the invalidity of the Section 338(h)(10)
Election. The aggregate obligations for such Losses with respect to the
invalidity of the Section 338(h)(10) Election shall not exceed: (i) for claims
with respect to which Buyer provides notice to Sellers' Representative prior to
expiration of the survival period described in Section 8.1(b) hereof, an amount
equal to the sum of (A) $12,250,000, plus (B) the Reimbursement Amount and any
Additional Reimbursement Amounts, plus (C) $10,000,000 minus amount of any
Losses previously recovered by Buyer Indemnitees in respect of claims for
misrepresentations and breach of warranties relating to Section 2.19 and Section
5.11 hereof; and (ii) for claims with respect to which Buyer provides notice to
Sellers' Representative after the expiration of the survival period described in
Section 8.1(b) hereof, an amount equal to the sum of: (A) $12,250,000, plus (B)
the Reimbursement Amount and any Additional Reimbursement Amounts made by Buyer
pursuant to Section 5.11(h) hereof, minus (C) the amount of any Losses
previously recovered by Buyer Indemnitees pursuant to Sections 8.5(e) and
8.5(f)(i) hereof, to the extent such recovered Losses exceed $10,000,000.

          (g) Notwithstanding the foregoing, the limitations in Sections 8.5(b)
shall not apply to claims relating to noncompliance with Title IV of the HEA.
The aggregate obligation for Losses in respect of noncompliance with Title IV of
the HEA, shall not exceed $25,000,000 with respect to any such claims asserted
prior to the first anniversary of the Closing Date (less the amount of any and
all Losses previously recovered from reductions in, or set offs against the
principal amount of the Indemnification Notes), with such maximum allowable
recovery decreasing (x) to $15,000,000 with respect to any such claims first
asserted after the first anniversary of the Closing Date and before the second
anniversary of the Closing Date (less the amount of any and all Losses
previously recovered from reductions in, or set offs against the principal
amount of the Indemnification Notes), and (y) $10,000,000 with respect to any
such claims first asserted after the second anniversary of the Closing Date and
before the third anniversary of the Closing Date (less the amount of any and all
Losses previously recovered from reductions in, or set offs against the
principal amount of the Indemnification Notes);

          (h) Notwithstanding anything to the contrary contained herein, the
limitations contained in Sections 8.5(a) and (b) shall not apply to claims
arising from fraud or knowing misrepresentations with intent to deceive, which
may be asserted without limitation as to

                                      -47-



amount. Notwithstanding anything to the contrary contained in this Agreement, no
Seller will have any obligation or liability under this Section 8.5(h) to the
Buyer Indemnitees for Losses in addition to or in excess of that portion of the
Aggregate Purchase Price received by such Seller hereunder; and

          (i) Notwithstanding the foregoing, the limitations in Sections 8.5(a)
shall not apply in respect of claims for breach or non-fulfillment of the
covenants contained in Article I hereof.

     8.6. Exclusive Remedy; Waivers. Buyer and the Sellers acknowledge and agree
that their sole and exclusive remedy for monetary damages with respect to any
and all claims relating to the subject matter of this Agreement shall be
pursuant to the indemnification provisions set forth in this Article VIII and
Section 5.11. In furtherance of the foregoing, Buyer hereby waives and releases
the Sellers from any and all rights, claims and causes of action, known and
unknown, foreseen or unforeseen, for monetary damages which exist or which may
arise in the future under any Environmental Law, including any common law
relating to environmental matters, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S)9601 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.) or any
other statutes now or hereafter in effect. Without in any way limiting the
obligations of the Sellers under this Agreement, each Seller hereby expressly
and irrevocably waives any rights of contribution, subrogation, recoupment,
counterclaim, set-off or indemnification that such Seller may have against any
of the Companies.

     8.7. Mitigation.

          (a) Buyer shall take and cause its affiliates (including the
Companies) to take all reasonable steps to mitigate any Loss upon becoming aware
of any event which would reasonably be expected to, or does, give rise thereto;
provided, however, that nothing contained in this Agreement will require Buyer
or any affiliate of Buyer to take any action, or refrain from taking any action,
which Buyer, in its sole discretion, deems not to be in the best interests of
Buyer, the Companies or the Schools.

          (b) The Sellers and, prior to the Closing, the Companies shall take
and cause each of their affiliates to take all reasonable steps to mitigate any
Loss upon becoming aware of any event which would reasonably be expected to, or
does, give rise thereto; provided, however, that nothing contained in this
Agreement will require the Sellers, the Companies or any affiliate of any of the
foregoing to take any action, or refrain from taking any action, which, in its
sole discretion, it deems not to be in its best interests.

     8.8. Collateral Sources. The amount of any Loss or Taxes for which
indemnification is provided under this Article VIII or Section 5.11 shall be net
of (i) in the case of Section 8.2, any accruals or reserves established on the
Final Closing Balance Sheets with respect to the matters to which those Losses
relate, (ii) any amounts recovered by the Indemnified Party pursuant to any
indemnification by or indemnification agreement with any third party, (iii) any
insurance proceeds or other cash receipts or sources of reimbursement received
(each of the foregoing named in clauses (i), (ii) and (iii) a "Collateral
Source") and (iv) an amount equal to the Tax benefit, if any, attributable to
such Loss. Sellers hereby acknowledge that it is the belief of Buyer that there
will be no Tax benefit associated with any potential Loss. If the amount to be
netted hereunder from any payment required under Article VIII is determined
after payment by the Indemnifying Party of any amount otherwise required to

                                      -48-



be paid to an Indemnified Party pursuant to this Article VIII, the Indemnified
Party shall repay to the Indemnifying Party, promptly after such determination,
any amount that the Indemnifying Party would not have had to pay pursuant to
this Article VIII had such determination had been made at the time of such
payment. The Indemnified Party shall use its reasonable efforts to seek recovery
from any Collateral Source for any such claim for indemnity before or within a
reasonable amount of time after making any claim for indemnification by the
Indemnifying Party. Any Indemnifying Party may, in its sole discretion, require
any Indemnified Party to grant an assignment of the right of such Indemnified
Party to assert a claim against any Collateral Source. In the event of such
assignment, the Indemnifying Party will pursue such claim at its own expense.

     8.9. Procedures Relating to Indemnification.

          (a) General Procedures. Except as provided in Section 5.11 with
respect to Tax matters and as contemplated by Section 8.9(b) hereof, the
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing (provided that the fees and expenses of such counsel shall be
borne by the Indemnified Party and shall not constitute a Loss hereunder) and
reasonably acceptable to the Indemnifying Party, the defense of any third party
claim, action or suit; provided that the Indemnified Party shall have certified
in writing that subsection (3) of the Litigation Conditions has been and will
continue to be satisfied. The Indemnified Party shall not be entitled, or shall
lose its right, to contest, defend, litigate and settle the third-party claim if
the Indemnifying Party shall, in the exercise of reasonable judgment and in good
faith, give written notice to the Indemnified Party of the Indemnified Party's
failure to satisfy any of the Litigation Conditions; provided that the
Indemnifying Party shall undertake to conduct and control the defense of such
action or suit and, in the event that the Indemnifying Party assumes defense of
such action or suit as a result of a failure of the Indemnified Party to satisfy
the requirements of subsection (2) of the Litigation Conditions, pay the fees
and expenses of counsel for the Indemnified Party incurred by the Indemnified
Party prior to assumption of the conduct and control of such action or suit by
the Indemnifying Party. For purposes hereof, the term "Litigation Conditions"
means each of the following has occurred and is continuing: (1) the Indemnified
Party agrees in writing to assume the defense of such third party claim within
ten (10) days of the Indemnified Party having given notice of the third-party
claim to the Indemnifying Party; (2) the third party claim is not likely, in the
Indemnifying Party's reasonable judgment to have a material adverse effect on
the reputation or business prospects of any Indemnifying Party; (3) the
Indemnified Party shall not be involved in any other claim, controversy or
dispute with the same third party claimant that is not the subject matter of the
litigation being controlled or another matter to which the Indemnified Party is
subject to indemnification under this Agreement; provided, that this subsection
(3) requirement shall not apply to any claim, controversy or dispute involving
any Education Agency (including the Department of Education); and (4) the
Indemnified Party shall diligently contest the third-party claim. The
Indemnified Party shall give the Indemnifying Party advance notice of any
proposed compromise or settlement and may not compromise or settle such third
party claim without obtaining the prior written consent of the Indemnifying
Party which consent shall not be unreasonably withheld; provided that the
Indemnified Party shall not consent to any settlement that does not include as
an unconditional term thereof the giving of a complete release from liability
with respect to such action or suit to the Indemnifying Party. The Indemnifying
Party shall have the right to participate in, and to be represented by counsel
(at its own expense) in any such contest, defense, litigation or settlement
conducted by the Indemnified Party. In the event that the Indemnified Party does
not elect to conduct and control the defense of such action or suit

                                      -49-



and the Indemnifying Party then elect to undertake, conduct and control the
conduct and settlement of such action or suit: (A) the Indemnifying Parties
shall not consent to any settlement that does not include as an unconditional
term thereof the giving of a complete release from liability with respect to
such action or suit to the Indemnified Party; (B) the Indemnifying Party shall
give the Indemnified Party advance notice of any proposed compromise or
settlement and may not compromise or settle such third party claim without
obtaining the prior written consent of the Indemnified Party which consent shall
not be unreasonably withheld; and (C) the Indemnifying Party shall permit the
Indemnified Party to participate in (but not control) such conduct or
settlement, at the Indemnified Party's sole expense, through counsel chosen by
the Indemnified Party. The Indemnified Party shall have the sole and exclusive
right to settle any third-party claim, on such terms and conditions as it deems
reasonably appropriate, to the extent such third-party claim involves equitable
or other non-monetary relief.

          (b) Certain Environmental Claims Procedures and Limitations. With
respect to any Environmental Claim the resolution of which requires
investigation, remediation or other response action ("Remediation") at any Real
Property or at any other location, the Sellers' Representative shall have the
right in its sole discretion to conduct and control the Remediation, and the
Sellers' Representative shall only be responsible to conduct such Remediation
which is required under Environmental Laws as such laws are in effect as of the
Closing Date, and to conduct such Remediation to the least stringent level
required by such Environmental Laws considering the pre-Closing use of the
property, and to do so with contractors of its choosing and utilizing the most
cost-effective method of Remediation. With respect to any Environmental Claims
relating to violations of Environmental Laws, the Sellers' Representative shall
have the right in its sole discretion to defend such claims, and the Sellers
shall be responsible for fines and penalties and Buyer's reasonable attorney's
fees, if the Sellers' Representative elects to have Buyer defend such claim, in
addition to the costs of Remediation (as limited by the preceding sentence) if
such claim requires Remediation. The Sellers shall not be responsible for any
Environmental Claims unless such claim is triggered by a third party (and not
initiated by the Buyer), and with respect to any Environmental Claim that
relates to contamination, unless such contamination is at levels which violate
Environmental Laws as such laws were in effect as of the Closing Date.

     8.10. Certain Understandings. Each of the parties is a sophisticated legal
entity or person that was advised by experienced counsel and, to the extent it
deemed necessary, other advisors in connection with this Agreement. Accordingly,
each of the parties hereby acknowledges that (i) no party has relied or will
rely in respect of this Agreement or the transactions contemplated hereby upon
any document or written or oral information previously furnished to or
discovered by it or its representatives, other than this Agreement (including
the Disclosure Letter), (ii) there are no representations or warranties by or on
behalf of any party hereto or any of its respective affiliates or
representatives other than those expressly set forth in this Agreement, and
(iii) the parties' respective rights and obligations with respect to this
Agreement and the events giving rise thereto will be solely as set forth in this
Agreement.

     8.11. Access to Information. From and after the Closing Date, the Sellers
and Buyer shall reasonably cooperate with each other so that (subject to any
limitations that are reasonably required to preserve any applicable
attorney-client privilege) each party has reasonable access to the business
records, contracts and other information existing at the Closing Date and
relating in any manner to the Purchased Interests, the operation of the Schools
or the Companies (whether in the possession of the Sellers or Buyer). No files,
books or records existing at the Closing Date and relating in any manner to the
Purchased Interests, the operation of the Schools or the

                                      -50-



Companies shall be destroyed by any party during the two (2) year period after
the Closing Date (which period shall be extended upon the reasonable request of
either party) without giving the other party at least thirty (30) days prior
written notice, during which time such other party shall have the right to
examine and to remove any such files, books and records prior to their
destruction. The access to files, books and records contemplated by this Section
8.11 shall be during normal business hours and upon not less than two (2) days
prior written request, shall be subject to such reasonable limitations as the
party having custody or control thereof may impose to preserve the
confidentiality of information contained therein, and shall not extend to
material subject to a claim of privilege unless expressly waived by the party
entitled to reasonably claim the same.

     8.12. RPalmer Guaranty.

          (a) Guaranty. In accordance with this guaranty (the "Guaranty"),
RPalmer hereby irrevocably, absolutely and unconditionally, becomes surety for
and guarantees payment to Buyer of Sellers' obligations to pay any and all
Losses hereunder arising out of or resulting from:

               (i) claims for misrepresentations and breach of warranties
relating to Sections 2.1, 2.2 , 2.4 and 2.5 and Sections 3.1, 3.2 and 3.3
hereof; and

               (ii) claims for misrepresentations and breach of warranties
relating to Section 2.19 and breaches of covenants relating to Section 5.11
hereof; and

               (iii) claims relating to noncompliance by the Companies with
Title IV of the HEA; and

               (iv) claims for breaches of covenants relating to Sections 1.3,
5.6, 5.10 and 7.1 hereof;

          (b) Notwithstanding the foregoing, in no event shall RPalmer's
liability under this Guaranty exceed (i) the lesser of (x) $6,600,000 or (y) the
aggregate amount distributed to the Sellers upon payment of the Indemnification
Notes in accordance with the payment terms of the Indemnification Notes, minus
(ii) the aggregate amount equal to any payments made by any Seller to the Buyer
for Losses (other than payments deemed made by any Seller as a result of the
reduction in the principal amount of the Indemnification Notes or the set off by
Buyer against the principal amount of the Indemnification Notes in accordance
with their terms).

          (c) Notwithstanding anything to the contrary, no action or claim under
this Guaranty may be brought or asserted until the date that is the first
anniversary of the Closing Date, and no action or claim under this Guaranty may
be brought or asserted after the date that is the second anniversary of the
Closing Date.

          (d) The obligation under this Guaranty is irrevocable, absolute and
continuing until terminated in accordance with the terms set forth in this
Section 8.12. RPalmer's responsibility shall not be discharged, released,
diminished, or impaired in whole or in part by any setoff, counterclaim,
defense, act or occurrence that RPalmer may have against the Sellers as a result
or arising out of this or any other transaction.

          (e) The obligations of RPalmer under this Guaranty shall be subject to
all rights and limitations set forth in this Article VIII.

                                      -51-



     8.13. Warrant Sellers' Guaranty.

          (a) Guaranty. In accordance with this guaranty (the "TL Guaranty"),
Tech Leaders hereby irrevocably, absolutely and unconditionally, becomes surety
for and guarantees payment to Buyer of TL First Corp's obligations to pay any
and all Losses arising under this Agreement.

          (b) The obligations under this TL Guaranty are irrevocable, absolute
and continuing until terminated. Tech Leaders' responsibility shall not be
discharged, released, diminished, or impaired in whole or in part by any setoff,
counterclaim, defense, act or occurrence that Tech Leaders may have against TL
First Corp as a result or arising out of this or any other transaction.

                                   ARTICLE IX

                                  MISCELLANEOUS

     9.1. Termination.

          (a) The parties may terminate this Agreement by mutual written consent
at any time prior to the Closing;

          (b) Buyer may terminate this Agreement by giving written notice to
Sellers at any time prior to the Closing if the Closing has not occurred on or
before October 15, 2003, unless the failure results primarily from Buyer itself
breaching any representation, warranty or covenant contained in this Agreement,
or unless an extension is mutually agreeable to Sellers and Buyer; and

          (c) Sellers may terminate this Agreement by giving written notice to
Buyer at any time prior to the Closing if the Closing has not occurred on or
before October 15, 2003, unless the failure results primarily from any Seller or
any Company breaching any representation, warranty or covenant contained in this
Agreement, or unless an extension is mutually agreeable to Sellers and Buyer.

     9.2. Construction. As used herein, unless the context otherwise requires:
references to "Article", "Section" or "clause" are to an article, section or
clause hereof; "include," "includes" and "including" are deemed to be followed
by "without limitation" whether or not they are in fact followed by such words
or words of like import; "hereof," "herein," "hereunder" and comparable terms
refer to the entirety of this Agreement and not to any particular article,
section or other subdivision hereof or attachment hereto; references herein to
"knowledge" of Sellers or the Companies are limited to the actual knowledge of
such Seller or Sellers or the executive officers of the applicable Company;
references to an agreement or other instrument or law, statute or regulation are
referred to as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provision) and all regulations, rulings
and interpretations promulgated pursuant thereto; and the headings of the
various articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.

     9.3. Notices. All notices, and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made the second day after mailing, if sent by registered or certified
mail, return receipt requested, upon delivery,

                                      -52-



if sent by hand delivery, when received, if sent by prepaid overnight carrier,
with a record of receipt, or the first day after the date of dispatch, if sent
by cable, telegram, facsimile or telecopy (with a copy simultaneously sent by
registered or certified mail, return receipt requested), to the parties at the
following addresses:

          (a)  if to Buyer to:

               Education Management Corporation
               210 Sixth Avenue
               33rd Floor
               Pittsburgh, PA 15222-2603
               Facsimile: (412) 562-0900
               Attn: John R. McKernan, President

               and

               Frederick W. Steinberg, Esquire
               Senior Vice President, General Counsel
               and Secretary
               Education Management Corporation
               210 Sixth Avenue
               33rd Floor
               Pittsburgh, PA 15222-2603
               Facsimile: (412) 562-0900

          (b)  if to the Sellers' Representative:

               Russell E. Palmer
               c/o The Palmer Group
               Suite 530
               3600 Market Street
               Philadelphia, PA 19104
               Facsimile: (215) 243-2593

               with a copy to:

               Dechert LLP
               4000 Bell Atlantic Tower
               1717 Arch Street
               Philadelphia, PA 19103
               Attn: John D. LaRocca, Esq.
               Facsimile: (215) 994-2222

          (c) if to the Sellers, to the address set forth opposite such Seller's
name in Section 9.3(c) of the Disclosure Letter

               with a copy to:

               Dechert LLP
               4000 Bell Atlantic Tower
               1717 Arch Street

                                      -53-



               Philadelphia, PA 19103
               Attn: John D. LaRocca, Esq.
               Facsimile: (215) 994-2222

Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with the foregoing.

     9.4. Assignment. This Agreement and all the rights and powers granted
hereby shall bind and inure to the benefit of the parties hereto and their
respective permitted heirs, successors and assigns. This Agreement and the
rights, interests and obligations hereunder may not be assigned by any party
hereto, without the prior written consent of the other parties hereto.

     9.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
its conflict of law doctrines.

     9.6. Amendment and Waiver; Cumulative Effect. Upon the agreement of all of
the parties hereto, this Agreement may be amended in any respect, and any party,
as to such party, may (i) extend the time for the performance of any of the
obligations of any other party, (ii) waive any inaccuracies in representations
by any other party, (iii) waive compliance by any other party with any of the
agreements contained herein and performance of any obligations by such other
party, and (iv) waive the fulfillment of any condition that is precedent to the
performance by such party of any of its obligations under this Agreement. To be
effective, any such amendment or waiver must be in writing and be signed by the
party against whom enforcement of the same is sought. Neither the failure of any
party hereto to exercise any right, power or remedy provided under this
Agreement where otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party with its obligations hereunder, nor
any custom or practice of the parties at variance with the terms hereof, shall
constitute a waiver by such party of its right to exercise any such right, power
or remedy or to demand such compliance. The rights and remedies of the parties
hereto are cumulative and not exclusive of the rights and remedies that they
otherwise might have now or hereafter, at law, in equity, by statute or
otherwise.

     9.7. Contingent Agreement; Entire Agreement; No Third Party Beneficiaries.
Notwithstanding anything to the contrary contained herein, this Agreement
(including the recitals hereto) and the Exhibits and Disclosure Letter attached
hereto is binding on the Sellers from and after execution of this Agreement by
Sellers but is not binding on the Buyer unless approved by the Board of
Directors of Buyer on or before June 24, 2003. Unless and until such approval is
obtained, there is no binding obligation of Buyer with respect to the
transactions contemplated hereby, except as otherwise set forth in the
Confidentiality Agreement and the binding provisions of that certain Letter of
Intent, dated April 2, 2003, as amended. This Agreement, (including the recitals
hereto) and the Exhibits and Disclosure Letter attached hereto set forth all of
the promises, covenants, agreements, conditions and undertakings of the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, negotiations, inducements or
conditions, express or implied, oral or written. This Agreement is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder, except the provisions of Sections 8.2 and 8.3 relating to Buyer
Indemnitees and Seller Indemnitees who are intended to benefit from such
indemnities.

                                      -54-



     9.8. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.

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

     9.10. Sellers' Representative.

          (a) The Sellers, by virtue of their execution of this Agreement,
hereby irrevocably appoint RPalmer, as their Sellers' Representative for
purposes of this Agreement, the Note Escrow Agreement and the Indemnification
Notes, and consent to the taking by the Sellers' Representative of any and all
actions and the making of any decisions required or permitted to be taken by
them under this Agreement, the Note Escrow Agreement or the Indemnification
Notes (including the exercise of the power (i) to authorize set off by Buyer of
the principal amount of the Indemnification Notes in satisfaction of claims by
Buyer, (ii) to agree to, negotiate, enter into settlements and compromises of
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, (iii) to resolve any claim made
pursuant to this Agreement, and (iv) take all actions necessary in the judgment
of the Sellers' Representative for the accomplishment of the foregoing),
provided that the Sellers' Representative shall (A) provide periodic notice to
the Sellers regarding the status of the Indemnification Notes and (B) use
reasonable efforts to inform the Sellers regarding any claims resulting in the
reduction of the principal amount of the Indemnification Notes, or any set off
by Buyer against the principal of the Indemnification Notes, in excess of
$100,000. By its execution below, the Sellers' Representative hereby accepts its
appointment as the Sellers' Representative for purposes of this Agreement, the
Note Escrow Agreement and the Indemnification Notes. Buyer shall be entitled to
deal exclusively with the Sellers' Representative on all matters relating to
Section 1.3, 1.5(a), 1.6, 5.1(e), 5.5 and 5.11, Article VIII, the Note Escrow
Agreement and the Indemnification Notes.

          (b) The Sellers' Representative shall be authorized to take any action
and to make and deliver any certificate, notice, consent or instrument required
or permitted to be made or delivered under this Agreement, the Note Escrow
Agreement or the Indemnification Notes (an "Instrument") which the Sellers'
Representative determines in his discretion to be necessary, appropriate or
desirable, and, in connection therewith, to hire or retain, at the sole expense
of the Sellers, such counsel, investment bankers, accountants, representatives
and other professional advisors as he determines in his sole and absolute
discretion to be necessary, advisable or appropriate in order to carry out and
perform his rights and obligations hereunder. Any party receiving an Instrument
from the Sellers' Representative shall have the right to rely in good faith upon
such certification, and to act in accordance with the Instrument without
independent investigation.

                                      -55-



          (c) If the Sellers' Representative shall die, become disabled or
otherwise be unable to fulfill his responsibilities as agent of the Sellers,
then the Sellers shall, within ten (10) days after such death or disability,
appoint a successor representative by a vote of the beneficial holders of a
majority of the principal amount of the Indemnification Notes. Any such
successor shall become a "Sellers' Representative" for purposes of this
Agreement, the Note Escrow Agreement and the Indemnification Notes. The Sellers'
Representative may be replaced prior to the Closing Date by a vote of the
holders of a majority of the outstanding Purchased Interests or after the
Closing Date by the beneficial holders of a majority of the principal amount of
the Indemnification Notes.

          (d) The Sellers hereby forever release and discharge the Sellers'
Representative, legal counsel and accountants for the Sellers' Representative
(collectively, the "Released Party") of and from any and all claims and demands
of every kind and nature, known and unknown, suspected and unsuspected,
disclosed and undisclosed, for damages actual and consequential, past, present
and future, arising out of or in any way connected with the actions of the
Released Party so long as the Released Party is acting within his, her or its
capacity and the mandate of the role of Sellers' Representative as contemplated
by this Agreement, the Note Escrow Agreement and the Indemnification Notes.

          (e) To the extent permitted by law, each of the Sellers, pro rata in
accordance with such Seller's Indemnity Percentage, will indemnify and hold
harmless the Released Party against any losses, claims, expense, cause of
action, damages or liabilities (severally, but not jointly) to which the
Released Party may become subject in connection with fulfilling the role of
Sellers' Representative as contemplated by this Agreement, the Note Escrow
Agreement and the Indemnification Notes; and each of the Sellers will reimburse
any person intended to be indemnified pursuant to this section for any legal or
other expenses as reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage, liability or action.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]

                                      -56-



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

WITNESS:                                 EDUCATION MANAGEMENT CORPORATION


/s/ Richard Them                         By: /s/ John R. McKernan, Jr.
- --------------------------------------       ----------------------------------
                                         Title: President


WITNESS:                                 RUSSELL E. PALMER


/s/ Jeannette A. Drake                   /s/ Russell E. Palmer
- --------------------------------------   --------------------------------------
                                         Russell E. Palmer


WITNESS:                                 BRADLEY C. PALMER


/s/ Louis M. Marino                      /s/ Bradley Palmer
- --------------------------------------   --------------------------------------
                                         Bradley C. Palmer


WITNESS:                                 THE STEPHEN R. PALMER LIVING TRUST


/s/ Jeannette A. Drake                   By: /s/ Russell E. Palmer III
- --------------------------------------       ----------------------------------
                                         Trustee:


WITNESS:                                 THE RUSSELL E. PALMER III LIVING TRUST


/s/ Jeannette A. Drake                   By: /s/ Russell E. Palmer III
- --------------------------------------       ----------------------------------
                                         Trustee:


WITNESS:                                 THE KAREN KORFMANN LIVING TRUST


/s/ Carol A. Tino                        By: /s/ Lowell F. Raeder
- --------------------------------------       ----------------------------------
                                         Trustee:



WITNESS:                                 MICHAEL MASIN


/s/ Jeannette A. Drake                   /s/ Michael Masin
- --------------------------------------   --------------------------------------
                                         Michael Masin


WITNESS:                                 CONNIE WALTER


/s/ Jeannette A. Drake                   /s/ Connie Walter
- --------------------------------------   --------------------------------------
                                         Connie Walter


WITNESS:                                 TECHNOLOGY LEADERS L.P.


                                         By: Technology Leaders Management L.P.,
                                         its general partner


                                         By: TL Ventures Inc., its general
                                         partner


/s/ Jeannette A. Drake                   By: /s/ Robert E. Keith, Jr.
- --------------------------------------       ----------------------------------
                                         Name: Robert E. Keith, Jr.
                                         Title: Managing Director


WITNESS:                                 TECHNOLOGY LEADERS FIRST CORP.


/s/ Jeannette A. Drake                   By: /s/ Robert E. Keith, Jr.
- --------------------------------------       ----------------------------------
                                         Name: Robert E. Keith, Jr.
                                         Title: Managing Director


WITNESS:                                 J. WILLIAM BROOKS


/s/ Jerry Smith                          /s/ J. William Brooks
- --------------------------------------   --------------------------------------
                                         J. William Brooks


WITNESS:                                 GERARD FRANCOIS


/s/ Jeannette A. Drake                   /s/ Gerard Francois
- --------------------------------------   --------------------------------------
                                         Gerard Francois

                                      -2-



WITNESS:                                 DANNY FINUF


/s/ Jerry Smith                          /s/ Danny Finuf
- --------------------------------------   --------------------------------------
                                         Danny Finuf


WITNESS:                                 AMERICAN EDUCATION CENTERS, INC.


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO


WITNESS:                                 BROWN MACKIE EDUCATION CORPORATION


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO


WITNESS:                                 COMMONWEALTH BUSINESS COLLEGE EDUCATION
                                         CORPORATION


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO


WITNESS:                                 ASHER SCHOOL OF BUSINESS EDUCATION
                                         CORPORATION


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------

                                      -3-



                                         Name: President
                                         Title: CEO


WITNESS:                                 STAUTZENBERGER COLLEGE EDUCATION
                                         CORPORATION


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO


WITNESS:                                 MICHIANA COLLEGE EDUCATION CORPORATION


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO

WITNESS:                                 SELLERS' REPRESENTATIVE


/s/ Jerry Smith                          By: /s/ J. William Brooks
- --------------------------------------       ----------------------------------
                                         Name: President
                                         Title: CEO


/s/ Jeannette A. Drake                   /s/ Russell E. Palmer
- --------------------------------------   --------------------------------------

                                      -4-

EX-4.1

                                                                     EXHIBIT 4.1

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

                                  by and among

                        EDUCATION MANAGEMENT CORPORATION

                                 as the Borrower

                             THE BANKS PARTY HERETO

                                  as the Banks

                                       and

                       NATIONAL CITY BANK OF PENNSYLVANIA,

                                  as the Agent

                                       and

            WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent

                       SUNTRUST BANK, as Syndication Agent

                   FLEET NATIONAL BANK, as Documentation Agent

                                       and

                   JPMORGAN CHASE BANK, as Documentation Agent

                                 August 18, 2003



                                TABLE OF CONTENTS



                                                                                        Page
                                                                                        ----
                                                                                       
INDEX OF EXHIBITS..........................................................................v

INDEX OF SCHEDULES........................................................................vi

ARTICLE I. DEFINITIONS.....................................................................2
    1.1    Defined Terms...................................................................2
    1.2    GAAP Definitions...............................................................19
    1.3    Other Definitional Conventions.................................................19
    1.4    Headings.......................................................................20

ARTICLE II. THE CREDIT....................................................................20
    2.1    Revolving Credit Loans.........................................................20
    2.2    Swing Loans; Supplemental Swing Loans..........................................24
    2.3    Letters of Credit..............................................................29
    2.4    Term Loan Subfacility..........................................................35
    2.5    Certain Provisions Relating to Interest Rates..................................38
    2.6    Yield Protection and Reimbursement.............................................43
    2.7    Capital Adequacy...............................................................45
    2.8    [Intentionally Omitted.].......................................................46
    2.9    Lending Offices................................................................46
    2.10   Time, Place and Manner of Payments.............................................46
    2.11   Payment From Accounts Maintained by the Borrower...............................46
    2.12   Swing Loan Settlement Date Procedures..........................................46
    2.13   Substitution of a Bank.........................................................47

ARTICLE III. SECURITY; SET-OFF............................................................47
    3.1    Security Interests; Mortgages..................................................47
    3.2    Set-Off........................................................................48

ARTICLE IV. REPRESENTATIONS AND WARRANTIES................................................48
    4.1    Existence......................................................................48
    4.2    Authority......................................................................49
    4.3    Capitalization of Subsidiaries.................................................49
    4.4    Validity and Enforceability....................................................49
    4.5    No Conflict....................................................................49
    4.6    Consents.......................................................................50
    4.7    Litigation.....................................................................50
    4.8    Compliance With Applicable Laws, etc...........................................50


                                       -i-



                                                                                       
    4.9    Financial Statements...........................................................50
    4.10   Environmental Matters..........................................................50
    4.11   Deferred Compensation Plans....................................................51
    4.12   Title to Properties............................................................52
    4.13   Intellectual Property..........................................................52
    4.14   Tax Returns and Payments.......................................................53
    4.15   Material Adverse Change........................................................53
    4.16   Solvency.......................................................................53
    4.17   Investment Company Act.........................................................53
    4.18   Public Utility Holding Company Act.............................................54
    4.19   Liens and Security Interests...................................................54
    4.20   Margin Stock...................................................................54
    4.21   Updates to Schedules...........................................................54
    4.22   Disclosure.....................................................................54
    4.23   Use of Proceeds................................................................55
    4.24   Insurance......................................................................55
    4.25   Material Contracts; Burdensome Restrictions....................................55
    4.26   Employment Matters.............................................................55
    4.27   Senior Debt Status.............................................................56

ARTICLE V. AFFIRMATIVE COVENANTS..........................................................56
    5.1    Use of Proceeds................................................................56
    5.2    Furnishing Information.........................................................56
    5.3    Preservation of Existence......................................................60
    5.4    Payment of Taxes and Fees......................................................60
    5.5    Notice of Change of Business...................................................60
    5.6    Hazard and Casualty Insurance..................................................60
    5.7    Good Repair....................................................................61
    5.8    Corporate Records..............................................................61
    5.9    Inspection of Records and Properties...........................................61
    5.10   Continued Ownership of Active Subsidiaries.....................................61
    5.11   Compliance With Laws...........................................................61
    5.12   Further Assurances.............................................................62
    5.13   Liens and Security Interests...................................................62
    5.14   Good Standing Certificates.....................................................63

ARTICLE VI. NEGATIVE COVENANTS............................................................63
    6.1    Maintenance of Ratio of Total Funded Debt to EBITDA............................63
    6.2    [Intentionally Omitted]........................................................63
    6.3    Net Worth......................................................................63
    6.4    Fixed Charge Coverage Ratio....................................................63
    6.5    Disposal of Assets.............................................................63
    6.6    Permitted Indebtedness.........................................................64
    6.7    Prohibition on Encumbrances....................................................65
    6.8    Advance of Funds and Investments...............................................67
    6.9    Dividend and Redemption Restrictions...........................................68



                                      -ii-



                                                                                       
    6.10   Merger.........................................................................68
    6.11   Regulations X, T and U Compliance..............................................69
    6.12   Cohort Default Rates...........................................................69
    6.13   Permitted Acquisitions.........................................................69
    6.14   Change Fiscal Year.............................................................70
    6.15   Change of Business.............................................................71
    6.16   Amendment to Purchase Agreement................................................71
    6.17   Affiliate Transactions.........................................................71
    6.18   Prepayment of Indebtedness.....................................................71

ARTICLE VII. CONDITIONS PRECEDENT.........................................................71
    7.1    All Revolving Credit Loan, Term Loans, Swing Loan, Supplemental Swing Loan
              and All Letters of Credit...................................................71
    7.2    Conditions Precedent to the Initial Revolving Credit Disbursement and the
              Issuance of the Initial Letter of Credit....................................72

ARTICLE VIII. EVENTS OF DEFAULT...........................................................75
    8.1    Payment Default................................................................75
    8.2    Cross Defaults.................................................................75
    8.3    Insolvency.....................................................................75
    8.4    Dissolution....................................................................76
    8.5    Adverse Judgments..............................................................76
    8.6    Failure to Comply With Certain Covenants.......................................76
    8.7    Failure to Comply With Other Covenants.........................................76
    8.8    Material Adverse Change........................................................76
    8.9    Misrepresentation..............................................................76
    8.10   Change of Control..............................................................76
    8.11   Events Relating to Plans or Benefit Arrangements...............................77
    8.12   Consequences of an Event of Default............................................77

ARTICLE IX. AGREEMENT AMONG BANKS.........................................................78
    9.1    Appointment and Grant of Authority.............................................78
    9.2    Non-Reliance on Agent..........................................................78
    9.3    Responsibility of Agent and Other Matters......................................79
    9.4    Action on Instructions.........................................................80
    9.5    Action in Event of Default.....................................................80
    9.6    Indemnification................................................................80
    9.7    Agent's Rights as a Bank.......................................................81
    9.8    Advances by Agent..............................................................81
    9.9    Payment to Banks...............................................................81
    9.10   Pro Rata Sharing...............................................................82
    9.11   Successor Agent................................................................82

ARTICLE X. MISCELLANEOUS..................................................................82
    10.1    Amendments and Waivers........................................................82



                                      -iii-



                                                                                       
    10.2    Notices.......................................................................84
    10.3    Holiday Payments..............................................................85
    10.4    Tax Withholding...............................................................85
    10.5    Survival......................................................................86
    10.6    Costs.........................................................................86
    10.7    Certain Taxes.................................................................87
    10.8    Successors, Assigns and Participations........................................87
    10.9    Confidentiality...............................................................89
    10.10   Indemnification...............................................................90
    10.11   Integration...................................................................91
    10.12   Severability..................................................................91
    10.13   APPLICABLE LAW................................................................91
    10.14   CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.................................91
    10.15   Counterparts..................................................................92



                                      -iv-



INDEX OF EXHIBITS

Exhibit Designation                        Exhibit Name
- -------------------                        ------------

Exhibit "A"           Form of Revolving Credit Note

Exhibit "B"           Form of Swing Loan Note

Exhibit "C"           Form of Request for Revolving Credit
                      Loan/Advance of Term Loan/Swing Loan/Supplemental Swing
                      Loan

Exhibit "D"           [Intentionally Omitted]

Exhibit "E"           Form of Supplemental Swing Loan Note

Exhibit "F"           [Intentionally Omitted]

Exhibit "G"           Form of Form of Bank Joinder

Exhibit "H"           Form of Pledge Agreement

Exhibit "I"           [Intentionally Omitted]

Exhibit "J"           Form of Mortgage and Security Agreement

Exhibit "K"           Form of Compliance Certificate

Exhibit "L"           Form of Opinion of Counsel to
                      Borrower

Exhibit "M"           Form of Assignment and Assumption
                      Agreement

Exhibit "N"           Form of Borrower Agreement of Guaranty and Suretyship

                                       -v-



                               INDEX OF SCHEDULES

1.1    Commitments of Banks

2.3    Letters of Credit Under Existing Credit Agreement

4.1    Active Subsidiaries

4.3    Ownership of Stock; Rights or Options

4.7    Litigation

4.10   Environmental Matters

4.11   Deferred Compensation Plans

4.12   Owned Real Property

4.13   Intellectual Property

6.6    Permitted Existing Indebtedness of the Borrower

6.7    Permitted Existing Encumbrances

                                      -vi-



                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

          This Second Amended and Restated Credit Agreement is dated as of
August 18, 2003 by and among EDUCATION MANAGEMENT CORPORATION, a Pennsylvania
corporation (the "Borrower"), the FINANCIAL INSTITUTIONS listed on Schedule 1.1
hereto and each other financial institution which, from time to time, becomes a
party hereto in accordance with Sections 2.1(j) or 10.8 (individually, a "Bank"
and collectively the "Banks"), and NATIONAL CITY BANK OF PENNSYLVANIA, as the
Agent for the Banks and the Issuing Bank (the "Agent") WACHOVIA BANK, NATIONAL
BANK, as Syndication Agent, SUNTRUST BANK, as Syndication Agent, FLEET NATIONAL
BANK, as Documentation Agent, and JPMORGAN CHASE BANK, as Documentation Agent.

                                   WITNESSETH:

          WHEREAS, the Borrower and certain of the Banks are parties to that
certain Amended and Restated Credit Agreement dated as of September 20, 2001, as
amended (the "Existing Credit Agreement") pursuant to which the Banks made
available to the Borrower a revolving credit facility in the aggregate principal
amount of $150,000,000, with such revolving credit facility containing
sub-facilities for (i) the issuance of standby letters of credit in an aggregate
amount not to exceed $35,000,000, (ii) a swing line of credit of up to
$10,000,000 in the aggregate at any one time outstanding and (iii) a
supplemental swing line of credit in the aggregate amount of up to $30,000,000
at any one time outstanding. The Existing Credit Agreement also contained a term
loan in the amount of $50,000,000;

          WHEREAS, the Borrower has entered into certain acquisition agreements
pursuant to which the Borrower contemplates the acquisition of certain other
Persons in businesses similar to the Subsidiaries of the Borrower by acquiring
the stock of such other Persons, acquiring the assets of such Person, or merging
such other Persons with and into a wholly owned Subsidiary of the Borrower;

          WHEREAS, the Borrower has requested the Banks to increase the
revolving credit facility to $250,000,000, with such revolving credit facility
to contain sub-facilities for (i) the issuance of standby and commercial letters
of credit in an aggregate amount not to exceed (a) $150,000,000 from the Closing
Date to September 30, 2003 and (b) $75,000,000 from and after September 30,
2003, (ii) a swing line of credit of up to $15,000,000 in the aggregate at any
one time outstanding, (iii) a supplemental swing line of credit of up to
$30,000,000 in the aggregate at any one time outstanding and (iv) a term loan
sublimit in the amount of $125,000,000; and

          WHEREAS, the Banks are willing to provide such credit upon the terms
and conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of mutual promises contained herein
and other valuable consideration and intending to be legally bound hereby, the
parties hereto agree as follows:



                             ARTICLE I. DEFINITIONS

     1.1 Defined Terms.

     As used herein, the following terms shall have the meaning specified unless
the context otherwise requires:

     "Accredited Subsidiary" means each Subsidiary which is accredited or
approved, as applicable, by accrediting agencies, including but not limited to
the Accrediting Commission of Career Schools and Colleges of Technology, the
National Association of Trade and Technical Schools, the American Bar
Association, the Southern Association of Colleges and Schools, the North Central
Association of Colleges and Schools or any other similar Person which accredits,
certifies, or otherwise approves proprietary post-secondary vocational or career
training schools or schools offering associate, bachelor, masters or doctorate
degrees.

     "Acquiring Person" means any Person or group of two or more Persons acting
as a partnership, limited partnership, syndicate, or other group for the purpose
of acquiring, holding or disposing of voting stock of the Borrower, together
with all affiliates and associates (as defined in Rule 12b-2 under the
Securities and Exchange Act of 1934, as amended) of such Person or Persons.

     "Active Subsidiary" means individually, and "Active Subsidiaries" shall
mean collectively, (i) each Subsidiary of the Borrower shown on Schedule 4.1
hereof as being an Active Subsidiary as of the Closing Date and (ii) each other
Subsidiary of the Borrower which at any time in the future (A) becomes an
Accredited Subsidiary or (B) has revenues (on a consolidated basis) of $300,000
or more in any Fiscal Year.

     "AEC" means American Education Centers, Inc. a Delaware corporation.

     "AEC Purchase Agreement" means that Stock Purchase Agreement dated as of
June 24, 2003among Russell E. Palmer, Bradley C. Palmer, Stephen R. Palmer
Living Trust, Russell E. Palmer III Living Trust, Karen Korfmann Living Trust,
Michael Masin, Connie Walter, Technology Leaders L.P., a Delaware limited
partnership, Technology Leaders First Corp., a British Virgin Islands
corporation; J. William Brooks, Gerard Francois, Danny Finuf; American Education
Centers, Inc., a Delaware corporation, Brown Mackie Education Corporation, a
Delaware corporation, Commonwealth Business College Education Corporation, a
Delaware corporation, Asher School of Business Education Corporation, a Delaware
corporation, Stautzenberger College Education Corporation, a Delaware
corporation, and Michiana College Education Corporation, a Delaware corporation;
Russell E. Palmer, in his capacity as the Sellers' representative; and Borrower.

     "Affiliate" means, as to any Person, any second Person which, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. For purposes of this definition, the
terms "control", "controlled by", and "under common control with" shall mean the
possession of the power to direct or cause the direction of the management and
policies of any Person, whether through the ownership of shares, by contract or
otherwise.

                                       2



     "Agent" means National City Bank of Pennsylvania, or any successor agent,
in its capacity as the administrative agent for the Banks and the Issuing Banks
under this Credit Agreement and the other Loan Documents.

     "Agent's Fee" means fees payable to the Agent, for its own account, for
arranging and administering the Credit Facility as described in the Agent's
Letter (i.e. all fees payable under such letter, except for the Closing Fee).

     "Agent's Letter" means that certain fee letter dated August 15, 2003,
between the Borrower and the Agent.

     "Applicable Base Rate Margin" shall have the meaning ascribed to it in
Subsection 2.5(b) hereof.

     "Applicable Eurodollar Rate Margin" shall have the meaning ascribed to it
in Subsection 2.5(b) hereof.

     "Applicable Money Market Rate Margin" shall have the meaning ascribed to it
in Subsection 2.5(b) hereof.

     "Argosy" means Argosy Education Group, Inc., an Illinois corporation.

     "Article" means an article of this Credit Agreement unless another document
is specifically referenced.

     "Assignment and Assumption Agreement" means an Assignment and Assumption
Agreement substantially in the form of Exhibit "M" hereto by and among a
Purchasing Bank, a Transferor Bank and the Agent, on behalf of itself and the
remaining Banks, and consented to by the Borrower to the extent required by
Section 10.8.

     "Authorized Officer" means Chairman, Chief Executive Officer, President,
Vice President, Chief Financial Officer, Treasurer, Controller or Assistant
Treasurer of any Person. The Agent, the Banks and the Issuing Banks shall be
entitled to rely on the incumbency certificates delivered pursuant to Section
7.2 for the initial designation of each Authorized Officer of the Borrower.
Additions or deletions to the list of Authorized Officers may be made by the
Borrower, at any time, by delivering to the Agent, for redelivery to the Banks
and the Issuing Banks, a revised fully-executed incumbency certificate for the
Borrower.

     "Availability Period" shall mean the period from and including the Closing
Date to but excluding the Repayment Date.

     "Banks" shall mean collectively, and "Bank" shall mean separately, the
financial institutions named on Schedule 1.1, National City Bank and, unless the
context clearly requires otherwise, and the Issuing Banks, together with their
respective successors and assigns.

     "Bank Indebtedness" means the liability of the Borrower, as of any date of
determination, without duplication, to pay the Commitment Fee, the Agent's Fee,
the Letter of Credit Fees, the Issuance Fee, the outstanding principal amount of
the Revolving Credit Loans, the Swing Loans,

                                       3



the Supplemental Swing Loans, the Term Loan and any draws upon any Letter of
Credit, interest thereon, any other amounts due pursuant to Article II hereof,
all obligations under the Guaranty Agreement, all obligations to Banks and
Affiliates of Banks under interest rate agreements permitted under Section
6.6(xi) and all reasonable out-of-pocket expenses incurred by the Banks or the
Agent in connection with the preparation, negotiation, administration,
enforcement of this Credit Agreement, the Revolving Credit Notes, the Swing Loan
Note, the Supplemental Swing Loan Notes, the other Loan Documents, the
transactions contemplated thereby, or the protection of the Agent's, the Banks'
or any Issuing Bank's rights under any of the foregoing described instruments
(including but not limited to the reasonable fees and expenses of counsel) to
the extent such expenses are the responsibility of the Borrower pursuant to this
Credit Agreement.

     "Bank Joinder" means a joinder substantially in the form of Exhibit "G"
hereto.

     "Base Net Worth" shall mean the sum of 85% of Net Worth as of the Fiscal
Year ended June 30, 2003 plus 50% of consolidated net income of the Borrower and
its Subsidiaries for each Fiscal Quarter in which net income was earned (as
opposed to a net loss) during the period from July 1, 2003 through the date of
determination.

     "Base Rate" means, as of any date of determination, a rate of interest per
annum equal to the higher of (i) the Prime Rate, as of such date of
determination, or (ii) the sum of (A) the Federal Funds Rate plus (B) one-half
of one percent (0.5%) per annum, as of such date of determination. Such interest
rate shall change automatically from time to time, effective as of the effective
date of each change in the Prime Rate or the Federal Funds Rate.

     "Base Rate Loan" means any of the Loans bearing interest at a rate
determined on the basis of the Base Rate.

     "Base Rate Option" means the interest rate option described in item (i) of
Subsection 2.5(b) hereof.

     "Benefit Arrangement" means an "employee benefit plan" within the meaning
of Section 3(3) of ERISA, which is not a Plan or a Multiemployer Plan and which
is maintained, or otherwise contributed to, by any Person for the benefit of
employees of such Person or an ERISA Affiliate thereof.

     "Borrower" means Education Management Corporation, a corporation organized
and existing under the laws of the Commonwealth of Pennsylvania and having its
principal office at 210 Sixth Avenue, 33rd Floor, Pittsburgh, Pennsylvania
15222.

     "Borrowing Date" means, with respect to any Loan, the date for the making
thereof or the renewal or conversion thereof at or to the same or a different
Option, which shall be a Business Day.

     "Business Day" means (i) with respect to any borrowing or payment on,
renewal of or conversion to a Eurodollar Rate Loan, any day other than (a) a
Saturday or Sunday, (b) a day on which commercial banks in Pittsburgh,
Pennsylvania are required or authorized by law to close and (c) a day on which
dealings are not carried on in the London interbank market; and (ii) for

                                       4



all other purposes, any day other than (a) a Saturday or Sunday or (b) a day on
which commercial banks in Pittsburgh, Pennsylvania are required or authorized by
law to close.

     "Capital Adequacy Event" shall have the meaning ascribed to such term in
Section 2.7

     "Capital Compensation Amount" shall have the meaning ascribed to such term
in Section 2.7.

     "Capital Expenditures" means the total capital expenditures of the Borrower
and its Subsidiaries excluding (i) capital expenditures of the Borrower and its
Subsidiaries which are classified as leasehold improvements on the books and
records of the Borrower, (ii) capital expenditures of the Borrower and its
Subsidiaries related to expansion projects or new programs, and (iii) capital
expenditures related to Subsidiaries of the Borrower that were recently acquired
or incorporated (and have commenced operations) by the Borrower as of the time
at which the Fixed Charges are calculated, as follows:



- -----------------------------------------------------------------------------------------------
Dates upon which Fixed Charges are         Capital expenditures of Subsidiaries acquired or
Calculated:                                incorporated after the following dates are excluded:
- -----------------------------------------------------------------------------------------------
                                        
September 30, 2003 through June 30, 2004   June 30, 2002
- -----------------------------------------------------------------------------------------------
September 30, 2004 through June 30, 2005   June 30, 2003
- -----------------------------------------------------------------------------------------------
September 30, 2005 through June 30, 2006   June 30, 2004
- -----------------------------------------------------------------------------------------------
September 30, 2006 through June 30, 2007   June 30, 2005
- -----------------------------------------------------------------------------------------------


     "Capitalized Lease" means, as to any Person, any lease of tangible or
intangible property (whether real, personal or mixed) by such Person as the
lessee under which the obligations of the lessee would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person in accordance with GAAP.

     "Capitalized Lease Obligations" means, as to any Person and as of any date
of determination, the principal amount of liability of such Person reflecting
the aggregate discounted value of all future payments due under all Capitalized
Leases calculated in accordance with GAAP including, but not limited to
Statement of Financial Accounting Standards No. 13.

     "Change of Control" means (i) an Acquiring Person shall have acquired, or
obtained the right to acquire, legal or beneficial ownership of 50% or more of
the outstanding shares of the voting stock of the Borrower; or (ii) the
replacement or resignation (other than by reason of death, illness or
incapacity) within any period of twelve (12) consecutive calendar months, of a
majority of the members of the board of directors of the Borrower (the "Board"),
which results in members of the Board who were in office at the beginning of
such period constituting less than a majority of the members of the Board
(unless such replacement or resignation shall have been

                                       5



effected or initiated by a majority of the members of the board in office at the
beginning of such period or who became members of the board without effectuating
a Change of Control).

     "Closing Date" shall mean the Business Day on which the first Loan shall be
made, which shall be August 15, 2003, or, if all the conditions specified in
Section 7.2 have not been satisfied or waived by such date, not later than
August 15, 2003, as designated by the Borrower by at least two (2) Business
Days' advance notice to the Agent, or such other date as the parties agree. The
closing shall take place at 11 A.M., Pittsburgh time, on the Closing Date at the
Pittsburgh, Pennsylvania offices of Buchanan Ingersoll Professional Corporation,
or at such other time and place as the parties agree.

     "Closing Fee" means the fees paid to the Agent under the Agent's Letter
(other than the Agent's underwriting/arrangement fees and administrative fees)
which are allocated to the Banks in accordance with their pro rata share of the
aggregate Commitment Amount.

     "Code" means the Internal Revenue Code of 1986, as the same may be amended
from time to time and the regulations and rulings promulgated thereunder,
together with any successor legislation thereto.

     "Cohort Default Rate" shall have the meaning ascribed thereto by the DOE in
Title 34, Chapter VI, Part 668, Subpart B, Section 17 of the Code of Federal
Regulations (34 C.F.R. (S) 668.17), as the same may be amended from time to
time.

     "Collateral" shall mean the Pledged Collateral and, if Mortgages are
required under Section 3.1, the Real Property.

     "Commitment Amount" means, with respect to each Bank, the aggregate dollar
amount of its Revolving Credit Commitment, Swing Loan Commitment and
Supplemental Swing Loan Commitment.

     "Commitment Fee" means the fee described in Subsection 2.1(g) of this
Credit Agreement.

     "Commitment Percentage" means, with respect to each Bank, the percentage
amount set forth for such Bank under the caption "Percentage Amount" on Schedule
1.1 or in any Assignment and Assumption Agreement executed by such Bank, whether
in the capacity as a Purchasing Bank or a Transferor Bank, as such percentage
amount may be amended from time to time.

     "Compliance Certificate" means a compliance certificate substantially in
the form of Exhibit "K" hereto which shall be delivered by the Borrower to the
Agent and to each Bank in accordance with Subsection 5.2(d) hereof.

     "Consideration" means with respect to any Permitted Acquisition, the
aggregate of (i) the cash paid by any of the Borrower and the Subsidiaries of
the Borrower, directly or indirectly, to the seller in connection therewith,
exclusive of any earn-out payments made to the seller based upon the performance
of the Person or business acquired after the effective date of the Permitted
Acquisition, (ii) the value of the capital stock or warrants for the issuance of
capital stock of the

                                       6



Borrower or any Subsidiary issued to the seller in connection therewith (valued
on the date that a definitive agreement is executed in connection with any
Permitted Acquisition), (iii) the Indebtedness for Borrowed Money incurred or
assumed by any of the Borrower and its Subsidiaries, whether in favor of the
seller or otherwise and whether fixed or contingent, (iv) any Guarantee given or
incurred by the Borrower or any Subsidiary in connection therewith, and (v) any
other consideration given or obligation incurred by the Borrower or any
Subsidiary in connection therewith.

     "Consolidated" means the consolidation of the accounts of any two or more
Persons in accordance with GAAP.

     "Consolidated Tangible Net Worth" means as of any date of determination
total stockholders' equity less intangible assets of the Borrower and its
Subsidiaries as of such date determined and consolidated in accordance with
GAAP.

     "Contamination" means the presence in soil, groundwater or surface water of
Hazardous Substances in sufficient quantity or concentration to require material
investigation, corrective action or remediation under any Environmental Law.

     "Controlled Group" means, as to any Person, (i) a controlled group of
corporations as defined in Section 1563 of the Code or (ii) a group of trades or
businesses under common control as defined in Section 414(c) of the Code of
which such Person is a part or may become a part.

     "Credit Agreement" means this Credit Agreement together with the exhibits
and schedules hereto and hereof and all extensions, renewals, amendments,
modifications, restatements and replacements hereof and hereto.

     "Credit Facility" means the revolving credit facility consisting of the
Revolving Credit Commitment in the aggregate amount of $250,000,000 with a
standby and commercial letter of credit sub-facility in the aggregate amount of
(a) $150,000,000 from the Closing Date to September 30, 2003 and $75,000,000
from and after September 30, 2003 and a Swing Loan sub-facility in an amount of
$15,000,000 and a Supplemental Swing Loan sub-facility in an amount of
$30,000,000 and a Term Loan sub-facility in the aggregate amount of
$125,000,000.

     "Default" means an event, condition, act or omission to act which
constitutes a default in the performance or observance of any covenant,
agreement or provision of any Loan Document, which event, condition, act or
omission to act would become or constitute an Event of Default with the passage
of time, the giving of notice or both, and without subsequent cure within any
applicable period of time.

     "Disbursement" means the one or more advances of proceeds to the Borrower
made pursuant to Sections 2.1 and 2.2 and 2.4.

     "Document" means any document, as that term is defined in the UCC, of any
Person, whether now owned or hereafter acquired or created.

     "DOE" means the United States Department of Education or as the context may
require, the United States Secretary of Education, or any successor thereto.

                                       7



     "DOL" means the United States Department of Labor or as the context may
require, the United States Secretary of Labor, or any successor thereto.

     "Dollars" or "$" means the legal tender of the United States of America.

     "EBITDA" means, for any period, on a Consolidated basis, the sum of net
income, depreciation and amortization, other non-cash charges to net income,
interest expense, and income tax expense, minus non-cash credits to net income,
in each case of the Borrower and its Subsidiaries for such period determined and
consolidated in accordance with GAAP.

     "Encumbrance" means any encumbrance, mortgage, lien (statutory or other),
charge, pledge, hypothecation, security interest, assignment, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any Capitalized Lease having substantially the
same economic effect as any of the foregoing) in, upon or against any asset of
any Person, whether or not voluntarily given.

     "Environmental Claim" means any claim, suit, notice, order, demand or other
communication made by any Person, including the Borrower, with respect to the
Borrower, any of its Subsidiaries or any of their respective properties, whether
owned or leased, that: (i) asserts a violation of any Environmental Law; (ii)
asserts a liability under any Environmental Law; (iii) orders an investigation,
corrective action, remediation or other response under any Environmental Law;
(iv) alleges personal injury or property damage resulting from Hazardous
Substances; or (v) alleges that there is or may be Contamination.

     "Environmental Law" means any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, grants, franchises,
licenses, agreements or other governmental restrictions issued, promulgated or
granted by any Governmental Person relating to the environment or the release of
any materials into the environment.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may be amended, from time to time, and the rulings and regulations
promulgated thereunder, together with any successor legislation thereto.

     "ERISA Affiliate" means, as of any date of determination and as to any
Person, any member of a Controlled Group of which such Person is a member, and
any trade or business (whether or not incorporated) under common control with
such Person, and all other entities which, together with such Person, are or
were treated as a single employer under Section 414 of the Code (which shall
include any Subsidiary of such Person).

     "Eurodollar Rate" means, with respect to each Eurodollar Rate Loan, the
rate of interest per annum with respect to any Interest Period obtained by the
Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th
of 1% per annum) (i) the rate of interest determined by the Agent in accordance
with its usual procedures (which determination shall be conclusive, absent
manifest error) to be the average of the London interbank offered rates listed
on the "LIBO" page of the Reuters Monitor Money Rate Service (or an appropriate
successor thereto or, if Reuters or its successor ceases to provide such quotes,
a comparable replacement as determined by the Agent) at 11:00 A.M. (London,
England time) one (1) Business Day prior to

                                       8



the first day of each Interest Period for an amount comparable to the Eurodollar
Rate Loan for such Interest Period and having a Borrowing Date and a maturity
comparable to such Interest Period by (ii) a number (expressed as a decimal)
equal to (A) 1.00 minus (B) the Eurodollar Reserve Percentage, if any. The
Eurodollar Rate described above may also be expressed by the following formula:

                       Average of London interbank offered rates listed on
     Eurodollar Rate = "LIBO" page of Reuters Monitor Money Rate Service
                       -------------------------------------------------
                                [1.00 - Eurodollar Reserve Percentage]

     "Eurodollar Rate Loans" means any of the Loans bearing interest at a rate
determined on the basis of the Eurodollar Rate.

     "Eurodollar Rate Option" means the interest rate option described in item
(ii) of Subsection 2.5(b) hereof.

     "Eurodollar Reserve Percentage" means, for any Interest Period, that
percentage (expressed as a decimal), as calculated by the Agent, which is in
effect on the first day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirements (including without limitation supplemental,
marginal or emergency reserve requirements) with respect to eurocurrency funding
(currently referred to as "Eurocurrency Liabilities") of a member bank in such
system in an amount comparable to the Eurodollar Rate Loan for such Interest
Period and for a duration comparable to such Interest Period.

     "Event of Default" means any event described in Article VIII of this Credit
Agreement.

     "Expiration Date" shall have the same meaning as "Repayment Date."

     "FDIC" means the Federal Deposit Insurance Corporation or any Person
succeeding to its functions.

     "Federal Funds Rate" means, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations at approximately 10:00 A.M. (Pittsburgh, Pennsylvania time) on
such day on such transactions received by the Agent from three (3) Federal funds
brokers of recognized standing selected by the Agent in its sole discretion.

     "Fiscal Quarter" shall mean each three-month fiscal period of the Borrower
beginning respectively on each successive January 1, April 1, July 1 and October
1 during the term hereof and ending on the immediately succeeding March 31, June
30, September 30 and December 31.

     "Fiscal Year" shall mean each annual fiscal period of the Borrower
beginning July 1 and ending on the immediately succeeding June 30.

                                       9



     "Fixed Charge Coverage Ratio" shall mean the ratio of EBITDA to
consolidated Fixed Charges.

     "Fixed Charges" means for any period of determination the sum of net
interest expense, income taxes, scheduled principal installments on Indebtedness
for Borrowed Money, dividends, Capital Expenditures and payments under
Capitalized Lease Obligations, in each case of the Borrower and its Subsidiaries
determined and consolidated in accordance with GAAP.

     "GAAP" shall mean generally accepted United States accounting principles
which shall include, but not be limited to, the official interpretations thereof
as defined by the Financial Accounting Standards Board, its predecessors and its
successors.

     "Government Acts" shall have the meaning ascribed to it in Subsection
2.3(g) hereof.

     "Governmental Person" means the government of the United States or the
government of any state or locality therein, any political subdivision or any
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body or entity, or other regulatory bureau, authority, body or entity
of the United States or any state or locality therein, including the FDIC, the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority.

     "Governmental Rule" means any law, statute, rule, regulation, ordinance,
order, judgment, guideline or decision of any Governmental Person (including,
without limitation, Governmental Acts).

     "Guarantee" means, as to any Person, any obligation, direct or indirect, by
which such Person undertakes to guaranty, assume or remain liable for the
payment or performance of another Person's obligations, including but not
limited to (i) endorsements of negotiable instruments, (ii) discounts with
recourse, (iii) agreements to pay or perform upon a second Person's failure to
pay or perform, (iv) remaining liable on obligations assumed by a second Person,
(v) agreements to maintain the capital, working capital, solvency or general
financial condition of a second Person and (vi) agreements for the purchase or
other acquisition of products, materials, supplies or services, if in any case
payment therefor is to be made regardless of the non-delivery of such products,
materials or supplies or the non-furnishing of such services.

     "Guaranty Agreement" shall mean the Agreement of Guaranty and Suretyship in
substantially the form of Exhibit N executed and delivered by the Borrower to
the Agent for the benefit of the Banks.

     "Hazardous Substances" means any (i) hazardous, toxic or polluting
substances or wastes as defined by any Environmental Law; (ii) petroleum
products; or (iii) other substances determined to be hazardous in any law
currently in effect or hereafter enacted.

     "Indebtedness for Borrowed Money" as applied to any Person means (i) the
direct liabilities of such Person for money borrowed or credit received (other
than trade accounts payable incurred in the ordinary course of business),
whether evidenced by a bond, note, debenture, Capitalized Lease Obligation,
deferred purchase price arrangement, title retention device, reimbursement
agreement or otherwise, including but not limited to any liabilities

                                       10



calculated in accordance with GAAP with respect to any currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, and (ii) the contingent liabilities of such Person under any
Guarantee (including the amount of any guarantee obligations arising under any
student loan programs) of the liabilities described in clause (i) above.

     "Indemnified Party" shall have the meaning ascribed to it in Section 10.10
hereof.

     "Interest Period" means any individual Interest Period of one (1), two (2),
three (3) or six (6) months (if available) selected by the Borrower pursuant to
the terms and conditions of Subsection 2.5(c) hereof, commencing on the
Borrowing Date, conversion date or renewal date of a Eurodollar Rate Loan to
which such period shall apply.

     "IRS" means the United States Internal Revenue Service or, as the context
may require, the United States Department of Treasury, or any successor thereto.

     "Issuance Fee" means the fee described in item (ii) of Subsection 2.3(e)
hereof.

     "Issuing Bank" means individually and "Issuing Banks" mean collectively,
the Agent and any other Bank designated by the Agent as an Issuing Bank pursuant
to Section 2.3 hereof, in their capacities as issuers of the Letters of Credit
hereunder.

     "Lending Office" means, as to any Bank, its office located at the address
set forth in its administrative questionnaire as its "Lending Office" or such
other office as such Bank may thereafter designate as its "Lending Office" by
notice to the Borrower and the Agent.

     "Letter of Credit" means any stand-by or commercial letter of credit issued
by an Issuing Bank pursuant to Section 2.3 hereof and the other terms and
provisions hereof, for the account of the Borrower or for the account of any of
the Borrower's Subsidiaries, provided that the Borrower is a guarantor and
surety thereof, as any such letter of credit may from time to time be amended,
modified, renewed, extended, supplemented or replaced.

     "Letter of Credit Exposure" means, at any date of determination, with
respect to each Bank with a Revolving Credit Commitment, such Bank's pro rata
share of the Stated Amount of any Letter of Credit then in effect.

     "Letter of Credit Fees" means the fees described in item (i) of Subsection
2.3(e) hereof.

     "Loan" means any and, "Loans" mean collectively, the Revolving Credit
Loans, the Swing Loans, the Supplemental Swing Loans and the Term Loans.

     "Loan Documents" means this Credit Agreement, the Notes, the Pledge
Agreement, the Mortgages, if any, the Guaranty Agreement, the Agent's Letter,
each Compliance Certificate, each Request for Revolving Credit Loans, each Swing
Loan Request, each Supplemental Swing Loan Request, any application or agreement
for a Letter of Credit and any interest rate protection agreement entered into
between the Borrower and its Subsidiaries and any Bank or any Affiliate of any
Bank as permitted under Section 6.6(xi).

                                       11



     "Loan Parties" means the Borrower and each of its Subsidiaries which is a
signatory of any of the Loan Documents.

     "Loan Request" shall mean either a Revolving Credit Loan Request, a Swing
Loan Request, a Supplemental Swing Loan Request or a Term Loan Request.

     "Margin Stock" means "margin stock" as defined in Regulation U.

     "Material Adverse Change" means any circumstance or event which (i) has, or
is substantially likely to have, a material adverse effect upon the validity or
enforceability of this Credit Agreement or any of the other Loan Documents, (ii)
is, or is substantially likely to be, adverse to the business, properties,
assets, financial condition or results of operations of the Borrower and its
Subsidiaries, taken as a whole, and which impairs materially, or could
reasonably be expected to impair materially, the ability of the Borrower to duly
and punctually pay or perform its obligations under the Loan Documents,
including without limitation, the loss of any Title IV funding(s) that is
substantially likely to result in the foregoing or (iii) impairs materially, or
is substantially likely to impair materially, the ability of the Agent or the
Banks, to the extent permitted, to enforce the Agent's or the Banks' legal
remedies pursuant to this Credit Agreement and the other Loan Documents.

     "Material Adverse Effect" means an effect that results in or causes or has
a reasonable likelihood of resulting in or causing a Material Adverse Change.

     "Material Indebtedness" has the meaning ascribed to that term in Section
8.2.

     "Material Subsidiary" means individually, and "Material Subsidiaries" shall
mean collectively (i) any Subsidiary of the Borrower which had annual revenues
equal to or greater than $3,000,000 for the Fiscal Year ended June 30, 2003,
(ii) any Subsidiary of the Borrower not included in the preceding item (i) which
hereafter has annual revenues equal to or greater than $3,000,000 in any Fiscal
Year of the Borrower, and (iii) any Person acquired by the Borrower or any
Subsidiary of the Borrower after the Closing Date which at the time of the
acquisition had annual revenues equal to or greater than $3,000,000 in its most
recent fiscal year or at any time thereafter.

     "Money" means all money, as that term is defined in the UCC, of any Person,
whether now owned or hereafter acquired.

     "Money Market Rate" shall be an interest rate as from time to time
determined by the Agent as being the sum of the Federal Funds Rate plus 50 basis
points.

     "Money Market Rate Loan" means any Loan which bears, or is to bear,
interest under the Money Market Rate Option.

     "Money Market Rate Option" means the interest rate option described in item
(iii) of Subsection 2.5(b) hereof.

     "Mortgage" shall mean the Mortgage and Security Agreement in substantially
the form of Exhibit "J" with respect to the Real Property which may be, pursuant
to Subsection 3.1 hereof,

                                       12



executed and delivered by the Borrower and any Subsidiary which owns Real
Property to the Agent for the benefit of the Banks.

     "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Person is making or accruing an obligation to
make contributions or has within any of the preceding five (5) plan years made
or accrued an obligation to make contributions.

     "Multiple Employer Plan" means a Plan which has two or more contributing
sponsors (including the Borrower or any member of the Controlled Group) at least
two of whom are not under common control, as such plan is described in Sections
4063 and 4064 of ERISA.

     "National City Bank" means National City Bank of Pennsylvania, together
with its successors and assigns.

     "Net Proceeds" means, with respect to the sale, assignment, lease,
sublease, transfer or other disposition of any of the assets of the Borrower or
its Subsidiaries, in any transaction or series of coordinated transactions, the
net after-tax proceeds of any such transaction after (i) taking into account any
adjustments for basis, gain or other adjustment recognized under the Code and
(ii) deducting therefrom any reasonable closing costs paid by the Borrower or
such Subsidiary in connection therewith.

     "Net Worth" shall mean as of any date of determination total stockholders'
equity of the Borrower and its Subsidiaries as of such date determined and
consolidated in accordance with GAAP.

     "Note" means any and, "Notes" shall mean collectively, all of the Revolving
Credit Notes, the Swing Loan Note, and the Supplemental Swing Loan Notes.

     "Option" means either the Base Rate Option, Money Market Rate Option or the
Eurodollar Rate Option.

     "Participant" shall mean any financial institution or other Person which
purchases an individual interest in all or any part of the Revolving Credit
Loans, the Term Loans or any particular segment of any Portion thereof.

     "Participation" means any sale, made in accordance with the provisions of
Subsection 10.8(d), by any Bank to any Participant of an undivided interest in
all or a part of, such Bank's Revolving Credit Commitment, Revolving Credit
Loans and Term Loan, if any.

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.

     "Permitted Acquisition" shall have the meaning set forth in Section 6.13.

     "Permitted Encumbrances" shall mean those Encumbrances allowed pursuant to
Section 6.7(a) hereof.

                                       13



     "Person" means any individual, partnership, corporation, trust, joint
venture or unincorporated organization and any government or any agency,
political subdivision or department thereof.

     "Plan" shall mean any "single employer plan" within the meaning of Section
4001(a)(15) of ERISA established and maintained by the Borrower or any ERISA
Affiliate.

     "Pledge Agreement" shall mean the Pledge Agreement in substantially the
form of Exhibit "H" executed and delivered by the Borrower and any Subsidiary
owning capital stock, partnership interests or limited liability company
interests in any of the Material Subsidiaries, to the Agent for the benefit of
the Banks.

     "Pledged Collateral" shall mean the property of the Borrower and the
Subsidiaries in which security interests are to be granted under the Pledge
Agreement

     "Portion" means, at any time, the aggregate principal amount of the
Revolving Credit Loans and Term Loans outstanding hereunder which bears interest
at a specific interest rate for a specific Interest Period pursuant to a request
for borrowing or a notice of interest rate election.

     "Prime Rate" means the interest rate per annum publicly announced from time
to time by the Agent as its prime rate, which rate may not be the lowest
interest rate then being charged commercial borrowers by the Agent.

     "Prior Security Interest" shall mean a valid and enforceable perfected
first-priority security interest under the Uniform Commercial Code in the
Pledged Collateral which is junior in its lien priority only to (i) Encumbrances
described in Section 6.7(a)(ii) to the extent such prospective tax payments are
given priority by statute, or (ii) Encumbrances described in Sections
6.7(a)(vii) and(viii).

     "Prohibited Transaction" shall mean any one or more of the prohibited
transactions defined under Section 406 of ERISA or Section 4975 of the Code and
which is not exempt as a statutory, individual or class exemption under Section
408 of ERISA or Section 4975 of the Code.

     "Proprietary Information" means all non-public information about the
Borrower or any of its Subsidiaries which has been furnished by the Borrower or
any of its Subsidiaries, whether furnished before or after the Closing Date, and
regardless of the manner in which it is furnished.

     "Purchasing Bank" means a Bank which becomes a party to this Credit
Agreement by executing an Assignment and Assumption Agreement.

     "Real Property" shall mean the real estate owned by the Borrower and the
Subsidiaries set forth on Schedule 4.12, which may, subject to the terms of
Section 3.1, be encumbered by the Mortgages.

     "Register" shall have the meaning ascribed to it in Subsection 10.8(c)
hereof.

     "Regulations" shall have the meaning ascribed to that term in Section 10.4.

                                       14



     "Regulation D" means Regulation D promulgated by the Board of Governors of
the Federal Reserve System (12 C.F.R. Part 204 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.

     "Regulation T" means Regulation T promulgated by the Board of Governors of
the Federal Reserve System (12 C.F.R. Part 220 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.

     "Regulation U" means Regulation U promulgated by the Board of Governors of
the Federal Reserve System (12 C.F.R. Part 221 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.

     "Regulation X" means Regulation X promulgated by the Board of Governors of
the Federal Reserve System (12 C.F.R. Part 224 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.

     "Release" means any material spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
Hazardous Substances into the environment.

     "Repayment Date" means August 15, 2008.

     "Reportable Event" means any one or more events defined in Section 4043(b)
of ERISA for which the thirty (30) day notice period has not been waived by the
PBGC.

     "Request for Revolving Credit Loan" means any written request for a
revolving credit loan executed by the Borrower and delivered to the Agent
substantially in the form of Exhibit "C" to this Credit Agreement.

     "Required Banks" means, as of any date of determination:

               (i) if there are no Loans(excluding Swing Loans), Letters of
Credit or Letter of Credit reimbursement obligations, Banks whose Revolving
Credit Commitments aggregate at least 51% of the Revolving Credit Commitments of
all of the Banks, or

               (ii) if there are Loans (excluding Swing Loans), Letters of
Credit or Letter of Credit reimbursement obligations outstanding, any Bank or
group of Banks if the sum of the Loans (excluding Swing Loans), Letter of Credit
Exposure and Letter of Credit reimbursement obligations of such Banks then
outstanding aggregates at least 51% of the total principal amount of all of the
Loans (excluding Swing Loans), Letter of Credit Exposure and Letter of Credit
reimbursement obligations then outstanding. The Revolving Credit Loans and
Letter of Credit reimbursement obligations shall be deemed, for purposes of this
definition, to be in favor of the Agent and not a participating Bank if the
Agent has made the advance and such

                                       15



Bank has not made its pro rata advance in respect thereof and shall be deemed to
be in favor of such Bank to the extent of its advance if it has made its pro
rata advance in respect thereof.

     "Revolving Credit Bank" means any financial institution listed on Schedule
1.1 as having a Commitment Amount with respect to Revolving Credit Loans and
each other financial institution which, from time to time, becomes a party to
this Credit Agreement in accordance with Subsection 10.8(b) hereof and purchases
a Commitment Amount with respect to Revolving Credit Loans.

     "Revolving Credit Commitment" shall mean, as to any Bank at any time, the
amount initially set forth opposite its name on Schedule 1.1 in the column
labeled "Amount of Commitment for Revolving Credit Loans" (as the same may be
reduced in accordance with Section 2.1(f) and 2.1(k)), and thereafter in the
most recent Assignment and Assumption Agreement executed by such Bank, whether
in the capacity as a Purchasing Bank or a Transferor Bank.

     "Revolving Credit Disbursement" means the several Revolving Credit Loans
made simultaneously by each Revolving Credit Bank under the Revolving Credit
Commitment.

     "Revolving Credit Loan" means each loan of funds by a Revolving Credit Bank
of its Commitment Percentage for the revolving credit loans as described in
Section 2.1 hereof.

     "Revolving Credit Loan Account" means the bookkeeping account established
by each Revolving Credit Bank in the name of the Borrower pursuant to Subsection
2.1(i) hereof.

     "Revolving Credit Loan Request" shall mean a request for Revolving Credit
Loans made in accordance with Section 2.1(c) hereof.

     "Revolving Credit Note" and "Revolving Credit Notes" means any one or all
of the promissory notes of the Borrower evidencing Bank Indebtedness of the
Borrower hereunder with respect to the Revolving Credit Loans, which Revolving
Credit Notes shall be substantially in the form of Exhibit "A" to this Credit
Agreement, and all extensions, renewals, amendments, modifications, restatements
or replacements thereto or thereof.

     "Stated Amount" means the amount available to the beneficiary of any Letter
of Credit for drawing thereunder as such amount is reduced in accordance with
the provisions of such Letter of Credit.

     "Subsection" means a numbered subsection of this Credit Agreement, unless
another document is specifically referenced.

     "Subsidiary" means any corporation, partnership, limited liability company,
association, joint stock company, trust, unincorporated organization, or joint
venture of which at least a majority of the outstanding stock having by the
terms thereof ordinary voting power to elect a majority of the Board of
Directors of such corporation is at the time directly or indirectly owned or
controlled by the Borrower or by one or more of its Subsidiaries.

                                       16



     "Subsidiary Guarantee" shall mean a Guarantee, in a form acceptable to the
Agent, to be executed and delivered by a Subsidiary in accordance with the
provisions of Subsection 6.6(ix) herein which shall provide that such Subsidiary
shall unconditionally guarantee and become surety for a portion of the Bank
Indebtedness that is limited in amount to the principal amount of the
Indebtedness for Borrowed Money incurred by such Subsidiary in accordance with
Subsection 6.6(ix) and reduced as the principal amount of such Indebtedness for
Borrowed Money is repaid by such Subsidiary in the ordinary course of business
(including without limitation, any prepayments of principal made by the
Subsidiary in the ordinary course of its business so long as such prepayments
are not made with a direct or indirect purpose of reducing or eliminating the
obligations of such Subsidiary under the Subsidiary Guarantee).

     "Supplemental Swing Loan Banks" means any financial institution listed on
Schedule 1.1 to this Credit Agreement as having a Commitment Amount with respect
to Supplemental Swing Loans and each other financial institution which, from
time to time, becomes a party to this Credit Agreement in accordance with
Subsection 10.8(b) hereof and purchases a Commitment Amount with respect to
Supplemental Swing Loans.

     "Supplemental Swing Loan Commitment" shall mean the dollar amount set forth
for each Supplemental Swing Loan Bank under the caption "Supplemental Swing Loan
Commitment" on Schedule 1.1 to this Credit Agreement signed by such Bank or in
any Assignment and Assumption Agreement executed by such Bank, whether in the
capacity as a Purchasing Bank or a Transferor Bank. The aggregate Supplemental
Swing Loan Commitments of all of the Supplemental Swing Loan Banks shall not
exceed $30,000,000 in the aggregate. Notwithstanding anything contained in this
Agreement or any of the other Loan Documents to the contrary, the foregoing
commitment is a sub-facility of such Bank's Revolving Credit Commitment and as
such shall mature, expire, be proportionally reduced or terminate upon the
occurrence of a like event affecting such Bank's Revolving Credit Commitment.

     "Supplemental Swing Loan Note" and "Supplemental Swing Loan Notes" shall
mean any one or all of the Supplemental Swing Loan Notes of the Borrower in the
form of Exhibit "E" evidencing the Supplemental Swing Loans, together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.

     "Supplemental Swing Loan Request" shall mean a request for Supplemental
Swing Loans made in accordance with Section 2.2B(c) hereof.

     "Supplemental Swing Loans" shall mean collectively and Supplemental Swing
Loan shall mean separately all Supplemental Swing Loans or any Supplemental
Swing Loan made by Supplemental Swing Loan Banks to the Borrower pursuant to
Section 2.2B hereof.

     "Swing Loan Commitment" shall mean National City Bank's commitment to make
Swing Loans to the Borrower pursuant to Section 2.2A hereof in an aggregate
principal amount of up to $15,000,000 outstanding at any time. Notwithstanding
anything contained in this Agreement or any of the other Loan Documents to the
contrary, the foregoing commitment is a sub-facility of National City Bank's
Revolving Credit Commitment, and as such shall mature, expire, be proportionally
reduced or terminate upon the occurrence of a like event affecting National
City's Revolving Credit Commitment.

                                       17



     "Swing Loan Note" shall mean the Swing Loan Note of the Borrower in the
form of Exhibit "B" evidencing the Swing Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.

     "Swing Loan Request" shall mean a request for Swing Loans made in
accordance with Section 2.2A(b) hereof.

     "Swing Loans" shall mean collectively and Swing Loan shall mean separately
all Swing Loans or any Swing Loan made by National City Bank to the Borrower
pursuant to Section 2.2A hereof.

     "Swing Loan Settlement Date" shall mean the Tuesday of each week (if such
day is a Business Day and if not, the next succeeding Business Day) and any
other Business Day on which the Agent elects to effect settlement pursuant to
Section 2.12.

     "Teach-Out Obligations" means those certain obligations of any Person under
various state laws to provide for the completion of any enrolled student's
education in the event of the closing of a school.

     "Termination Event" means (i) a Reportable Event with respect to a Plan or
an event described in Section 4062(e) of ERISA with respect to a Plan, (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Plan during a plan year
in which the Borrower or any such ERISA Affiliate was a "substantial employer"
as such term is defined in Section 4001(a)(2) of ERISA and the incurrence of
liability to the PBGC under Section 4063 of ERISA, (iii) the incurrence of
liability by the Borrower or any such ERISA Affiliate under Section 4064 of
ERISA upon the termination of a Plan, (iv) the distribution of a notice of
intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, or
(v) the institution of proceedings to terminate a Plan by the PBGC under Section
4042 of ERISA.

     "Termination Proceeding" means, with respect to any Plan, any termination
proceeding under Section 4042 of ERISA or any successor section of ERISA.

     "Term Loans" means the term loan of each Bank made to the Borrower as
described in Section 2.4 hereof.

     "Term Loan Request" shall have the meaning ascribed to that term in Section
2.4(a)(i).

     "Total Funded Debt" means, as of the end of any Fiscal Quarter, on a
Consolidated basis without duplication (including but not limited to any
duplication reflecting Guarantees of the Borrower or any Subsidiary permitted by
Subsection 6.6(iii) hereof), the difference between (a) Indebtedness for
Borrowed Money of the Borrower and its Subsidiaries, as of such date, and (b)
all unrestricted cash and cash equivalents in excess of $5,000,000 held by the
Borrower and its Subsidiaries including without limitation the cash balance as
at the end of such Fiscal Quarter held by the Agent or any Bank in cash
collateral, escrow, direct loan, reserve, electronic funds transfer, trust or
other unrestricted accounts (exclusive of any such accounts which do not appear
on the Borrower's or such Subsidiary's balance sheet) on behalf of the Borrower
or any of its Subsidiaries.

                                       18



     "Transfer Effective Date" means for each Assignment and Assumption
Agreement, the date upon which such Assignment and Assumption Agreement is
effective.

     "Transferor Bank" means a selling Bank pursuant to an Assignment and
Assumption Agreement.

     "UCC" means the Uniform Commercial Code as now adopted and from time to
time amended in the Commonwealth of Pennsylvania or any other jurisdiction which
controls the perfection of a security interest.

     "Unfunded Benefit Liabilities" means with respect to any Plan, the amounts
described in Section 4001(a)(18) of ERISA.

     "Unreimbursed Amount" shall have the meaning assigned to it in Subsection
2.3(c) hereof.

     "Withdrawal Liability" means "withdrawal liability" as defined by the
provisions of Part 1 of Subtitle E to Title IV of ERISA.

     1.2 GAAP Definitions.

     Accounting terms used in this Credit Agreement but not defined herein shall
have the meanings ascribed to them under GAAP as in effect from time to time;
provided, however, that all accounting terms used in Sections 6.1, 6.3. and 6.4
shall have the meaning given to such terms under GAAP as in effect on the date
hereof applied on a basis consistent with those used in preparing the Borrower's
historical financial statements. In the event of any change after the date
hereof in GAAP, and if such change would result in the inability to determine
compliance with the financial covenants set forth in Sections 6.1, 6.3 and 6.4
based upon the Borrower's regularly prepared financial statements by reason of
the preceding sentence, then the parties hereto agree to endeavor, in good
faith, to agree upon an amendment to this Credit Agreement that would adjust
such financial covenants in a manner that would not affect the substance
thereof, but would allow compliance therewith to be determined in accordance
with the Borrower's financial statements at that time; until this Credit
Agreement is so amended, the covenants shall remain as set forth in this Credit
Agreement.

     1.3 Other Definitional Conventions.

          (i) All terms defined in this Credit Agreement shall have the
above-defined meanings when used in this Credit Agreement, the other Loan
Documents, exhibits, schedules, appendices or any other document or certificate
executed or delivered in connection with this Credit Agreement, unless the
context thereof shall otherwise clearly require.

          (ii) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Credit Agreement shall refer to this Credit Agreement
as a whole and not to any particular provision of this Credit Agreement, and
Section and Subsection references are to this Credit Agreement unless otherwise
specified.

                                       19



          (iii) All terms defined in this Credit Agreement in the singular shall
have comparable meanings when used in plural, and vice versa, unless otherwise
specified.

          (iv) The word "or" as used herein shall mean and connote non-exclusive
alternatives, unless expressly stated or the context clearly requires otherwise.

     1.4 Headings.

     The headings of the Sections and Subsections of this Credit Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.

                             ARTICLE II. THE CREDIT

     2.1 Revolving Credit Loans.

          (a) Revolving Credit Commitment. The Revolving Credit Banks severally
agree, subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, that the Borrower shall have
the right to borrow, repay and reborrow during the Availability Period an
aggregate principal amount not to exceed TWO HUNDRED FIFTY MILLION AND NO/100
DOLLARS ($250,000,000) at any one time outstanding (the "Revolving Credit
Commitment"); provided, however, the amount otherwise available for borrowing
under the Revolving Credit Commitments as of any time of determination shall be
reduced by the sum of (i) the aggregate Stated Amounts of all Letters of Credit
issued and outstanding, as of such date of determination plus (ii) the aggregate
unreimbursed draws of any Letter of Credit plus (iii) the outstanding principal
balance of all Swing Loans plus (iv) the outstanding principal balance of all
Supplemental Swing Loans, plus (v) the outstanding principal balance of all Term
Loans.

          (b) Individual Bank Commitment Amount. Each of the Revolving Credit
Banks shall be severally liable for advancing its respective Commitment
Percentage of the Revolving Credit Loans set forth on Schedule 1.1 (as the same
may be reduced in accordance with Section 2.1(f)), or on the most recent
Assignment and Assumption Agreement to which such Bank is a party; provided,
however, that no such Revolving Credit Bank shall be required to make a
Revolving Credit Loan if such loan would cause that Revolving Credit Bank's
Revolving Credit Loans plus it's pro rata share of (i) the outstanding principal
balance of all Swing Loans, (ii) the outstanding principal balance of all
Supplemental Swing Loans, (iii) the stated amount of all Letters of Credit
issued and outstanding, (iv) the unreimbursed draws of any Letter of Credit, and
(v) the outstanding principal balance of all Term Loans to exceed the Commitment
Amount for Revolving Credit Loans set forth on Schedule 1.1 or on the most
recent Assignment and Assumption Agreement to which such Bank is a party.

          (c) Revolving Credit Disbursements.

          (i) Each Revolving Credit Disbursement under Subsection 2.1(a) shall
be in the aggregate amount of $1,000,000 or more, provided that each increment
in excess of $1,000,000 shall be $100,000 or an integral multiple thereof. The
obligation of the Borrower to repay, on or before the Repayment Date, the
aggregate unpaid principal amount of all Revolving Credit Disbursements made by
the Revolving Credit Banks shall be evidenced by Revolving

                                       20



Credit Notes substantially in the form of Exhibit "A" hereto, one made by the
Borrower to the order of each Revolving Credit Bank in the Commitment Amount for
Revolving Credit Loans of such Revolving Credit Bank and delivered to each such
Revolving Credit Bank. The principal amount actually due and owing each
Revolving Credit Bank under the Revolving Credit Loans shall be the aggregate
unpaid principal amount of all Revolving Credit Loans made by such Revolving
Credit Bank, all as shown on the Revolving Credit Loan Accounts established
pursuant to Subsection 2.1(i) hereof.

          (ii) Each request for a Revolving Credit Disbursement under Subsection
2.1(a) shall be made by 1:00 P.M. (Pittsburgh, Pennsylvania time) to the Agent
orally or in writing, by an Authorized Officer, (A) in the case of Base Rate
Loans, on or before the same Business Day of the proposed Revolving Credit
Disbursement and (B) in the case of Eurodollar Rate Loans, at least three (3)
Business Days prior to the proposed Revolving Credit Disbursement, in each case
specifying the date on which such Revolving Credit Disbursement is to be made,
the amount thereof, selecting the interest rate therefor pursuant to Subsection
2.5(b) hereof and, if appropriate, selecting the Interest Period therefor. Each
written request for a Revolving Credit Disbursement shall be evidenced by, and
each oral request for a Revolving Credit Disbursement hereunder shall be
followed by, a request for Revolving Credit Loan substantially in the form of
Exhibit "C" hereto (a "Revolving Credit Loan Request"), duly executed by an
Authorized Officer of the Borrower. Promptly upon receipt of such notice, the
Agent shall notify each Revolving Credit Bank of the Borrower's request and the
amount of such requested Revolving Credit Disbursement which is to be advanced
by such Revolving Credit Bank. Each such Revolving Credit Bank shall make its
pro rata share of such Revolving Credit Disbursement available at the Agent's
principal office in immediately available funds no later than 4:00 P.M.
(Pittsburgh, Pennsylvania time) on the date of the requested Revolving Credit
Disbursement. Each Revolving Credit Disbursement shall be credited by the Agent
to a demand deposit account of the Borrower at the Agent's principal office no
later than 4:30 P.M. (Pittsburgh, Pennsylvania time) on the date of such
Revolving Credit Disbursement.

          (d) Interest. The Revolving Credit Notes shall bear interest on the
actual unpaid principal amount thereof from time to time outstanding from the
date thereof until payment in full as set forth in Section 2.5 hereof.

          (e) Voluntary Prepayments. The Borrower shall have the right at its
option to prepay any Portion of the Revolving Credit Loans, in whole or in part,
at any time, subject to Borrower's obligation to pay a premium in accordance
with Section 2.6(ii)(A) if a Eurodollar Rate Loan (or part thereof) is prepaid
on a date other than the last day of the applicable Interest Period. Each such
prepayment shall be applied first to the principal balance of the Revolving
Credit Loans and then to any accrued and unpaid interest. Each partial
prepayment shall be in the aggregate amount of $500,000 or more, provided that
each increment in excess of $500,000 shall be $100,000 or an integral multiple
thereof. The Borrower shall give the Agent prior written notice of each
voluntary prepayment specifying the aggregate principal amount to be prepaid,
the date of prepayment and, if one or more Eurodollar Rate Options are in
effect, the Portion(s) of the Revolving Credit Loans being prepaid. Notice of
prepayment having been given as aforesaid, the principal amount specified in
such notice shall become due and payable on the prepayment date.

                                       21



          (f) Voluntary Permanent Reduction of the Revolving Credit Commitment.
The Borrower, upon three (3) Business Days' written notice to the Agent, may
permanently reduce the Revolving Credit Commitment by a minimum reduction of at
least $5,000,000; provided, however, that if such reduction would require
repayment of then outstanding amounts of the Revolving Credit Loans or any Swing
Loans, Supplemental Swing Loans or Term Loans, such repayment must occur on or
before the date on which the voluntary permanent reduction becomes effective.

          (g) Commitment Fee. The Borrower agrees to pay to the Agent, for the
benefit of the Revolving Credit Banks, on October 1, 2003, and quarterly in
arrears thereafter on the first day of each succeeding January, April, July and
October during the term of the Revolving Credit Commitment and on the Repayment
Date, a commitment fee equal to the average daily difference between the
Revolving Credit Commitments of the Banks minus the sum of the Banks' Revolving
Credit Loans outstanding (including Supplemental Swing Loans outstanding but
excluding any outstanding Swing Loans of National City Bank) and Letter of
Credit Exposure and Term Loans outstanding during the immediately preceding
Fiscal Quarter. The commitment fee shall be calculated at a rate per annum set
forth in the chart below based upon the Ratio of the Borrower's Total Funded
Debt to EBITDA:

=====================================================================
Ratio of Total Funded Debt to EBITDA       Commitment Fee (per annum)
- ---------------------------------------------------------------------
Greater than 2.0 to 1.0                        35.0 basis points
- ---------------------------------------------------------------------
Greater than 1.5 to 1.0 but less than or
   equal to 2.0 to 1.0                         30.0 basis points
- ---------------------------------------------------------------------
Greater than 1.0 to 1.0 but less than or
   equal to 1.5 to 1.0                         25.0 basis points
- ---------------------------------------------------------------------
Greater 0.50 to 1.0 but less than or
   equal to 1.0 to 1.0                         20.0 basis points
- ---------------------------------------------------------------------
Less than or equal to 0.50 to 1.0              20.0 basis points
=====================================================================

The Commitment Fee due hereunder shall be calculated on the basis of a 365-366
day year and the actual number of days elapsed. Upon receipt by the Agent of the
quarterly financial statements delivered pursuant to Subsection 5.2(a) hereof,
the applicable percentage shall be adjusted, if necessary, effective on the
first day of the calendar month following delivery of such quarterly financial
statements. In calculating the above ratio, Total Funded Debt shall be
determined as of the end of such Fiscal Quarter and EBITDA shall be measured, on
a rolling four quarter basis, for the immediately preceding four Fiscal Quarters
then ended, taking into account the pro forma adjustments to EBITDA, if any,
made in accordance with the description in Section 6.1. Notwithstanding the
table of applicable percentages set forth above and the adjustment to the
Commitment Fee in accordance with the terms of this subsection 2.1(g), during
the period from the Closing Date through the six month anniversary of the
Closing Date, the Commitment Fee (per annum) shall not be less than 25 basis
points.

                                       22



          (h) Repayment. On the Repayment Date, the Borrower shall repay in full
all of the then unpaid and outstanding Revolving Credit Loans, together with all
interest thereon to the date of such repayment and all other fees and costs due
hereunder.

          (i) Revolving Credit Loan Account. Each Revolving Credit Bank shall
open and maintain on its books a Revolving Credit Loan Account in the name of
the Borrower with respect to such Revolving Credit Bank's Revolving Credit
Loans, repayments, prepayments, the computation and payment of interest and the
computation of other amounts due and sums paid to the Agent, on behalf of such
Revolving Credit Bank, pursuant to this Section 2.1. Except in the case of
manifest error in computation, such Revolving Credit Loan Account shall be
conclusive and binding on the Borrower as to the amount at any time due to such
Revolving Credit Bank from the Borrower pursuant to this Section 2.1.

          (j) Increase in Revolving Credit Commitments. The Borrower may request
an increase in the amount of the Revolving Credit Commitments provided that (i)
any such increase shall not cause the total amount of Revolving Credit
Commitments to exceed $275,000,000, as such amount may be reduced from time to
time pursuant to Section 6.6(x), and (ii) any such increase shall be in
increments of not less than $5,000,000. If the Borrower desires to increase the
Revolving Credit Commitments, the Borrower shall offer the existing Banks the
opportunity to participate in any such increase before requesting that another
lender join this Agreement as a Bank to provide a Revolving Credit Commitment,
provided however, that no Bank shall be obligated to increase its Revolving
Credit Commitment and no such Bank's Revolving Credit Commitment shall be
increased without its consent. Any new lender shall be subject to the approval
of the Agent. If such increase is provided by a new lender, such new lender and
Agent shall execute a Bank Joinder and such new lender shall thereby join this
Agreement and each of the Loan Documents as a Bank on the effective date of the
increase. If such increase in Revolving Credit Commitments is provided by either
a new lender, or by one or more of the existing Banks but not ratably by all of
the existing Banks, the Borrower shall repay all of the outstanding Revolving
Credit Loans on the effective date of the increase, subject to the Borrower's
obligation under Section 2.6 [Yield Protection and Reimbursement]. The Banks
shall participate in any new Revolving Credit Loans made on or after the
effective date of the increase ratably according to their Revolving Credit
Commitments as modified on the date of such increase. It is acknowledged that
the Borrower can use the proceeds of new Revolving Credit Loans made on the
effective date of such increase to repay any existing Revolving Credit Loans on
that date, provided that the Borrower has complied with Section 2.1(c)
[Revolving Credit Disbursements] and the other requirements for the making of
such Revolving Credit Loans hereunder and Section 2.6 [Yield Protection and
Reimbursement].

          (k) Mandatory Reduction of Revolving Credit Commitments. The Revolving
Credit Commitments shall be automatically reduced (i) on the date and by an
amount equal to the scheduled amortization on the Term Loans as provided for in
Section 2.4(c) regardless of whether any Terms Loans are outstanding on such
date, and (ii) on the date of incurrence and by the amount by which Indebtedness
for Borrowed Money incurred by the Borrower and its Subsidiaries exceeds
$100,000,000, in accordance with and subject to Section 6.6(x).

                                       23



     2.2 Swing Loans; Supplemental Swing Loans.

          A. Swing Loans.

          (a) Swing Loan Commitment. Subject to the terms and conditions hereof
and relying upon the representations and warranties herein set forth, and in
order to facilitate loans and repayments between Swing Loan Settlement Dates,
National City Bank may, at its option, cancelable at any time for any reason
whatsoever, make swing loans (the "Swing Loans") to the Borrower at any time or
from time to time after the date hereof to, but not including, the Expiration
Date, in an aggregate principal amount up to but not in excess of $15,000,000
(the "Swing Loan Commitment"), provided that the sum of (i) the aggregate Stated
Amounts of all Letters of Credit issued and outstanding, as of such date of
determination plus (ii) the aggregate unreimbursed draws of any Letter of Credit
plus (iii) the outstanding principal balance of all Swing Loans plus (iv) the
outstanding principal balance of all Supplemental Swing Loans, plus (v) the
outstanding principal balance of all Revolving Credit Loans plus (vi) the
outstanding principal balance of all Term Loans, shall not exceed the Revolving
Credit Commitments of all the Banks. Within such limits of time and amount and
subject to the other provisions of this Agreement, the Borrower may borrow,
repay and reborrow pursuant to this Section 2.2A. It is acknowledged by National
City Bank that a cancellation of the Swing Loan Commitment shall not in and of
itself reduce National City Bank's Revolving Credit Commitment.

          (b) Swing Loan Requests. Except as otherwise provided herein, the
Borrower may from time to time prior to the Expiration Date request National
City Bank to make Swing Loans by delivery to National City Bank not later than
1:00 P.M. (Pittsburgh, Pennsylvania time) on the proposed Borrowing Date of a
duly completed request therefor substantially in the form requested by National
City Bank or by telephone immediately confirmed in writing by letter, facsimile
or telex (each, a "Swing Loan Request"), it being understood that the Agent may
rely on the authority of any individual making such a telephonic request without
the necessity of receipt of such written confirmation. Each Swing Loan Request
shall be irrevocable and shall specify the proposed Borrowing Date, the interest
rate Option and the principal amount of such Swing Loan, which shall be not less
than $100,000.

          (c) Making Swing Loans. So long as National City Bank elects to make
Swing Loans, National City Bank shall, after receipt by it of a Swing Loan
Request pursuant to Section 2.2, fund such Swing Loan to the Borrower in U.S.
Dollars and immediately available funds at the Agent's principal office prior to
3:00 P.M. (Pittsburgh, Pennsylvania time) on the Borrowing Date.

          (d) Swing Loan Note. The obligation of the Borrower to repay the
unpaid principal amount of the Swing Loans made to it by National City Bank,
together with interest thereon shall be evidenced by a demand promissory note of
the Borrower dated the Closing Date in substantially the form attached hereto as
Exhibit "B" payable to the order of National City Bank in a face amount equal to
the Swing Loan Commitment.

          (e) Borrowings to Repay Swing Loans. National City Bank may, at its
option, exercisable at any time for any reason whatsoever, demand repayment of
the Swing Loans from the Revolving Credit Banks, and each Bank shall make a
Revolving Credit Loan in an amount

                                       24



equal to such Bank's Commitment Percentage of Revolving Credit Loans of the
aggregate principal amount of the outstanding Swing Loans, plus, if National
City Bank so requests, accrued interest thereon, provided that no Bank shall be
obligated in any event to make Revolving Credit Loans in excess of its Revolving
Credit Commitment minus such Bank's outstanding Revolving Credit Loans,
Supplemental Swing Loans, Term Loans, Letter of Credit Exposure and pro rata
share of unreimbursed draws of any Letter of Credit. Revolving Credit Loans made
pursuant to the preceding sentence shall bear interest at the Base Rate Option
and shall be deemed to have been properly requested in accordance with Section
2.1 without regard to any of the requirements of that provision pertaining to
Loan Requests and each Revolving Credit Bank acknowledges and agrees that its
obligation to make Revolving Credit Loans in accordance with the terms of this
Section 2.2A(e) is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including without limitation non-satisfaction of the
conditions set forth in Section 7. National City Bank shall provide notice to
the Banks (which may be telephonic or written notice by letter, facsimile or
telex) that such Revolving Credit Loans are to be made under this Section 2.2A
and of the apportionment among the Banks, and the Banks shall be unconditionally
obligated to fund such Revolving Credit Loans (whether or not the conditions
specified in Section 2.1 are then satisfied) by the time National City Bank so
requests, which shall not be earlier than 3:00 P.M. (Pittsburgh, Pennsylvania
time) on the Business Day next after the date the Banks receive such notice from
National City Bank.

          (f) Voluntary Prepayments. The Borrower shall have the right at its
option to prepay any Portion of the Swing Loans, in whole or in part, at any
time. Each such prepayment shall be applied first to the principal balance of
the Swing Loans and then to any accrued and unpaid interest. Each partial
prepayment shall be in the aggregate amount of $100,000 or more, provided that
each increment in excess of $100,000 shall be $10,000 or an integral multiple
thereof unless the Borrower is prepaying the entire outstanding principal
balance of the Swing Loans. The Borrower shall give the Agent prior written
notice of each voluntary prepayment specifying the aggregate principal amount to
be prepaid and the date of prepayment. Notice of prepayment having been given as
aforesaid, the principal amount specified in such notice shall become due and
payable on the prepayment date.

          (g) Permanent Reduction of the Swing Loan Commitment.

          (A) Voluntary Reduction. The Borrower, upon three (3) Business Days'
written notice to the Agent, may permanently reduce the Swing Loan Commitment by
a minimum reduction of at least $1,000,000; provided, however, that if such
reduction would require repayment of then outstanding amounts of the Swing
Loans, such repayment must occur on or before the date on which the voluntary
permanent reduction becomes effective.

          (B) Mandatory Reduction. In the event that the Borrower shall have
reduced the Revolving Credit Commitment of the Banks and National City Bank's
Swing Loan Commitment is greater than its Revolving Credit Commitment as so
reduced, then the Swing Loan Commitment shall be automatically reduced to
National City Bank's Revolving Credit Commitment. In the event that National
City Bank's Swing Loans exceed the Swing Loan Commitment, the Borrower shall
contemporaneously with the reduction in the commitment prepay the Swing Loans to
an amount less than the Swing Loan Commitment, as so reduced.

                                       25



          (h) Interest. The Swing Loan Notes shall bear interest on the actual
unpaid principal amount thereof from time to time outstanding from the date
thereof until payment in full as set forth in Section 2.5 hereof.

          B. Supplemental Swing Loans.

          (a) Supplemental Swing Loan Commitment. The Supplemental Swing Loan
Banks severally agree, subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, that the Borrower
shall have the right to borrow, repay and reborrow during the Availability
Period an aggregate principal amount not to exceed THIRTY MILLION AND NO/100
DOLLARS ($30,000,000) at any one time outstanding (the "Supplemental Swing Loan
Commitments"); provided, however, the sum of (i) the aggregate Stated Amounts of
all Letters of Credit issued and outstanding, as of such date of determination
plus (ii) the aggregate unreimbursed draws of any Letter of Credit plus (iii)
the outstanding principal balance of all Swing Loans plus (iv) the outstanding
principal balance of all Supplemental Swing Loans plus (v) the outstanding
principal balance of all Revolving Credit Loans plus (vi) the outstanding
principal balance of all Term Loans, shall not exceed the Revolving Credit
Commitments of all the Banks.

          (b) Individual Bank Supplemental Swing Loan Commitment Amount. The
Commitment Percentage with respect to Supplemental Swing Loans for each
Supplemental Swing Loan Bank shall be the same Commitment Percentage as such
Bank's Commitment Percentage for Revolving Credit Loans hereunder. Each
Supplemental Swing Loan to be advanced in accordance with Section 2.2B(a) shall
be advanced pro rata among the Supplemental Swing Loan Banks in an amount
corresponding to its pro rata share of the Revolving Credit Commitments. Each of
the Supplemental Swing Loan Banks shall be severally liable for advancing its
respective Commitment Percentage for Revolving Credit Loans set forth opposite
such Supplemental Swing Loan Bank's name on Schedule 1.1; provided, however,
that no such Supplemental Swing Loan Bank shall be required to make a
Supplemental Swing Loan to the extent such loan would cause that Bank's
Revolving Credit Loans, Term Loans, Supplemental Swing Loans, Swing Loans and
pro rata share of the Letters of Credit outstanding plus unreimbursed draws of
any Letter of Credit in the aggregate, to exceed its Revolving Credit Commitment
set forth on Schedule 1.1 or on the most recent Assignment and Assumption
Agreement to which such Bank is a party.

          (c) Supplemental Swing Loan Requests. Except as otherwise provided
herein, the Borrower may from time to time prior to the Expiration Date request
the Supplemental Swing Loan Banks to make Supplemental Swing Loans by delivery
to Agent not later than 1:00 P.M. (Pittsburgh, Pennsylvania time) on the
Business Day of the proposed Borrowing Date of a duly completed request therefor
substantially in the form requested by Agent or by telephone immediately
confirmed in writing by letter, facsimile or telex (each, a "Supplemental Swing
Loan Request"), it being understood that the Agent may rely on the authority of
any individual making such a telephonic request without the necessity of receipt
of such written confirmation. Each Supplemental Swing Loan Request shall be
irrevocable, shall specify the proposed Borrowing Date and the principal amount
of such Supplemental Swing Loan, which shall be not less than $500,000, and
shall elect an interest rate option, as permitted herein, to be applicable to
such borrowing.

                                       26



          (d) Making Supplemental Swing Loans. Promptly upon receipt of notice
from the Borrower of its election to borrow Supplemental Swing Loans, the Agent
shall notify each Supplemental Swing Loan Bank of the Borrower's request and the
amount of such requested Supplemental Swing Loan which is to be advanced by such
Supplemental Swing Loan Bank. Each such Supplemental Swing Loan Bank shall make
its pro rata share of such Supplemental Swing Loan disbursement available at the
Agent's principal office in immediately available funds no later than 4:00 P.M.
(Pittsburgh, Pennsylvania time) on the date of the requested Supplemental Swing
Loan. Each Supplemental Swing Loan shall be credited by the Agent to a demand
deposit account of the Borrower at the Agent's principal office no later than
4:30 P.M. (Pittsburgh, Pennsylvania time) on the date of such Supplemental Swing
Loan.

          (e) Supplemental Swing Loan Note. The obligation of the Borrower to
repay the unpaid principal amount of the Supplemental Swing Loans made to it by
the Supplemental Swing Loan Banks, together with interest thereon shall be
evidenced by a demand promissory note of the Borrower dated the Closing Date in
substantially the form attached hereto as Exhibit "E" payable to the order of
each Supplemental Swing Loan Bank in a face amount equal to such Bank's
Supplemental Swing Loan Commitment.

          (f) Borrowings to Repay Supplemental Swing Loans. Each Supplemental
Swing Loan Bank may, at its option, exercisable at any time for any reason
whatsoever, demand that the Supplemental Swing Loans of such Bank be converted
to Revolving Credit Loans by providing Agent with written instructions to such
effect. Upon receipt of a demand by any Supplemental Swing Loan Bank to convert
its Supplemental Swing Loans to Revolving Credit Loans, each Bank shall make a
Revolving Credit Loan in an amount equal to such Bank's Commitment Percentage of
Revolving Credit Loans of the aggregate principal amount of the Supplemental
Swing Loans being converted, plus, if such Supplemental Swing Loan Bank so
requests, accrued interest thereon, provided that no Bank shall be obligated in
any event to make Revolving Credit Loans in excess of its Revolving Credit
Commitment minus such Bank's outstanding Supplemental Swing Loans, Term Loans,
Letter of Credit Exposure and pro rata share of unreimbursed draws for any
Letter of Credit. Revolving Credit Loans made pursuant to the preceding sentence
shall bear interest at the Base Rate Option and shall be deemed to have been
properly requested in accordance with Section 2.1 without regard to any of the
requirements of that provision pertaining to Loan Requests and each Revolving
Credit Bank acknowledges and agrees that its obligation to make Revolving Credit
Loans in accordance with the terms of the Section 2.2(B)(f) is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including without limitation non-satisfaction of the conditions set forth in
Section 7. The Agent shall provide notice to the Banks (which may be telephonic
or written notice by letter, facsimile or telex) that such Revolving Credit
Loans are to be made under this Section 2.2 and of the apportionment among the
Banks, and the Banks shall be unconditionally obligated to fund such Revolving
Credit Loans (whether or not the conditions specified in Section 2.1 are then
satisfied) by the time Agent so requests, which shall not be earlier than 3:00
P.M. (Pittsburgh, Pennsylvania time) on the Business Day next after the date the
Banks receive such notice from Agent.

          (g) Mandatory Conversion of Supplemental Swing Loans. In the event
that the Borrower has Supplemental Swing Loans outstanding for more than seven
(7) calendar days, the Borrower shall borrow Revolving Credit Loans in an amount
necessary to repay such

                                       27



Supplemental Swing Loans. In the event that the Borrower fails to promptly
comply with the preceding sentence, the Agent shall in its own discretion be
permitted to issue a demand on the Banks for Revolving Credit Loans under the
preceding sentence, all as if the Supplemental Swing Loan Banks had demanded
conversion.

          (h) Voluntary Prepayments. The Borrower shall have the right at its
option to prepay any Portion of the Supplemental Swing Loans, in whole or in
part, at any time. Each such prepayment shall be applied first to the principal
balance of the Supplemental Swing Loans and then to any accrued and unpaid
interest. Each partial prepayment shall be in the aggregate amount of $500,000
or more, provided that each increment in excess of $500,000 shall be $100,000 or
an integral multiple thereof unless the Borrower is prepaying the entire
outstanding principal balance of the Supplemental Swing Loans. The Borrower
shall give the Agent prior written notice of each voluntary prepayment
specifying the aggregate principal amount to be prepaid and the date of
prepayment. Notice of prepayment having been given as aforesaid, the principal
amount specified in such notice shall become due and payable on the prepayment
date.

          (i) Permanent Reduction of the Supplemental Swing Loan Commitment.

          (A) Voluntary Reduction. The Borrower, upon three (3) Business Days'
written notice to the Agent, may permanently reduce the Supplemental Swing Loan
Commitment by a minimum reduction of at least $5,000,000; provided, however,
that if such reduction would require repayment of then outstanding amounts of
the Supplemental Swing Loans, such repayment must occur on or before the date on
which the voluntary permanent reduction becomes effective.

          (B) Mandatory Reduction. In the event that the Borrower shall have
reduced the Revolving Credit Commitments with the effect that the Supplemental
Swing Loan Commitment of any Supplemental Swing Loan Bank is greater than such
Bank's Revolving Credit Commitment as so reduced, then such Bank's Supplemental
Swing Loan Commitment shall be automatically reduced to such Bank's Revolving
Credit Commitment. In the event that such Bank's Supplemental Swing Loans exceed
such Bank's Supplemental Swing Loan Commitment, the Borrower shall
contemporaneously with the reduction in the commitment prepay the Supplemental
Swing Loans to an amount less than the Supplemental Swing Loan Commitment, as so
reduced.

          (j) Interest. The Supplemental Swing Loan Notes shall bear interest on
the actual unpaid principal amount thereof from time to time outstanding from
the date thereof until payment in full as set forth in Section 2.5 hereof.

          C. Establishment of Canadian Swing Loan Subfacility.

          The Borrower may request that the Banks establish a Canadian swing
loan subfacility pursuant to which a Subsidiary organized in Canada may borrow
up to the equivalent of $10,000,000 US from National City Bank, Canada Branch or
such other lender designated by the Agent and under which each Bank will have an
obligation to purchase a participation interest, based on such Bank's ratable
share, in such Canadian swing loan upon the request of the Agent; provided that
the establishment of such Canadian swing loan shall not increase any Bank's

                                       28



Revolving Credit Commitment hereunder. The establishment of such Canadian swing
loan subfacility shall be made pursuant to an amendment to this Credit Agreement
acceptable to the Agent in its reasonable discretion, and notwithstanding
anything to the contrary contained in Section 10.1 or elsewhere in this Credit
Agreement to the extent such amendment relates to the terms and provisions of
the Canadian swing loans and the procedures for loan requests, funding,
reimbursement and risk participations in such Canadian swing loan substantially
similar to those of the Swing Loans, will not require the consent of the Banks
or the Required Banks.

     2.3 Letters of Credit.

          (a) Issuance of Letter of Credit. Subject to the terms and conditions
of this Credit Agreement and in reliance upon the representations and warranties
of the Borrower set forth herein, the Agent (and, upon request of the Borrower,
consent of the Agent, and consent of the requested Issuing Bank, any other Bank
designated by the Borrower in accordance with the terms of this Section) agrees
to issue Letters of Credit, upon the request of the Borrower during the
Availability Period, for the account of the Borrower and its Subsidiaries in an
aggregate Stated Amount not to exceed (i) from the Closing Date to September 30,
2003, ONE HUNDRED FIFTY MILLION AND NO/100 DOLLARS ($150,000,000), and (ii) from
September 30, 2003 and thereafter, SEVENTY FIVE MILLION AND NO/100 DOLLARS
($75,000,000), in each case minus any unreimbursed draws of any Letter of
Credit; provided, however, the sum of the outstanding principal balance of
Revolving Credit Loans, the Swing Loans, the Supplemental Swing Loans, the
Stated Amount of issued Letters of Credit and the aggregate unreimbursed draws
of any Letter of Credit and Term Loans shall at no time exceed the Revolving
Credit Commitment as the same may be reduced from time to time; provided
further, that exclusive of the Letters of Credit (if any) issued to fund the
escrow fund in connection with the acquisition of AEC under Section 1.2(a)(i) of
the AEC Purchase Agreement, the aggregate Stated Amount of all Letters of Credit
shall not exceed SEVENTY FIVE MILLION AND NO/100 DOLLARS ($75,000,000). The
issuance of any Letter of Credit in accordance with the provisions of this
Subsection 2.3(a) shall be in accordance with the relevant Issuing Bank's then
current practices relating to the issuance by such Issuing Bank of stand-by and
commercial letters of credit, as the case may be, including without limitation,
the execution of appropriate application and reimbursement agreements, as well
as subject to the satisfaction of each condition set forth in Section 7.1
hereof. No Letter of Credit shall be issued with an expiration date beyond the
earlier of the Repayment Date or one year from the date of issuance. Letters of
Credit may be issued for the account of the Borrower or for the account of a
Subsidiary of the Borrower (upon receipt by the relevant Issuing Bank from the
account party of an application and reimbursement agreement for a Letter of
Credit and related documents required by such Issuing Bank with respect to such
Letter of Credit). The aggregate amount of all Letters of Credit issued for the
account of the Subsidiaries of the Borrower shall not exceed Twenty Million and
00/100 Dollars ($20,000,000) at any one time outstanding. The Letters of Credit
issued for the account of the Subsidiaries of the Borrower shall be included in
the One Hundred Fifty Million and 00/100 Dollars ($150,000,000) or Seventy Five
Million and 00/100 Dollars ($75,000,000), as applicable, aggregate maximum
dollar amount of Letters of Credit set forth above. All reimbursement
obligations of the Subsidiaries of the Borrower with respect to Letters of
Credit issued for the account of such Subsidiaries shall be guarantied by the
Borrower pursuant to the Guaranty Agreement.

                                       29



               Subject to the terms and conditions of this Credit Agreement,
each of the Letters of Credit listed on Schedule 2.3 hereof, shall from and
after the date hereof be deemed to be a Letter of Credit issued under and
pursuant to the terms of this Credit Agreement.

                    From time to time the Borrower may request that a Bank other
than National City issue Letters of Credit on its behalf (or on behalf of its
Subsidiary) hereunder by submitting a written request to such effect to the
Agent, which request the Agent shall forward to the requested Bank; in the event
that such requested Bank consents thereto, and subject to the consent of the
Agent, the Agent shall be permitted to designate one or more of such additional
Banks as "Issuing Banks" hereunder.

          (b) Risk Participations.

          (i) Participations. Immediately upon the issuance of any Letter of
Credit, and thereafter, immediately upon each increase or decrease in the Stated
Amount thereof, each Revolving Credit Bank hereby agrees to irrevocably purchase
and shall be deemed to have irrevocably purchased from the relevant Issuing Bank
an undivided, full risk, non-recourse participation in each such Letter of
Credit (including any such increase or decrease in the Stated Amount of each
such Letter of Credit) and in draws thereunder in an amount equal to such
Revolving Credit Bank's Commitment Percentage of Revolving Credit Loans of the
maximum Stated Amount thereof which is or at any time may become available to be
drawn thereunder.

          (ii) Restrictions. In the event that any Issuing Bank is required for
any reason to refund or repay to the Borrower, any guarantor or any other Person
(other than a Revolving Credit Bank hereunder) all or any portion of any amount
remitted to such Issuing Bank pursuant to this Credit Agreement, the relevant
Issuing Bank shall promptly notify the Agent, which will in turn promptly notify
each Revolving Credit Bank thereof and the Revolving Credit Banks shall promptly
remit to the Agent, for the benefit of such Issuing Bank, within three (3)
Business Days following demand therefor, their respective Commitment Percentages
for Revolving Credit Loans of the amount which is so refunded or repaid. In the
event any restrictions are imposed upon such Issuing Bank or any of the
Revolving Credit Banks by any Governmental Rule of any Governmental Person
having jurisdiction over the banking activities of such Issuing Bank or any
other Revolving Credit Bank, which would prevent such Issuing Bank from issuing
the Letter of Credit or amending the Letter of Credit or would prevent any
Revolving Credit Bank from honoring its obligations under this Section 2.3, the
commitment of such Issuing Bank to issue the Letter of Credit or enter into any
amendment with respect thereto shall be immediately suspended.

          (iii) Notice of Restrictions. If any Revolving Credit Bank believes
any such restriction would prevent such Revolving Credit Bank from honoring its
obligations under this Section 2.3, it shall promptly notify the Agent. The
Agent shall promptly notify the Borrower, the relevant Issuing Bank and the
other Revolving Credit Banks of the existence and nature of (A) any restriction
which would cause the suspension of the commitment of such Issuing Bank to issue
the Letter of Credit or to enter into amendments with respect thereto and (B)
any restriction which would prevent any Revolving Credit Bank from honoring its
obligations under this Section 2.3.

                                       30



          (iv) Effect of Restrictions. Upon receipt of any notice pursuant to
item (iii) above, the Borrower will thereupon undertake reasonable efforts to
obtain the cancellation of each Letter of Credit; provided, however, that the
refusal of any beneficiary of any Letter of Credit to surrender such Letter of
Credit will not be an Event of Default hereunder and the Borrower shall
undertake good faith efforts to obtain a substitute letter of credit for such
Letter of Credit. Nothing contained in this Subsection 2.3(b) shall be deemed a
termination of the Revolving Credit Commitment and, in the event of a suspension
of the commitment of the relevant Issuing Bank to issue Letters of Credit or to
enter into amendments with respect thereto as set forth above, the Borrower may
continue to borrow under the Revolving Credit Commitment provided the
requirements of Section 7.1 hereof are complied with.

          (c) Payment of Amounts Drawn Under Letters of Credit. Upon each
request for a draw under any Letter of Credit by the beneficiary thereof, the
relevant Issuing Bank shall immediately notify the Borrower and the Agent, and
the Borrower shall reimburse, or cause the reimbursement of, such Issuing Bank
on demand in an amount in same day funds equal to the amount of such draw;
provided, however, unless the Borrower shall have notified the Agent and such
Issuing Bank prior to such time that the Borrower intends to reimburse such
Issuing Bank for all or a portion of the amount of such draw with funds other
than the proceeds of Revolving Credit Loans, the Borrower shall conclusively be
deemed to have given a request for a Disbursement under Subsection 2.1(c) hereof
to the Agent requesting the Revolving Credit Banks to make Revolving Credit
Loans at the Base Rate Option on the first Business Day immediately following
the date on which such draw is honored in an aggregate amount equal to the
excess of the amount of such drawing over the amount theretofore received by
such Issuing Bank in reimbursement thereof (the "Unreimbursed Amount"), plus
accrued interest on such amount at the rate set forth in Subsection 2.3(e)(iii)
hereof. If the Borrower shall be deemed to have given a request for a
Disbursement under Subsection 2.1(c) hereof to the Agent pursuant to this
Subsection 2.3(c), then, (notwithstanding the satisfaction or waiver of the
conditions specified in Section 7.1 hereof), the Revolving Credit Banks shall,
on the first Business Day immediately following the date of such draw, make
Revolving Credit Loans at the Base Rate Option in the aggregate amount of the
Unreimbursed Amount plus accrued interest on such amount at the rate set forth
in Subsection 2.3(e)(iii) hereof. The proceeds of any such Revolving Credit
Loans shall be applied directly by the Agent, upon receipt thereof from the
Banks, to reimburse the relevant Issuing Bank for the Unreimbursed Amount plus
accrued interest on such amount. The foregoing shall not limit or impair the
obligation of the Borrower to reimburse such Issuing Bank on demand.

          (d) Payment by the Banks. In the event that the Borrower shall fail to
reimburse the relevant Issuing Bank on demand as provided in Subsection 2.3(c)
above in an amount equal to the amount of any draw honored by such Issuing Bank
under any Letter of Credit, such Issuing Bank shall promptly notify the Agent
and each Revolving Credit Bank of the Unreimbursed Amount plus the accrued
interest on such amount and of such Bank's respective participation therein.
Each Revolving Credit Bank shall make available to the relevant Issuing Bank an
amount equal to its respective participation in same day funds, at the office of
such Issuing Bank specified in such notice, not later than 12:00 Noon
(Pittsburgh, Pennsylvania time) on the Business Day specified in such notice by
such Issuing Bank. In the event that any Revolving Credit Bank fails to make
available to the relevant Issuing Bank the amount of such Revolving Credit
Bank's participation in such Letter of Credit as provided in this Subsection

                                       31



2.3(d), such Issuing Bank shall be entitled to recover such amount on demand
from such Revolving Credit Bank together with interest at the Federal Funds Rate
for a period of three (3) Business Days after demand and thereafter, at the Base
Rate. Nothing in this Subsection 2.3(d) shall be deemed to prejudice the right
of any Revolving Credit Bank to recover from the relevant Issuing Bank any
amounts made available by such Revolving Credit Bank to such Issuing Bank
pursuant to this Subsection 2.3(d) in the event that it is determined by a court
of competent jurisdiction that payment of such amounts with respect to any
Letter of Credit by such Issuing Bank constituted gross negligence or willful
misconduct on the part of such Issuing Bank. The relevant Issuing Bank shall
distribute to each other Revolving Credit Bank which has paid all amounts
payable by it under this Subsection 2.3(d) with respect to such Letter of
Credit, such other Revolving Credit Bank's pro rata share of all payments
received by such Issuing Bank from the Borrower in reimbursement of a draw
honored by such Issuing Bank under such Letter of Credit when such payments are
received.

          (e) Compensation.

          (i) Letter of Credit Fees. On the first day of each October, January,
April and July hereafter and on the Repayment Date, the Borrower agrees to pay
to the Agent, on behalf of each Revolving Credit Bank, to be shared by the
Revolving Credit Banks on a pro rata basis in accordance with each Revolving
Credit Bank's risk participation in such Letter of Credit pursuant to Subsection
2.3(b) hereof, a nonrefundable fee (computed on the basis of a year of 360 days
and actual day elapsed), payable in arrears, equal to the product of (A) the
average Stated Amount of each Letter of Credit outstanding over the preceding
Fiscal Quarter (or such shorter period, if less than a quarter) times (B) the
applicable percentage per annum as determined below:

==============================================================
                                             Applicable Letter
                                                     of
                                             Credit Percentage
   Ratio of Total Funded Debt to EBITDA         (per annum)
- --------------------------------------------------------------
Greater than 2.0 to 1.0                       150 basis points
- --------------------------------------------------------------
Greater than 1.5 to 1.0, but less than or
equal to 2.0 to 1.0                           125 basis points
- --------------------------------------------------------------
Greater than 1.0 to 1.0, but less than or
equal to 1.5 to 1.0                           100 basis points
- --------------------------------------------------------------
Greater than 0.50 to 1.0, but less than or
equal to 1.0 to 1.0                          87.5 basis points
- --------------------------------------------------------------
Less than or equal to 0.50 to 1.0              75 basis points
==============================================================

                                       32



Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the applicable percentage shall be
adjusted, if necessary, effective on the first day of the calendar month
following delivery of such quarterly financial statements. In calculating the
above ratio, Total Funded Debt shall be determined as of the end of such Fiscal
Quarter and EBITDA shall be measured, on a rolling four quarter basis, for the
immediately preceding four Fiscal Quarters then ended, taking into account the
pro forma adjustments to EBITDA, if any, made in accordance with the description
in Section 6.1. Notwithstanding the Table of applicable percentages set forth
above and the adjustments to the applicable Letter of Credit percentage in
accordance with the terms of this Section 2.3(e)(i), during the period from the
Closing Date through the six month anniversary of the Closing Date, the
applicable Letter of Credit percentage shall not be less than 100 basis points.

          (ii) Issuance Fee. In addition to the Letter of Credit Fees set forth
in Subsection 2.3(e)(i) above, the Borrower shall pay to the Agent, for the sole
account of each Issuing Bank, an Issuance Fee equal to one-eighth of one percent
(1/8%) of the Stated Amount of each Letter of Credit issued by such Issuing
Bank, payable quarterly in arrears on the first day of each October, January,
April and July hereafter and on the Repayment Date.

          (iii) Interest and Other Fees.

          (A) With respect to any draw made under any Letter of Credit, the
Borrower shall pay interest, payable on demand, on the amount paid by the
relevant Issuing Bank in respect of such draw from the Business Day of the draw
through the date such amount is reimbursed by the Borrower (including any such
reimbursement out of the proceeds of Revolving Credit Loans pursuant to
Subsection 2.3(c) hereof) at a rate which is at all times equal to (A) if no
Event of Default shall have occurred and be continuing, the Base Rate or (B) if
any Event of Default shall have occurred and be continuing, two percent (2.00%)
per annum in excess of the Base Rate; and

          (B) With respect to the issuance, amendment or transfer of any Letter
of Credit and a draw made thereunder, the Borrower shall pay documentary and
processing charges in accordance with the relevant Issuing Bank's standard
schedule for such charges in effect at the time of such issuance, amendment,
transfer or draw, as the case may be.

          (f) Duty to Review Demands; Obligation Absolute. The obligation of the
Borrower to reimburse the relevant Issuing Bank for draws made under any Letter
of Credit and the obligations of the Revolving Credit Banks under Subsection
2.3(d) hereof shall be absolute, unconditional and irrevocable and shall be paid
directly in accordance with the terms of this Credit Agreement under all
circumstances, including, without limitation, the following circumstances:

          (i) any lack of validity or enforceability of such Letter of Credit;

          (ii) the existence of any claim, set-off, defense or other right which
the Borrower may have at any time against a beneficiary or any transferee of
such Letter of Credit (or any Persons for whom any such transferee may be
acting), the relevant Issuing Bank, any Revolving Credit Bank or any other
Person, whether in connection with this Credit Agreement,

                                       33



the transactions contemplated herein or any unrelated transaction (including any
underlying transaction between the Borrower or one of its Subsidiaries and the
beneficiary of such Letter of Credit);

          (iii) any draft, demand, certificate or any other document presented
under such Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect provided that any act or failure to act on the part of the
relevant Issuing Bank does not constitute gross negligence or willful misconduct
on the part of such Issuing Bank;

          (iv) payment by the relevant Issuing Bank under such Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit; provided that such
payment does not constitute gross negligence or willful misconduct on the part
of such Issuing Bank;

          (v) any other circumstance or happening whatsoever, which is
substantially similar to any of the foregoing; and

          (vi) the fact that an Event of Default shall have occurred and be
continuing.

          (g) Indemnification; Nature of an Issuing Bank's Duties. In addition
to amounts payable as elsewhere provided in this Section 2.3, the Borrower
hereby agrees to protect, indemnify, pay and save each Revolving Credit Bank
(including, without limitation, each Issuing Bank) harmless from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which such Revolving Credit Bank
may incur or be subject to as a consequence, direct or indirect, of (i) the
issuance of the Letter of Credit or any amendment thereto, other than as a
result of the gross negligence or willful misconduct of the relevant Issuing
Bank as determined by a court of competent jurisdiction, (ii) the failure of the
relevant Issuing Bank to honor a draw under any Letter of Credit if such Issuing
Bank in good faith and upon advice of counsel believes that it is prohibited
from making such payment as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Person (all
such acts or omissions herein called "Government Acts"), or (iii) any material
breach by the Borrower of any representation, warranty, covenant, term or
condition in, or the occurrence of any default under, any document related to
the issuance or any amendment of any Letter of Credit.

          As between the Borrower and the relevant Issuing Bank, the Borrower
assumes all risks of the acts and omissions of, or misuse of any Letter of
Credit by, the beneficiary of any Letter of Credit. In furtherance and not in
limitation of the foregoing, the relevant Issuing Bank shall not be responsible:
(i) for the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for or
the issuance or amendment of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) for failure of a
beneficiary of any Letter of Credit to comply fully with conditions required in
order to draw upon any Letter of Credit; (iv) for errors,

                                       34



omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telecopy, telex or otherwise, whether or not they be
in cipher; (v) for errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document required in order
to make a draw under any Letter of Credit or of the proceeds thereof; (vii) for
the misapplication by a beneficiary of any Letter of Credit of the proceeds of
any drawing under any Letter of Credit; (viii) for any consequences arising from
causes beyond the control of such Issuing Bank, including, without limitation,
any Government Acts; and (ix) for any other circumstances whatsoever in making
or failing to make payment under any Letter of Credit; except that the Borrower
shall have a claim against such Issuing Bank, and such Issuing Bank shall be
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential, damages suffered by the Borrower, as determined by a
court of competent jurisdiction to be the result of (i) such Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms of any Letter of
Credit, (ii) such Issuing Bank's payment on a draw under any Letter of Credit to
any Person other than the beneficiary of any Letter of Credit or its lawful
successor, representative or assign or (iii) such Issuing Bank's willful failure
to pay under any Letter of Credit after the presentation to it by the
beneficiary of any Letter of Credit or its lawful successor, representative or
assign of a sight draft and certificate or other documents strictly complying
with the terms and conditions of any Letter of Credit, unless such Issuing Bank
in good faith and upon advice of counsel believes that it is prohibited by law
or other legal authority from making such payment. None of the above shall
affect, impair, or prevent the vesting of any of the relevant Issuing Bank's
rights or powers hereunder.

          Except for the relevant Issuing Bank's obligations under any Letter of
Credit, such Issuing Bank shall have no liability to the Borrower or to any
other Person resulting from a reduction of the credit rating of such Issuing
Bank or any deterioration in such Issuing Bank's financial condition.

          In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the relevant
Issuing Bank under or in connection with the Letter of Credit or the related
sight drafts or certificates or documents, if taken or omitted in good faith,
shall not put such Issuing Bank under any resulting liability to the Borrower.

          (h) Construction of Application and Agreement for Letter of Credit.
This Credit Agreement is intended to supplement any application or agreement
executed and delivered in connection with the issuance of any Letter of Credit
hereunder. Whenever possible, this Credit Agreement is to be construed as
consistent with any such application or agreement and, to the extent that the
provisions of this Credit Agreement and such application or agreement conflict,
the terms of this Credit Agreement shall control.

     2.4 Term Loan Subfacility.

          (a) Term Loans. Subject to the terms and conditions hereof, and
relying upon the representations and warranties herein set forth, each Bank with
a Revolving Credit Commitment severally agrees that the Borrower shall have the
right to borrow, repay and reborrow term loans in an aggregate amount not to
exceed ONE HUNDRED TWENTY FIVE MILLION AND

                                       35



NO/100 DOLLARS (each a "Term Loan" and collectively, the "Term Loans"), provided
however, that the sum of (i) the outstanding principal balance of Revolving
Credit Loans, the Swing Loans, the Supplemental Swing Loans, the Stated Amount
of issued Letters of Credit, the unreimbursed draws of any Letter of Credit and
the Term Loans shall at not at any time exceed the Revolving Credit Commitments
as the same may be reduced from time to time. Notwithstanding anything contained
in the Agreement or any of the other Loan Documents to the contrary, the Term
Loan facility is a sub-facility of the Revolving Credit Commitments, and as such
shall mature, expire, be proportionally reduced or terminate upon the occurrence
of a like event affecting the Revolving Credit Commitments.

          (i) The request by the Borrower for the advance with respect to the
Term Loans under this Section 2.4 shall be made by 1:00 P.M. (Pittsburgh,
Pennsylvania time) to the Agent in writing, by an Authorized Officer, (A) in the
case of Base Rate Loans, at least one (1) Business Day prior to the proposed
advance of the Term Loans and (B) in the case of Eurodollar Rate Loans, at least
three (3) Business Days prior to the proposed advance of the Term Loans, in each
case specifying the date on which such advance of the Term Loans is to be made,
selecting the interest rate therefor pursuant to Subsection 2.5(b) hereof and,
if appropriate, selecting the Interest Period therefor. The Borrower's written
request for the advance of the Term Loans shall be a request for the advance of
the entire amount of the Term Loans and shall be evidenced by a Request for Term
Loans substantially in the form of Exhibit "C" hereto (a "Term Loan Request"),
duly executed by an Authorized Officer of the Borrower. Promptly upon receipt of
such notice, the Agent shall notify each Bank of the Borrower's request, and
each such Bank shall make its pro rata share of such advance under the Term
Loans available at the Agent's principal office in immediately available funds
no later than 4:00 P.M. (Pittsburgh, Pennsylvania time) on the date of the
requested advance of Term Loans.

          (ii) [Intentionally omitted.]

          (b) Individual Bank Term Loans. The Commitment Percentage with respect
to Term Loans for each Revolving Credit Bank shall be the same Commitment
Percentage as such Bank's Commitment Percentage for Revolving Credit Loans
hereunder. Each Term Loan to be advanced shall be advanced pro rata among the
Revolving Credit Banks in an amount corresponding to its pro rata share of the
Revolving Credit Commitments; provided, however, that no Revolving Credit Bank
shall be required to make a Term Loan to the extent such loan would cause that
Bank's Revolving Credit Loans, Supplemental Swing Loans, Swing Loans, pro rata
share of Letters of Credit outstanding, unreimbursed draws of an Letter of
Credit plus Term Loans to exceed the Revolving Credit Commitment set forth on
Schedule 1.1 or in the most recent Assignment and Assumption Agreement to which
such Bank is a party. The failure of any Bank to make a Term Loan shall not
relieve any other Bank of its obligations to make a Term Loan nor shall it
impose any additional liability on any other Bank hereunder.

          (c) Amortization of Term Loans; Mandatory Reduction of Revolving
Credit Commitments. The principal amount of all Term Loans shall be payable in
four (4) consecutive annual installments, each in the amount of $5,000,000,
commencing October 1, 2004 and on October 1 each year thereafter, with a final
payment of the remaining principal balance and accrued and unpaid interest due
on the Repayment Date. On October 1 of each year, the Revolving Credit
Commitments and Term Loan sublimit shall be automatically, permanently

                                       36



reduced by an amount equal to the scheduled amortization of the Term Loans on
such date, and such reduction of Revolving Credit Commitments shall apply pro
rata among the Revolving Credit Banks.

          (d) Interest. The Term Loans shall bear interest on the actual unpaid
principal amount thereof from time to time outstanding from the date thereof
until payment in full as set forth in Section 2.5 hereof.

          (e) Voluntary Prepayments. The Borrower shall have the right at its
option to prepay any Portion of the Term Loans, in whole or in part, at any
time, subject to Borrower's obligation to pay a premium in accordance with
Section 2.6(ii)(A) if a Eurodollar Rate Loan (or part thereof) is prepaid on a
date other than the last day of the applicable Interest Period. Each such
prepayment shall be applied first to the principal balance of the Term Loans and
then to any accrued and unpaid interest. Each partial prepayment shall be in the
aggregate amount of $500,000 or more, provided that each increment in excess of
$500,000 shall be $100,000 or an integral multiple thereof. The Borrower shall
give the Agent prior written notice of each voluntary prepayment specifying the
aggregate principal amount to be prepaid, the date of prepayment and, if one or
more Eurodollar Rate Options are in effect, the Portion(s) of the Term Loans
being prepaid. Notice of prepayment having been given as aforesaid, the
principal amount specified in such notice shall become due and payable on the
prepayment date.

          (f) Mandatory Prepayments. Within ten (10) days of any sale of assets
by the Borrower or any Subsidiary authorized by Section 6.5 when the fair market
value of the assets subject to such sale plus the fair market value of all such
sales in any Fiscal Year of the Borrower exceeds $5,000,000 in the aggregate,
the Borrower shall make a mandatory prepayment of principal on the Term Loans
equal to the Net Proceeds of such sale (as estimated in good faith by the
Borrower and acceptable to the Agent), together with accrued interest on such
principal amount. Within five (5) days of any receipt by the Borrower or any
Subsidiary of insurance or condemnation proceeds in excess of $5,000,000 other
than insurance and condemnation proceeds relating to the Collateral which are
addressed in the Loan Documents, the Borrower shall make a mandatory prepayment
of principal on the Term Loans equal to the amount of insurance and condemnation
proceeds received by the Borrower or any Subsidiary. Exclusive of the proceeds
of Indebtedness permitted under Section 6.6, upon any receipt by the Borrower or
any Subsidiary of proceeds of loans or other Indebtedness for Borrowed Money,
the Borrower shall make a mandatory prepayment of principal on the Loans equal
to the amount of proceeds of such loans or other Indebtedness for Borrowed
Money. All prepayments pursuant to this Section 2.4(f) shall be applied first to
payment of the principal amount of the Term Loans pro rata to the remaining
scheduled amortization payments thereunder.

          (g) Repayment. On the Repayment Date, the Borrower shall repay in full
all of the then unpaid and outstanding Term Loans, together with all interest
thereon to the date of such repayment and all other fees and costs due
hereunder.

                                       37



     2.5 Certain Provisions Relating to Interest Rates.

     The Notes shall bear interest, on the actual unpaid principal amount
thereof from time to time outstanding, from the date thereof until payment in
full, at one or more of the rates of interest set forth in this Section 2.5.

          (a) Interest Payments. The Borrower shall pay accrued interest on the
unpaid aggregate principal balance of the Notes in arrears (A) with respect to
each Base Rate Loan and Money Market Rate Loan (i) on the first day of each
October, January, April and July of each year during the term hereof, (ii) at
maturity, whether by acceleration or otherwise, of the Notes, and (iii)
thereafter on demand until all amounts outstanding under the Notes are paid in
full; and (B) with respect to each Eurodollar Rate Loan (i) on the last day of
each Interest Period (provided, however, if the Interest Period chosen for any
Eurodollar Rate Loan exceeds three (3) months, interest on that Eurodollar Rate
Loan shall be due and payable on the last day of every three (3) month period
during such Interest Period and on the last day of such Interest Period), (ii)
at maturity, whether by acceleration or otherwise, of the Notes, and (iii)
thereafter on demand until all amounts outstanding under the Notes are paid in
full.

          (b) Interest Rates. The unpaid principal amount of the Loans shall
bear interest for each day until due at one or more rates selected by the
Borrower from among the Options set forth below (subject to the permitted
interest rates that may be selected for each type of Loan as described below);
it being understood that, subject to the provisions of this Credit Agreement,
the Borrower may select different Options to apply simultaneously to different
Portions of the Loans but may select no more than eight (8) different Interest
Periods to apply to Eurodollar Rate Loans. In the event that any Swing Loan or
Supplemental Swing Loan is bearing interest at the Money Market Rate Option, no
additional Swing Loans or Supplemental Swing Loans, as the case may be, may be
borrowed at, or converted to, the Money Market Rate Option with respect to such
type of Loans. The Revolving Credit Loans shall bear interest at either the Base
Rate Option or the Eurodollar Rate Option. The Swing Loans shall bear interest
at the Base Rate Option or the Money Market Rate Option. The Supplemental Swing
Loans shall bear interest at either the Money Market Rate Option or the Base
Rate Option. The Term Loans shall bear interest at either the Base Rate Option
or the Eurodollar Rate Option.

          (i) Base Rate Option. Interest under the Base Rate Option shall accrue
at a rate per annum (computed upon the basis of a year of 360 days and the
actual number of days elapsed) for each day equal to the sum of (A) the Base
Rate plus (B) the Applicable Base Rate Margin determined below.

                                       38



============================================================
                                             Applicable Base
                                               Rate Margin
   Ratio of Total Funded Debt to EBITDA        (per annum)
- ------------------------------------------------------------
Greater than 2.0 to 1.0                      25 basis points
- ------------------------------------------------------------
Greater than 1.5 to 1.0, but less than or
equal to 2.0 to 1.0                           0 basis points
- ------------------------------------------------------------
Greater than 1.0 to 1.0, but less than or
equal to 1.5 to 1.0                           0 basis points
- ------------------------------------------------------------
Greater than 0.50 to 1.0, but less than or
equal to 1.0 to 1.0                           0 basis points
- ------------------------------------------------------------
Less than or equal to 0.50 to 1.0             0 basis points
============================================================

Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the Applicable Base Rate Margin shall be
adjusted, if necessary, effective on the first day of the calendar month
following delivery of such quarterly financial statements. In calculating the
above ratio, Total Funded Debt shall be determined as of the end of such Fiscal
Quarter and EBITDA shall be measured, on a rolling four quarter basis, for the
immediately preceding four Fiscal Quarters then ended, taking into account the
pro forma adjustments to EBITDA, if any, made in accordance with the description
in Section 6.1.

          (ii) Eurodollar Rate Option. Interest under the Eurodollar Rate Option
shall accrue at a rate per annum (computed upon the basis of a year of 360 days
and the actual number of days elapsed) for each day equal to the sum of (A) the
Eurodollar Rate for each Interest Period plus (B) the Applicable Eurodollar Rate
Margin as determined below.

==============================================================
                                                 Applicable
                                                 Eurodollar
                                                Rate Margin
   Ratio of Total Funded Debt to EBITDA         (per annum)
- --------------------------------------------------------------
Greater than 2.0 to 1.0                       150 basis points
- --------------------------------------------------------------
Greater than 1.5 to 1.0, but less than or
equal to 2.0 to 1.0                           125 basis points
- --------------------------------------------------------------
Greater than 1.0 to 1.0, but less than or
equal to 1.5 to 1.0                           100 basis points
- --------------------------------------------------------------
Greater than 0.50 to 1.0, but less than or
equal to1.0 to 1.0                           87.5 basis points
- --------------------------------------------------------------
Less than or equal to 0.50 to 1.0              75 basis points
==============================================================

Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the Applicable Eurodollar Rate Margin
shall be adjusted, if necessary, effective on the first day of the calendar
month following delivery of such quarterly financial statements. In calculating
the above ratio, Total Funded Debt shall be determined as of the end of such
Fiscal Quarter and EBITDA shall be measured, on a rolling four quarter basis,
for the immediately preceding four Fiscal Quarters then ended, taking into
account the pro forma adjustments to EBITDA, if any, made in accordance with the
description in Section 6.1. Notwithstanding the table of applicable percentages
set forth above and the adjustment to the

                                       39



Applicable Eurodollar Rate Margin in accordance with the terms of this
subsection 2.5(b)(ii), during the period from the Closing Date through the six
month anniversary of the Closing Date, the Applicable Eurodollar Rate Margin
(per annum) shall not be less than 100 basis points.

          (iii) Money Market Rate Option. Interest under the Money Market Rate
Option shall accrue at a rate per annum (computed upon the basis of a year of
360 days and the actual number of days elapsed) for each day equal to the sum of
(A) the Money Market Rate in effect on each given day plus (B) the Applicable
Money Market Rate Margin as determined below.

==============================================================
                                              Applicable Money
                                                   Market
      Ratio of Total Funded Debt to              Rate Margin
                  EBITDA                         (per annum)
- ------------------------------------------   -----------------
Greater than 2.0 to 1.0                       150 basis points
Greater than 1.5 to 1.0, but less than or
equal to 2.0 to 1.0                           125 basis points
Greater than 1.0 to 1.0, but less than or
equal to 1.5 to 1.0                           100 basis points
Greater than 0.50 to 1.0, but less than or
equal to 1.0 to 1.0                          87.5 basis points
Less than or equal to 0.50 to 1.0              75 basis points
==============================================================

Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the Applicable Money Market Rate Margin
shall be adjusted, if necessary, effective on the first day of the calendar
month following delivery of such quarterly financial statements. In calculating
the above ratio, Total Funded Debt shall be determined as of the end of such
Fiscal Quarter and EBITDA shall be measured, on a rolling four quarter basis,
for the immediately preceding four Fiscal Quarters then ended, taking into
account the pro forma adjustments to EBITDA, if any, made in accordance with the
description in Section 6.1. Notwithstanding the table of applicable percentages
set forth above and the adjustment to the Applicable Money Market Rate Margin in
accordance with the terms of this subsection 2.5(b)(iii), during the period from
the Closing Date through the six month anniversary of the Closing Date, the
Applicable Money Market Rate Margin (per annum) shall not be less than 100 basis
points.

          (iv) Payment Default Rate. Upon the expiration of any cure period
relating to an Event of Default pursuant to Section 8.1 hereof, and during the
period in which such Event of Default continues, (A) the principal amount of the
Base Rate Loans and Money Market Rate Loans, whether or not the same have become
due and payable by maturity, acceleration, declaration or otherwise shall bear
interest at a rate per annum which shall be two hundred (200) basis points above
the rate otherwise in effect for the Base Rate Loans and Money Market Rate
Loans, respectively, and (B) the principal amount of all of the Eurodollar Rate
Loans, whether or not the same have become due and payable by maturity,
acceleration, declaration or otherwise, shall bear interest, until the end of
the current Interest Period, at a rate per annum which shall be two hundred
(200) basis points (2%) above the rate otherwise in effect for the Eurodollar
Rate

                                       40



Loans. At the end of each then current Interest Period, such Eurodollar Rate
Loans shall automatically be converted to Base Rate Loans, and thereafter the
interest rate shall be calculated in accordance with item (A) of this Subsection
2.5(iv).

          (c) Interest Periods; Limitations on Elections. In the event that the
Borrower shall at any time fail to elect an interest rate to be applicable to a
Portion of the Loan, such Portion shall bear interest at the Base Rate Option,
until a different interest rate is elected by the Borrower in accordance with
the provisions of this Agreement. At any time when the Borrower shall select,
convert to or renew the Eurodollar Rate Option to apply to all or any Portion of
the outstanding Revolving Credit Loans, it may fix one or more Interest Periods
to apply to Eurodollar Rate Loans. All the foregoing, however, is subject to the
following:

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

          (ii) any Interest Period which begins on the last day of a calendar
month or on a day for which there is no numerically corresponding day in the
subsequent calendar month during which such Interest Period is to end shall end
on the last Business Day of such subsequent month;

          (iii) the Eurodollar Rate Loan for each Interest Period shall be in an
aggregate principal amount of $1,000,000 or more; provided, however, that each
incremental unit in excess of $1,000,000 shall be $100,000 or an integral
multiple thereof; and

          (iv) no Interest Period may be elected which would end after the
Repayment Date.

          (d) Elections, Conversions or Renewals of Interest Rate Options.
Elections of or conversions to the Base Rate Option shall continue in effect
until converted as hereinafter provided. Elections of, conversions to or
renewals of the Eurodollar Rate Option shall expire as to each Eurodollar Rate
Loan at the expiration of the applicable Interest Period.

          At any time with respect to any Base Rate Loan or at the expiration of
the applicable Interest Period with respect to any Eurodollar Rate Loan, the
Borrower (subject to Subsection 2.5(e)) may cause all or any part of the
principal amount of such Loan to be converted to and/or (in the case of
Eurodollar Rate Loans) to be renewed under the Eurodollar Rate Option by notice
to the Agent as hereinafter provided. Such notice (i) may be oral or in writing
and if oral immediately confirmed in writing to the Agent, (ii) shall be
irrevocable, (iii) shall be given not later than 1:00 P.M. (Pittsburgh,
Pennsylvania time) not less than three (3) Business Days prior to the proposed
effective date for conversion to or renewal of, either in whole or in part, the
Eurodollar Rate Option and (iv) shall set forth:

          (A) the effective date, which shall be a Business Day;

          (B) the new Interest Period or Interest Periods selected; and

                                       41



          (C) with respect to each such Interest Period, the aggregate principal
amount of the corresponding Eurodollar Rate Loan.

          At the expiration of each Interest Period, any part (including the
whole) of the principal amount of the corresponding Eurodollar Rate Loan, as to
which no notice of conversion or renewal has been received as provided above,
shall automatically be converted to a Base Rate Loan. The Agent shall notify the
Borrower of any such automatic conversion.

          (e) Eurodollar Rate Unascertainable. In the event that, on any date on
which the Eurodollar Rate would otherwise be set, the Agent shall have
determined (which determination shall be prima facie evidence of the
unascertainability of the Eurodollar Rate) that, by reason of circumstances
affecting the eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate, the Agent shall give prompt notice of such
determination to the Borrower, and, until the Agent notifies the Borrower that
the circumstances giving rise to such determination no longer exist, the right
of the Borrower to borrow under, convert to or renew the Eurodollar Rate Option
shall be suspended. Any notice of borrowing under, conversion to or renewal of a
Eurodollar Rate Loan which was to become effective during the period of such
suspension shall be treated as a request to borrow under, convert to or renew a
Base Rate Loan with respect to the principal amount therein specified.

          (f) Illegality. If any Bank shall determine in good faith (which
determination shall be final and conclusive) that compliance by such Bank or its
Lending Office with any applicable law, treaty or governmental rule, regulation,
guideline, order, request or directive (whether or not having the force of law),
or the interpretation or application thereof by any governmental authority, has
made it unlawful or commercially impractical for any such Bank to make or
maintain Eurodollar Rate Loans (including but not limited to acquiring
eurodollar liabilities to fund Eurodollar Rate Loans), such Bank shall give
notice of such determination to the Agent and the Borrower; provided, however,
that before the giving of such notice pursuant to this Subsection 2.5(f), such
Bank shall designate a different Lending Office, if such designation will avoid
the need for such notice and will not in the judgment of such Bank be otherwise
disadvantageous to such Bank (in determining the issue of "disadvantageous," no
Bank shall be permitted to rely solely upon the basis that it would be
disadvantageous to continue to have Loans subject to the Eurodollar Rate Option
because it is more profitable to compute interest at the Base Rate Option).
Notwithstanding any provision of this Credit Agreement to the contrary, unless
and until such Bank shall have given notice that the circumstances giving rise
to such determination no longer apply:

          (A) with respect to any Interest Periods thereafter commencing,
interest on any Eurodollar Rate Loan shall be computed and payable under the
Base Rate Option; and

          (B) on such date, if any, as shall be required by law, any Eurodollar
Rate Loans then outstanding shall be automatically converted to Base Rate Loans
and the Borrower shall pay to the Agent, for the account of the Banks, the
accrued and unpaid interest on such Eurodollar Rate Loans to (but not including)
the date of such conversion.

          Such Bank shall furnish to the Agent and the Borrower a certificate as
to the amount necessary to compensate such Bank for the costs associated with
any prepayment

                                       42



pursuant to Subsection 2.5(f)(B) above (which certificate shall be prima facie
evidence of the amount owed by the Borrower to such Bank), and the Borrower
shall pay such amount to the Agent for the account of such Bank, as additional
consideration hereunder, within fifteen (15) days of the Borrower's receipt of
such certificate.

     2.6 Yield Protection and Reimbursement.

          (i) Yield Protection. Except for changes addressed in Subsection
2.5(f), if any Governmental Rule issued after the Closing Date or if any change
on or after the Closing Date in any Governmental Rule (including, without
limitation, Regulation D) or the interpretation or application thereof by any
Governmental Person charged with the administration thereof (whether or not
having the force of law):

          (A) subjects any Bank, its Lending Office or any Issuing Bank to any
tax, duty, levy, impost, charge, fee, deduction or withholding of any kind
hereunder (other than (x) a tax, including, without limitation, a branch tax,
imposed or based upon the income of such Bank, its Lending Office or such
Issuing Bank and (y) any franchise tax imposed on such Bank, its Lending Office
or such Issuing Bank by the laws of the jurisdiction under which such Bank, such
Lending Office or such Issuing Bank is organized or any political subdivision
thereof) or changes the basis of taxation of any Bank, its Lending Office or any
Issuing Bank with respect to the payments by the Borrower of principal or
interest due hereunder (other than any change which affects, and to the extent
that it affects, the taxation by the United States or any state thereof of the
total net income of such Bank or such Issuing Bank);

          (B) imposes, modifies or deems applicable any reserve, special deposit
or similar requirements against assets of, deposits with or for the account of,
or credit extended, commitments to lend or any Letters of Credit issued or
participations purchased therein by any Bank, its Lending Office, any Issuing
Bank or any corporation controlling such Bank or such Issuing Bank (other than
such requirements which are included in determining the applicable rate or rates
of interest hereunder); or

          (C) imposes upon any Bank, its Lending Office or any Issuing Bank any
other obligation or condition with respect to this Credit Agreement,

and the result of all of the foregoing is to increase the cost to such Bank, its
Lending Office, any Issuing Bank or any corporation controlling such Bank or
such Issuing Bank, of making the Loans, extending the Revolving Credit
Commitment, issuing any Letter of Credit or making or maintaining any
participation in any Letter of Credit, reduce the net after-tax income
receivable by such Bank, its Lending Office or such Issuing Bank from payments
under this Credit Agreement or impose any expense upon any Bank, its Lending
Office, any Issuing Bank or any corporation controlling such Bank, reduce the
rate of return on the capital of such Bank, its Lending Office, such Issuing
Bank or any corporation controlling such Bank by an amount which such Bank or
such Issuing Bank in good faith deems material,

               (A) the Bank or any Issuing Bank so affected shall promptly
notify the Borrower and the Agent of the happening of such event; and of the
amount determined by such Bank, its Lending Office or such Issuing Bank (which
determination shall be prima facie

                                       43



evidence of the amount owed by the Borrower to such Bank) to be necessary to
compensate such Bank or the relevant Issuing Bank for such increase in cost,
reduction in net after tax-income or additional expense;

               (B) the Borrower shall pay to the affected Bank or the affected
Issuing Bank, on demand, as additional interest on the Loans or draws under any
Letter of Credit, such amount as will compensate such Bank or such Issuing Bank
for such additional cost or expense or reduced amount, calculated from the date
of the notification by such Bank or such Issuing Bank; and

               (C) the Borrower may pay to such affected Bank or affected
Issuing Bank the affected Loan or draw under any Letter of Credit in full
without the payment of any additional amount other than on account of such
Bank's or such Issuing Bank's out-of-pocket losses (including funding losses, if
any, as provided in paragraph (ii) below) not otherwise provided for in
subparagraph (B) immediately above.

A certificate as to the increased cost or reduced amount as a result of any of
the foregoing events shall be promptly submitted by such Bank or such Issuing
Bank to the Borrower and the Agent in accordance with the provisions of Section
10.2 hereof. Such certificate shall, in the absence of manifest error, be
conclusive and binding as to the amount thereof. Notwithstanding anything
contained in this Section 2.6 to the contrary, each Bank agrees that it will not
make a request for compensation unless at such time the Bank is making a similar
claim for compensation from certain of its other borrowers which are similarly
situated.

          (ii) Reimbursement of Costs and Losses.

          (A) Voluntary Breakage. The Borrower hereby agrees to indemnify each
Bank against any loss or expense which such Bank may sustain or incur as a
consequence of the Borrower (x) failing to make any borrowing, conversion or
renewal of a Eurodollar Rate Loan on the scheduled date, or (y) failing to make
when due (whether by declaration, acceleration or otherwise); any payment or
prepayment of any amount due hereunder or in voluntarily making any payment or
prepayment of any Eurodollar Rate Loan or any part thereof on any day other than
the last day of its Interest Period.

          (B) Involuntary Breakage. The Borrower hereby agrees to indemnify each
Bank against any loss or expense which such Bank may sustain or incur as a
consequence of the Borrower (x) failing, through no fault of its own, including,
without limitation, the circumstances specified in Subsection 2.5(f), to make
any borrowing, conversion or renewal of a Eurodollar Rate Loan on the scheduled
date, (y) failing to make when due (whether by declaration, acceleration or
otherwise) any payment or prepayment of any amount due hereunder or (z) making
any payment or prepayment of any Eurodollar Rate Loans or any part thereof on
any day other than the last day of its Interest Period, including, but not
limited to, any premium or penalty incurred by such Bank in respect of funds
borrowed by it for the purpose of making or maintaining any Eurodollar Rate Loan
or any part thereof as determined by such Bank in the exercise of its sole but
reasonable discretion.

                                       44



          (iii) Notice of Costs and Losses. Each Bank will promptly notify the
Borrower and the Agent of any event of which it has knowledge which will entitle
such Bank to compensation pursuant to this Section 2.6 and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. Any Bank incurring such loss or expense
pursuant to this Section 2.6 shall furnish to the Borrower (through the Agent) a
certificate signed by an appropriate officer of such Bank as to the amount of
any such loss or expense showing the related calculations in reasonable detail
(which certificate shall be prima facie evidence of the amount owed by the
Borrower to such Bank), and the Borrower shall pay such amount to such Bank
within thirty (30) days of the Borrower's receipt of such certificate).
Notwithstanding the foregoing provisions of this Section 2.6, the Borrower shall
only be obligated to compensate any Bank for any amount arising or accruing
during (x) any time or period commencing not more than ninety (90) days prior to
the date on which such Bank notifies the Agent and the Borrower that it proposes
to demand such compensation and identifies to the Agent and the Borrower the
statute, regulation or other basis upon which the claimed compensation is or
will be based and (y) any time or period during which, because of the
retroactive application of such statute, regulation or other basis, such Bank
did not know that such amount would arise or accrue.

     The Borrower's obligations under this Section 2.6 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.

     2.7 Capital Adequacy.

     If, after the Closing Date, any adoption of, any change to or any change in
the interpretation of any Governmental Rule by any Governmental Person
exercising control over banks or financial institutions generally or any court
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Bank or any corporation
controlling such Bank (a "Capital Adequacy Event"), and the result of such
Capital Adequacy Event is to reduce the rate of return on capital of such Bank
or the capital of any corporation controlling such Bank as a consequence thereof
to a level below that which such Bank could have achieved but for such Capital
Adequacy Event (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount which such Bank deems to be material, such Bank
shall promptly deliver to the Borrower and the Agent a statement of the amount
necessary to compensate such Bank for the reduction in the rate of return on its
capital attributable to its Loans and the commitments under this Credit
Agreement (the "Capital Compensation Amount"). Each Bank shall determine the
Capital Compensation Amount in good faith, using reasonable attribution and
averaging methods. Each Bank shall, from time to time, furnish to the Borrower
and the Agent a certificate as to the amount so determined. Such certificate
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof. Such amount shall be due and payable by the Borrower to such
Bank ten (10) days after such notice is given. As soon as practicable after any
Capital Adequacy Event, such Bank shall submit to the Borrower and the Agent
estimates of the Capital Compensation Amounts that would be payable as a
function of such Bank's commitments hereunder.

     The Borrower's obligations under this Section 2.7 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.

                                       45



     2.8 [Intentionally Omitted.]

     2.9 Lending Offices.

     Each Bank may book its Loans at any Lending Office selected by such Bank
and may change its Lending Office from time to time. All terms of this Credit
Agreement shall apply to any such Lending Office and the Notes shall be deemed
held by each Bank for the benefit of such Lending Office. Each Bank may, by
written notice to the Agent and the Borrower, designate a Lending Office through
which its Loans will be made by it and for whose account payments are to be
made.

     2.10 Time, Place and Manner of Payments.

     All payments to be made by the Borrower under the Notes or of the Agent's
Fee, the Commitment Fee and all other amounts due the Agent, whether for its own
account or for the benefit of the Banks, hereunder shall be made at the
principal office of the Agent set forth in Article X. All payments to be made by
the Borrower under this Credit Agreement shall be paid in Dollars in immediately
available funds no later than 1:30 P.M. (Pittsburgh, Pennsylvania time) on the
date such payment is due. Except as specified elsewhere, if the date on which
any payment is due is not a Business Day such payment shall be due and payable
on the next succeeding day which is a Business Day. Such extension of time shall
be included in computing any interest or fees in respect of such payment.

     2.11 Payment From Accounts Maintained by the Borrower.

     In the event that any payment of principal, interest, Agent's Fee, the
Closing Fee, the Commitment Fee, the Letter of Credit Fees or any other amount
due the Agent, whether for its own account or for the benefit of the Banks,
under the Loan Documents is not paid when due, the Agent is hereby authorized to
effect such payment by debiting any demand deposit account of the Borrower
maintained with the Agent. This right of debiting accounts of the Borrower is in
addition to any right of set-off accorded the Agent hereunder or by operation of
law.

     2.12 Swing Loan Settlement Date Procedures.

     In order to minimize the transfer of funds between the Banks and National
City Bank, the Borrower may borrow, repay and reborrow Swing Loans and National
City Bank may make Swing Loans as provided herein during the period between
Settlement Dates. On each Swing Loan Settlement Date, not later than 2:00 P.M.
(Pittsburgh, Pennsylvania time), the Agent shall notify each Bank of its
Commitment Percentage for Revolving Credit Loans of the total of the Revolving
Credit Loans to be made on such date to repay the Swing Loans. Prior to 4:00
P.M. (Pittsburgh, Pennsylvania time) on such Swing Loan Settlement Date, each
Bank with Revolving Credit Commitments shall pay to the Agent the amount of its
Revolving Credit Loan to repay the outstanding Swing Loans. These settlement
procedures are established solely as a matter of administrative convenience, and
nothing contained in this Section 2.12 shall relieve the Banks of their
obligations to fund Revolving Credit Loans on dates other than a Swing Loan
Settlement Date pursuant to Section 2.1 or 2.2(B).

                                       46



     2.13 Substitution of a Bank.

     If (i) the obligation of any Bank to fulfill its obligations in relation to
the issuance of any Letter of Credit or the purchase of any risk participations
therein under Section 2.3 has been suspended pursuant to Subsection 2.3(b)(ii)
hereof, (ii) the obligation of any Bank to make Eurodollar Rate Loans has been
suspended pursuant to Subsection 2.5(e) hereof, (iii) any Bank has demanded
compensation under Section 2.5 or Section 2.6 hereof or (iv) any Bank has failed
to fund any Loan properly requested hereunder, the Agent shall, at the request
of the Borrower and with the assistance of the Borrower, undertake in good faith
to obtain a mutually satisfactory substitute lending institution or lending
institutions (which may be one or more of the Banks) to purchase the Revolving
Credit Note and the Supplemental Swing Loan Note, as the case may be, and assume
the Revolving Credit Loans, the Supplemental Swing Loans, the Revolving Credit
Commitment and the Supplemental Swing Loan Commitment of such Bank, as the case
may be, provided, however, in no way shall the Agent's efforts in trying to
obtain a substitute lending institution imply that the Agent or National City
Bank has any obligation to acquire such interest for its own account.

                         ARTICLE III. SECURITY; SET-OFF

     3.1 Security Interests; Mortgages.

     The Borrower hereby grants, and shall cause the Subsidiaries to grant to
the Agent for the benefit of the Agent and the Banks, as security for the Bank
Indebtedness, a security interest in all the capital stock and related property
of the Material Subsidiaries organized under the laws of a state or territory of
the United States and described in the Pledge Agreement and will cause all of
the capital stock and related property of (i) any Material Subsidiary organized
under the laws of a state or territory of the United States acquired pursuant
Section 6.13 or (ii) any Subsidiary organized under the laws of a state or
territory of the United States that becomes a Material Subsidiary after the date
hereof, to be pledged to the Agent for the benefit of the Banks. In the event
that the quarterly financial statements delivered to the Agent and the Banks
pursuant to Subsection 5.2(a) hereof evidence that the ratio of Total Funded
Debt to EBITDA is equal to or greater than 1.75 to 1.0 for two consecutive
Fiscal Quarters, the Borrower shall grant and shall cause its Subsidiaries to
grant to the Agent for the benefit of the Agent and the Banks, as security for
the Bank Indebtedness, a mortgage lien and security interest in the Real
Property and related property (that is not encumbered by a Permitted Encumbrance
identified on Schedule 6.7 or permitted under Section 6.7(viii) which would
prohibit the granting of a Mortgage in favor of the Agent), pursuant to
Mortgages substantially in the form of Exhibit J with appropriate changes to
reflect local law requirements, all as the Agent may require in its reasonable
discretion; provided however, that if the aggregate value of all Real Property
owned by the Borrower and its Subsidiaries which is not located in any state or
territory of the United States is less than $10,000,0000, such Real Property is
not required to be subject to a mortgage lien in favor of the Agent. In
connection with the Borrower's and such Subsidiaries' execution and delivery of
the Mortgages, the Borrower and such Subsidiaries shall deliver (i) title
insurance policies or binders in favor of the Agent for the benefit of the Banks
in customary ALTA current mortgagee's form, and in amount satisfactory to the
Agent, with premiums paid thereon, issued by a title insurance company
acceptable to the Agent and insuring the new Mortgages as a valid first priority
Lien upon the relevant Loan Party's title to the owned real property and (ii) an
opinion of counsel as

                                       47



required by the Agent with respect to the Mortgages.

     Thereafter, in the event that the quarterly financial statements delivered
to the Agent and the Banks pursuant to Subsection 5.2(a) hereof evidence that
the ratio of Total Funded Debt to EBITDA is less than 1.75 to 1.0 for two
consecutive Fiscal Quarters of the Borrower (as calculated in accordance with
Section 6.1) and no Event of Default has occurred and is continuing, the Agent
shall release the liens and security interests granted by the Borrower and its
Subsidiaries pursuant to the Mortgages. In the event that the liens pursuant to
the Mortgages have been released pursuant to the terms of the preceding sentence
and the ratio of Total Funded Debt to EBITDA (as calculated in accordance with
Section 6.1) thereafter equals or exceeds 1.75 to 1.0 for two consecutive Fiscal
Quarters, then upon request of the Agent as directed by the Required Banks, the
Borrower shall re-grant and shall cause its Subsidiaries to re-grant to the
Agent for the benefit of the Agent and the Banks, as security for the Bank
Indebtedness, a mortgage lien and security interest in the Real Property and
related property (that is not encumbered by a Permitted Encumbrance identified
in Section 6.7(viii) which would prohibit the granting of a Mortgage in favor of
the Agent).

     3.2 Set-Off.

     The Borrower hereby gives to the Banks a lien and security interest for the
amount of any Bank Indebtedness upon and in any property, credits, securities or
Monies (whether matured or unmatured) of the Borrower which may at any time be
delivered to, or be in the possession of, or owed by any Bank or any affiliate
of any Bank in any capacity whatever, including the balance of any deposit
account but excluding any trust, fiduciary, reserve, electronic funds transfer
or direct loan accounts, in each case maintained by the Borrower with such Bank.
The Borrower hereby authorizes each Bank in case of an Event of Default, at such
Bank's option, at any time and from time to time, to apply, at the discretion of
such Bank, to the payment of Bank Indebtedness, any and all such property,
credits, securities or Monies now or hereafter in the hands of such Bank
belonging or owed to the Borrower.

                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

          To induce the Banks, the Issuing Banks and the Agent to enter into
this Credit Agreement, to induce the Banks to make the Revolving Credit Loans,
the Term Loans, the Swing Loans, and the Supplemental Swing Loans herein
provided for, and to induce the Issuing Banks to issue the Letters of Credit
herein provided for, the Borrower represents and warrants to the Agent, the
Banks and the Issuing Banks that:

     4.1 Existence.

          (a) Borrower's Existence. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is duly qualified and in good standing as a
foreign corporation, authorized to do business in each jurisdiction where,
because of the nature of its activities or properties, such qualification is
required, except for those foreign jurisdictions where the Borrower's
non-qualification would not have a Material Adverse Effect.

                                       48



          (b) Active Subsidiary's Existence. Schedule 4.1 attached hereto sets
forth each Active Subsidiary of the Borrower in existence as of the Closing
Date. Except for Active Subsidiaries that have entered into a merger as
permitted by Section 6.10 herein and are not the surviving corporation, each of
the Borrower's Active Subsidiaries is duly organized, validly existing and in
good standing under the laws of the state of its incorporation and is duly
qualified and in good standing as a foreign corporation, authorized to do
business in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required, except for those foreign
jurisdictions where such Active Subsidiary's non-qualification would not have a
Material Adverse Effect.

     4.2 Authority.

     The Borrower has full power, authority and legal right to engage in the
activities conducted or proposed to be conducted by it and, with respect to the
Loans and Letters of Credit, to execute, deliver and perform its obligations
under the Loan Documents. The Borrower has taken all corporate actions necessary
or appropriate to authorize the execution, delivery and performance of the Loan
Documents.

     4.3 Capitalization of Subsidiaries.

     Schedule 4.3 lists all of the Subsidiaries of the Borrower, the issued and
outstanding stock of each Subsidiary and the owner thereof. All capital stock of
the Subsidiaries identified on Schedule 4.3 has been duly authorized and validly
issued and is fully paid and nonassessable. There is no stock or securities
convertible or exchangeable for any shares of such Subsidiary's common stock.
Except as set forth on Schedule 4.3, there are no outstanding rights or options
to subscribe for or to purchase any of such Subsidiary's capital stock or any
stock or securities convertible into or exchangeable for any Subsidiary's common
stock.

     4.4 Validity and Enforceability.

     This Credit Agreement constitutes a legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms, subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law). The Notes, and each other Loan Documents, when duly executed by the
Borrower, and delivered in accordance with this Credit Agreement, will
constitute legal, valid and binding obligations of the Borrower and the Active
Subsidiaries (as the case may be), enforceable in accordance with their
respective terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and to general principles of equity (regardless
of whether considered in a proceeding in equity or at law).

     4.5 No Conflict.

     The execution and delivery of this Credit Agreement, the Notes, and the
other Loan Documents by the Borrower and the other Loan Parties does not
conflict with or constitute a violation of, breach of, or default under (i) its
respective Certificate/Articles of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, lease, note agreement or other agreement or

                                       49



instrument to which the Borrower or any other Loan Party is a party or by which
the Borrower or any other Loan Party is bound, or (iii) any Governmental Rule of
any Governmental Person having jurisdiction over the Borrower or any other Loan
Party or any of their respective activities or property.

     4.6 Consents.

     All consents, approvals, authorizations and orders of governmental or
regulatory authorities which are required for the consummation of the
transactions contemplated by this Credit Agreement, the Notes and the other Loan
Documents, or which, in any way, would materially adversely affect the validity
or enforceability of any such Loan Document, if not obtained, have been
obtained.

     4.7 Litigation.

     Except as set forth on Schedule 4.7, there are no actions, suits,
investigations, litigation or governmental proceedings pending, or to the
knowledge of the Borrower threatened, against it or any Active Subsidiary with
respect to the Borrower or any Active Subsidiary, the results of which would
individually or in the aggregate constitute a Material Adverse Change.

     4.8 Compliance With Applicable Laws, etc.

     Neither the Borrower nor any of its Active Subsidiaries is in default with
respect to any order, writ, injunction or decree (i) of any court or (ii) of any
Governmental Person and the Borrower and its Active Subsidiaries are each
complying with all applicable statutes and regulations of each Governmental
Person having jurisdiction over their respective activities; provided, however,
the Borrower shall not be deemed in violation of this Section 4.8 as a result of
any non-compliance if (A) such order, writ, injunction or decree is being
contested by the Borrower or any Active Subsidiary in good faith and by proper
proceedings appropriately conducted or (B) the non-compliance with such order,
writ, injunction, decree statute or regulation would not constitute a Material
Adverse Change.

     4.9 Financial Statements.

     Copies of the Borrower's (i) audited Consolidated financial statements for
the Fiscal Year ended June 30, 2002 and (ii) unaudited Consolidated financial
statements for the Fiscal Year ended June 30, 2003, each prepared on a basis not
inconsistent with that of the preceding Fiscal Year, have been furnished to the
Agent, and each such statement presents fairly the Consolidated financial
condition of the Borrower as of such date and the results of its operations.

     4.10 Environmental Matters.

          (i) Except as set forth on Schedule 4.10 hereto, to the best of the
Borrower's knowledge:

          (A) the Borrower and each of its Active Subsidiaries is in compliance
with all applicable Environmental Laws except where noncompliance with any such
Environmental Law has not, or could not reasonably be expected to, result in a
Material Adverse Effect;

                                       50



          (B) other than materials used or produced, held, transported and
disposed of in accordance with all Environmental Laws, neither the Borrower nor
any Active Subsidiary has used in its operations, and the property of the
Borrower or such Active Subsidiary is not now and has never been used by the
Borrower or such Active Subsidiary (or, to the best knowledge of the Borrower
after due inquiry, by any predecessor in possession or other Person) for
treatment, generation, storage, recycling, or disposal of Hazardous Substances
in violation of any Environmental Laws, except where noncompliance with any such
Environmental Law has not, or could not reasonably be expected to, result in a
Material Adverse Effect;

          (C) no Hazardous Substances are present at any property owned or
leased by the Borrower or any Active Subsidiary, nor will any Hazardous
Substances be present upon any such property or in the operation thereof by the
Borrower or any Active Subsidiary, except which are handled in accordance with
all Environmental Laws, in proper storage containers or where such Hazardous
Substances have not been brought to or stored on the property by the Borrower or
its Active Subsidiaries and have not, or could not reasonably be expected to,
result in a Material Adverse Effect; and

          (D) the Borrower and its Active Subsidiaries have all necessary and
appropriate environmental permits, including but not limited to those for air
emissions, water discharges, and treatment, storage and disposal of the
Hazardous Substances, except where noncompliance with any the foregoing has not,
or could not reasonably be expected to, result in a Material Adverse Effect.

          (ii) There are no past, pending or, to the best of the Borrower's
knowledge, threatened Environmental Claims by or against the Borrower or any
Active Subsidiary or with respect to any property of the Borrower or such Active
Subsidiary that, individually or in the aggregate, could have a Material Adverse
Effect on the Borrower and its Active Subsidiaries, taken as a whole.

     4.11 Deferred Compensation Plans.

     Except as listed on Schedule 4.11 attached hereto, neither the Borrower nor
any of its Active Subsidiaries has any employee pension benefit plan (as that
term is defined in Section 3(2)(A) of ERISA) other than an employee stock
ownership plan.

     Except as set forth on Schedule 4.11:

          (A) The Borrower and each ERISA Affiliate is in compliance in all
material respects with any applicable provisions of ERISA with respect to all
Benefit Arrangements, Plans and Multiemployer Plans. There has been no
Prohibited Transaction with respect to any Benefit Arrangement or any Plan or,
to the best knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiple Employer Plan, which could result in any material liability of the
Borrower or any ERISA Affiliates. The Borrower and all ERISA Affiliates have
made when due any and all payments required to be made under any agreement
relating to a Multiemployer Plan or a Multiple Employer Plan or any Governmental
Rule pertaining thereto. With respect to each Plan and Multiemployer Plan, the
Borrower and all ERISA Affiliates (i) have fulfilled in all material respects
their obligations under the minimum funding standards of ERISA, (ii) have not

                                       51



incurred any liability to the PBGC, and (iii) have not had asserted against them
any penalty for failure to fulfill the minimum funding requirements of ERISA.

          (B) To the best of the Borrower's knowledge, each Multiemployer Plan
and Multiple Employer Plan is able to pay benefits thereunder when due.

          (C) Neither the Borrower nor any ERISA Affiliate has instituted or
intends to institute proceedings to terminate any Plan.

          (D) No event requiring notice to the PBGC under Section 302(f)(4)(A)
of ERISA has occurred or is reasonably expected to occur with respect to any
Plan, and no amendment with respect to which security is required under Section
307 of ERISA has been made or is reasonably expected to be made to any Plan.

          (E) The aggregate actuarial present value of all benefit liabilities
(whether or not vested) under each Plan, determined on a plan termination basis,
as disclosed in, and as of the date of, the most recent actuarial report for
such Plan, does not exceed the aggregate fair market value of the assets of such
Plan.

          (F) Neither the Borrower nor any ERISA Affiliate has incurred or
reasonably expects to incur any material withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA
Affiliate has been notified by any Multiemployer Plan or Multiple Employer Plan
that such Multiemployer Plan or Multiple Employer Plan has been terminated
within the meaning of Title IV of ERISA and, to the best knowledge of the
Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected
to be reorganized or terminated, within the meaning of Title IV of ERISA.

          (G) To the extent that any Benefit Arrangement is insured, the
Borrower and all ERISA Affiliates have paid when due all premiums required to be
paid for all periods through the Closing Date. To the extent that any Benefit
Arrangement is funded other than with insurance, the Borrower and all ERISA
Affiliates have made when due all contributions required to be paid for all
periods through the Closing Date.

          (H) All Plans, Benefit Arrangements and Multiemployer Plans have been
administered in accordance with their terms and applicable Governmental Rule.

     4.12 Title to Properties.

     The Borrower and each Active Subsidiary has good title to all of its
properties and assets except for (i) defects in title which, taken as a whole,
are not material to the Borrower or such Active Subsidiary and (ii) other
Permitted Encumbrances. All of the Borrower's and each Active Subsidiary's Real
Property is listed on Schedule 4.12 hereto.

     4.13 Intellectual Property.

     The Borrower and each Active Subsidiary owns or licenses all patents,
patent applications, trademarks, trademark applications, permits, service marks,
trade names, copyrights, copyright applications, licenses, franchises,
authorizations and other intellectual

                                       52



property rights that are necessary for the operations of its business, without
infringement upon or conflict with the rights of any other Person with respect
thereto, except where the consequences in the aggregate would not be reasonably
expected to have a Material Adverse Effect. To the best knowledge of the
Borrower, (i) no device, product, process, method, substance, part or component
or other material now employed, or now contemplated to be employed, by the
Borrower or any Active Subsidiary infringes upon or conflicts with any rights
owned by any other Person and (ii) no claim or litigation regarding any of the
foregoing is pending or threatened. No patent, invention, device, application,
principle and no Governmental Rule, standard or code involving the Borrower's or
any Active Subsidiary's intellectual property is pending or, to the knowledge of
the Borrower, proposed, except where the consequences in the aggregate would not
be reasonably expected to have a Material Adverse Effect. All of the Borrower's
and each Active Subsidiary's material patents, trademarks, permits, service
marks, trade names, copyrights, licenses, franchises and authorizations are
listed on Schedule 4.13 hereto.

     4.14 Tax Returns and Payments.

     The Borrower and each of its Active Subsidiaries have filed all United
States Federal tax returns and the Borrower and each Active Subsidiary has filed
all other material state or foreign tax returns, or extensions for the filing of
such tax returns within the time parameters permitted by law, which, to the
knowledge of the Borrower, are required by law to be filed by them (except where
the failure to file such tax returns would not materially adversely affect the
business, Consolidated financial conditions or the Consolidated results of
operations of the Borrower and its Subsidiaries as a whole) and have paid all
taxes due pursuant to such returns or pursuant to any assessments levied upon
the Borrower, the Active Subsidiaries or any of their respective properties,
assets or income which are due and payable, (other than those assessments,
taxes, fees or other charges, the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Borrower
or such Active Subsidiary). The charges, accruals and reserves on the books of
the Borrower and its Active Subsidiaries, in respect of federal, state and
foreign income taxes for all fiscal periods to date, are adequate in accordance
with GAAP.

     4.15 Material Adverse Change.

     Since June 30, 2002, there has been no Material Adverse Change in
operations or financial condition of the Borrower, individually, or the Borrower
and its Subsidiaries taken as a whole.

     4.16 Solvency.

     The Borrower and each Active Subsidiary is, and after giving effect to the
transactions contemplated pursuant to this Credit Agreement and the other Loan
Documents will be, solvent.

     4.17 Investment Company Act.

     The Borrower is not an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended from time to
time, or a company under

                                       53



the "control" of an "investment company," as those terms are defined in such
Act, and shall not become such an "investment company" or under such "control."

     4.18 Public Utility Holding Company Act.

     The Borrower is not a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or an "affiliate" of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended from time to time.

     4.19 Liens and Security Interests.

     Except for Permitted Encumbrances, there are no liens or security interests
on any of the real or personal property of the Borrower or any Active
Subsidiary.

     4.20 Margin Stock.

     The Borrower does not engage or intend to engage principally, or as one of
its important activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U). No part of the proceeds of any Loan has
been or will be used, immediately, incidentally or ultimately, to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System. Neither the Borrower nor any Active
Subsidiary of the Borrower holds or intends to hold margin stock in such amounts
that more than 25% of the reasonable value of the assets of the Borrower or
Active Subsidiary of the Borrower are or will be represented by margin stock.

     4.21 Updates to Schedules.

     Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Borrower shall promptly provide the Agent in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
same; provided, however, that no Schedule shall be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such Schedule.

     4.22 Disclosure.

     Neither this Credit Agreement nor any other document, statement,
certificate or other instrument delivered to the Agent or the Banks by or on
behalf of the Borrower pursuant to this Credit Agreement or any other Loan
Document contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which they were made, not
misleading. There is no

                                       54



fact known to the Borrower which materially and adversely affects or, so far as
the Borrower now foresees, will in the future materially and adversely affect
the business, operations, affairs, condition, properties, assets, financial
condition or results of operations of the Borrower and its Active Subsidiaries
which has not been set forth in this Credit Agreement or in the other documents,
instruments, certificates or statements (financial or otherwise) furnished to
the Agent or the Banks by or on behalf of the Borrower prior to or on the
Closing Date.

     4.23 Use of Proceeds.

     The Borrower and its Subsidiaries intend to use the proceeds of the Loans
in accordance with Section 5.1.

     4.24 Insurance.

     All insurance policies and other bonds to which Borrower or any of its
Subsidiaries is a party are valid and in full force and effect. No notice has
been given or claim made and no grounds exist to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such policies and
bonds provide adequate coverage from reputable and financially sound insurers,
or an insurance captive Subsidiary of the Borrower which is adequately
capitalized and is conformity with the standards of the insurance industry, all
as in the judgment of the Agent, insuring risks required to be covered
hereunder, in amounts sufficient to insure the assets and risks of Borrower and
each of its Subsidiaries in accordance with prudent business practice in the
industry of the Borrower and its Subsidiaries.

     4.25 Material Contracts; Burdensome Restrictions.

     All material contracts relating to the business operations of Borrower and
each of its Subsidiaries, including all material employee benefit plans and
material labor contracts, are valid, binding and enforceable upon the Borrower
or its Subsidiary and each of the other parties thereto in accordance with their
respective terms, and there is no material default thereunder, to the Borrower's
knowledge, with respect to parties other than the Borrower or its Subsidiary.
Neither the Borrower nor any of its Subsidiaries is bound by any contractual
obligation, or subject to any restriction in any organization document, or any
requirement of Governmental Rule which could reasonably be expected to result in
a Material Adverse Change.

     4.26 Employment Matters.

     The Borrower and its Subsidiaries conduct their businesses in compliance
with employment Governmental Rules, except where the failure to do so could not
reasonably be expected to result in a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
any labor contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any of the Borrower or any of
its Subsidiaries which in any case could reasonably result in a Material Adverse
Change.

                                       55



     4.27 Senior Debt Status.

               The obligations of Borrower under this Credit Agreement and each
of the other Loan Documents to which it is a party do rank and will rank at
least pari passu in priority of payment with all other Indebtedness for Borrowed
Money of Borrower. There is no lien upon or with respect to any of the
properties or income of Borrower or Subsidiary of Borrower which secures
indebtedness or other obligations of any Person except for Permitted
Encumbrances.

                        ARTICLE V. AFFIRMATIVE COVENANTS

          From the date hereof and for so much longer thereafter as the
Revolving Credit Commitment is in effect or any of the Bank Indebtedness remains
unpaid, the Borrower agrees, for the benefit of the Banks, the Issuing Banks and
the Agent, that:

     5.1 Use of Proceeds.

     Proceeds of the Revolving Credit Loans and the Term Loans shall be used by
the Borrower (a) to refinance the revolving credit loans, if any, outstanding
under the Borrower's Existing Credit Agreement, (b) for the payment of the
purchase price and related expenses in connection with the acquisitions by the
Borrower or its Subsidiaries of the ownership interests of AEC, and (c) for
general working capital purposes of the Borrower and its Active Subsidiaries,
including but not limited to capital expenditures, the acquisition and
development of additional schools, draws to meet DOE regulatory requirements and
Permitted Acquisitions. Proceeds of the Swing Loans shall be used by the
Borrower to finance its general working capital purposes on a day-to-day basis.
Proceeds of the Supplemental Swing Loans shall be used by the Borrower to
finance its short term borrowing needs for general corporate purposes. Subject
to Section 2.3, the Letters of Credit may be issued in the aggregate stated
principal amount not in excess of $150,000,000 for the period from the Closing
Date to September 30, 2003 and $75,000,000 thereafter, at any one time
outstanding for general corporate purposes.

     5.2 Furnishing Information.

     The Borrower will maintain a system of accounting established and
administered in accordance with GAAP consistently applied, and will maintain its
books in a manner so as to enable it to produce GAAP statements. Further, the
Borrower will:

          (a) Quarterly Reports of Borrower. Beginning with the Fiscal Quarter
ending September 30, 2003, furnish to the Agent, for redelivery to each Bank, as
soon as practicable but in any event within forty-five (45) days after the end
of each of the first, second and third Fiscal Quarters of the Borrower, copies
of (i) internally prepared Consolidated balance sheets of the Borrower, the
consolidating balance sheets, as at the close of each such Fiscal Quarter and
(ii) internally prepared Consolidated statements of profit and loss, of retained
earnings and cash flows of the Borrower, the consolidating statements of profit
and loss, of retained earnings and cash flows, for the quarter then ended and
for the period from the beginning of the Fiscal Year to the date of such balance
sheet, together with figures in comparative form for the corresponding date or
period, as the case may be, one year prior thereto, all prepared in accordance
with GAAP, consistently applied, except for the absence of notes thereon and
subject to year-end adjustments, and in such reasonable detail as the Agent may
request; provided, however, the Borrower shall

                                       56



be deemed in compliance with the timing requirements of this Section if the
Borrower shall file its 10Q statement with the Securities Exchange Commission in
a timely fashion and shall promptly send a copy of the financial statements to
the Agent.

          (b) Annual Reports of Borrower. Furnish to the Agent after the end of
each Fiscal Year, for redelivery to each Bank, as soon as practicable but in any
event within one hundred twenty (120) days after the end of each Fiscal Year
beginning on or after July 1, 2002, copies of the annual audited Consolidated
financial statements of the Borrower which shall include, among other things,
(A) the Consolidated balance sheet and Consolidated statements of income of the
Borrower, the consolidating balance sheets and consolidating statements of
income, as at the end of such Fiscal Year, (B) a Consolidated statement of
profit and loss, the consolidating statement of income and loss, and (C) a
summary of transactions in the stockholders' equity account of the Borrower, all
in reasonable detail, all prepared in accordance with GAAP and all certified
without qualification by an independent public accountant selected by the
Borrower and satisfactory to the Agent; provided, however, the Borrower shall be
deemed in compliance with the timing requirements of this Section if the
Borrower shall file its 10K statement with the Securities Exchange Commission in
a timely fashion and shall promptly send a copy of the financial statements to
the Agent.

          (c) Budgets; Forecasts. Furnish to the Agent, for redelivery to each
Bank, as soon as practicable but in any event within forty-five (45) days after
the commencement of each Fiscal Year, a copy of the Borrower's budget and
forecast for such year, in form and content acceptable to the Agent; provided,
however that with respect to the fiscal year commencing July 1, 2003, such
budget and forecast shall be delivered within ninety (90) days after the
commencement of such fiscal year.

          (d) Compliance Certificate. Together with each delivery of financial
statements pursuant to Subsections 5.2(a) and 5.2(b), a Compliance Certificate
substantially in the form of Exhibit "K" attached hereto, signed by the Chief
Financial Officer, or in his absence, the Treasurer of the Borrower, stating
that he has caused the terms of this Credit Agreement and of the Notes to be
reviewed and has made, or caused to be made under his supervision, a review of
the transactions and condition of the Borrower and its Active Subsidiaries
during the accounting period covered by such financial statements and that
nothing has come to his attention to lead him to believe that any Event of
Default hereunder or any condition or event which, after notice or lapse of time
or both, would constitute an Event of Default exists. If any such Event of
Default, condition or event existed or exists, such certificate shall specify
the nature and period of existence thereof and what action the Borrower or such
Active Subsidiary has taken or is taking or proposes to take with respect
thereto. Each such certificate shall also contain, for the period to which the
same relates, calculations in reasonable detail manifesting compliance as of the
close of such accounting period with the covenants contained in Sections 6.1
through 6.7 inclusive and Section 6.13 hereof. Such certificate shall in all
respects be in form and substance satisfactory to Agent.

          (e) Notification of Defaults. Furnish to the Agent, for redelivery to
each Bank, prompt notice upon the occurrence of any event of default or of any
event which, with the giving of notice or the lapse of time, or both, would
constitute an event of default under any Indebtedness for Borrowed Money
involving liabilities in excess of $500,000 in the aggregate.

                                       57



          (f) Other Reports, Information and Notices. The Borrower will deliver
or cause to be delivered to the Agent, for redelivery to each Bank, within the
time periods set forth below, the following other reports, information and
notices:

          (i) Notice of Events of Default and Material Adverse Changes. Promptly
after any Authorized Officer of the Borrower has learned of the occurrence or
existence of an Event of Default or a Material Adverse Change, telephonic notice
thereof specifying the details thereof, the anticipated effect thereof and the
action which the Borrower has taken, is taking or proposes to take with respect
thereto, which notice shall be promptly confirmed in writing within five (5)
days by an Authorized Officer of the Borrower.

          (ii) Notice of Breach of Material Contract. Promptly after any
Authorized Officer of the Borrower has learned of the occurrence or existence of
a default by any party to any material contract to which the Borrower or any
Active Subsidiary is a party which default has had or which may reasonably be
expected to have a Material Adverse Effect, telephonic notice thereof specifying
the details thereof, the anticipated effect thereof and the action which the
Borrower is taking or proposes to take with respect thereto, which notice shall
be promptly confirmed in writing within five (5) days by an Authorized Officer
of the Borrower.

          (iii) Notice of Litigation.

          (A) Promptly after any Authorized Officer of the Borrower has
knowledge thereof, written notice of any action, suit, proceeding or
investigation before any Governmental Person affecting the Borrower or any
Active Subsidiary, except for actions, suits, proceedings and investigations
which, if adversely determined, would not and could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Change; and

          (B) promptly after any Authorized Officer of the Borrower has
knowledge thereof, written notice of any decision, ruling, judgment which has
had or which could reasonably be expected to have a Material Adverse Effect and
any appeal, reversal or other significant action in connection with any such
action, suit, proceeding or investigation before any Governmental Person
affecting the Borrower or any Active Subsidiary.

          (iv) Orders, Etc. Promptly after receipt thereof, a copy of any order,
writ, decree, judgment, decision or injunction issued by any Governmental Person
in any proceeding, action, suit or investigation to which the Borrower or any
Active Subsidiary is a party which would or could reasonably be expected to
result in a Material Adverse Change.

          (v) ERISA Reports.

          (A) As soon as possible, and in any event not later than the date
notice is sent to the PBGC, notice of any Reportable Event regarding any Plan or
Benefit Arrangement of the Borrower, any Active Subsidiary of the Borrower or
any ERISA Affiliate and an explanation of any action which has been or which is
proposed to be taken with respect thereto;

          (B) concurrent with the filing thereof, a copy of any request to the
United States Secretary of the Treasury for a waiver or variance of the minimum
funding standards of

                                       58



Section 302 of ERISA and Section 412 of the Code with respect to any Plan or
Benefit Arrangement of the Borrower, any Active Subsidiary of the Borrower or
any ERISA Affiliate;

          (C) as soon as possible, but in no event later than sixty (60) days
after an officer of the Borrower becomes aware of unfunded accumulated benefit
obligations for any Plan of the Borrower or any ERISA Affiliate, as determined
in accordance with the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 87, Employer's Accounting for Pensions (or
any superseding statement thereto), written notice of the occurrence of such
event;

          (D) upon the request of the Agent, copies of each annual report (Form
5500 Series) with accompanying schedules filed with respect to any Plan or
Benefit Arrangement of the Borrower or any ERISA Affiliate;

          (E) promptly after receipt thereof, a copy of any notice which the
Borrower or any ERISA Affiliate may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Benefit Arrangement, or to
appoint a trustee to administer any Plan or Benefit Arrangement, or to assert
any liability under Title IV of ERISA against the Borrower or any ERISA
Affiliate;

          (F) a copy of any notice of assessment of Withdrawal Liability
received by the Borrower or any ERISA Affiliate in relation to any Multiemployer
Plan;

          (G) as soon as possible, and in no event later than the date
notification is sent to the PBGC, notice of the failure by the Borrower or any
ERISA Affiliate to make a required installment or other payment under Section
302 of ERISA and Section 412 of the Code;

          (H) concurrent with the filing thereof, a copy of any Notice of Intent
to Terminate any Plan of the Borrower or any ERISA Affiliate filed under Section
4041(c) of ERISA; and

          (I) promptly after receipt thereof, but without any obligation or
responsibility to secure the same, copies of any calculations of estimated
Unfunded Benefit Liabilities (or, if applicable, the portions of any estimated
Unfunded Benefit Liabilities that would be allocated to the Borrower or any
ERISA Affiliate under Sections 4063 and 4064 or Section 4062(e) of ERISA) for
any Plans of the Borrower, any Active Subsidiary of the Borrower or any ERISA
Affiliate.

          (vi) Notice of Environmental Claims. Promptly after receipt thereof,
the Borrower shall deliver to the Agent, for redelivery to the Banks, notice of
any material Environmental Claim.

          (vii) Tax Returns. The Borrower shall deliver to the Agent, for
redelivery to the Banks, promptly upon request, copies of all Federal and
foreign tax returns and reports filed by the Borrower or any Active Subsidiary
in respect of taxes measured by income (excluding sales, use and like taxes).

          (viii) Notices of Tax Audits. Promptly, and in any event within ten
(10) days after receipt thereof by the Borrower or any Active Subsidiary, the
Borrower shall furnish to the

                                       59



Agent, for redelivery to the Banks, a copy of each notice from any Governmental
Person received by the Borrower or any Active Subsidiary of a threatened
material adverse adjustment to any Federal or foreign tax return of the Borrower
or any Active Subsidiary, as applicable and a copy of each subsequent notice
with respect thereto from any such Governmental Person.

          (g) Updates to Schedules. Together with each delivery of the
Borrower's annual financial statements pursuant to Subsection 5.2(b) hereof, the
Borrower shall provide the Agent, for redelivery to the Banks, with written
revisions or updates to Schedule 4.1, 4.3, 4.7, 4.10, 4.11, 4.12 and 4.13;
provided, however, that no schedule shall be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such schedule.

     5.3 Preservation of Existence.

     Except as otherwise permitted pursuant to Section 6.10, at its own cost and
expense, the Borrower will, and will cause each Active Subsidiary to, do all
things necessary to preserve and keep in full force and effect its corporate
existence and its qualification under the laws of the state of its
incorporation. Further, the Borrower will, and will cause each Active
Subsidiary, other than Active Subsidiaries which no longer exist as a result of
a transaction permitted pursuant to Section 6.10, to maintain, preserve and
renew all rights, powers and privileges which are material to the Consolidated
operation of the Borrower's business, including the accreditation of its
Accredited Subsidiaries (the loss of which accreditation shall be deemed for
purposes of this Credit Agreement to be material).

     5.4 Payment of Taxes and Fees.

     The Borrower will, and will cause each of its Active Subsidiaries to,
promptly pay and discharge all taxes, assessments, and governmental charges and
levies upon it or upon its income, profits or property except for taxes,
assessments and governmental charges or levies (a) the payment of which is being
contested in good faith by appropriate proceedings, or (b) the non-payment of
which would not reasonably be expected to have a Material Adverse Effect on the
Borrower and its Subsidiaries taken as a whole, and as to which it shall have
set aside on its books reserves for such claims as are determined to be adequate
by the application of GAAP consistently applied.

     5.5 Notice of Change of Business.

     The Borrower will promptly give written notice to the Agent, for redelivery
to the Banks, if the Borrower or any of its Active Subsidiaries which is a
Person primarily engaged in proprietary education or other related fields ceases
to be so primarily engaged.

     5.6 Hazard and Casualty Insurance.

     The Borrower will, and will cause each Active Subsidiary to, keep and
maintain hazard and casualty insurance with responsible insurance companies on
such of the properties of the Borrower and its Active Subsidiaries, in such
amounts and against such risks as is customarily

                                       60



maintained by similar businesses similarly situated and owning, leasing or
operating similar properties. If Mortgages are required under Section 3.1
hereof, with respect to the Real Property and related property in which a lien
is granted to Agent pursuant to the Mortgages, the Borrower and its Subsidiaries
shall deliver to the Agent such insurance policies or certificates of insurance
as reasonably required by Agent, with additional insured, mortgagee and lender
loss payable special endorsements attached thereto in form and substance
satisfactory to the Agent naming the Agent on behalf of the Banks as additional
insured, mortgagee and lender loss payee.

     5.7 Good Repair.

     The Borrower will, and will cause each Active Subsidiary to, do all things
necessary to maintain, preserve, protect and keep its respective property in
good repair, working order and condition, ordinary wear and tear excepted, and
make all necessary and proper repairs, renewals and replacements so that its
respective business carried on in connection therewith may be conducted at all
times as presently conducted.

     5.8 Corporate Records.

     The Borrower will, and will cause each Active Subsidiary to, maintain
proper books of record and account in accordance with sound accounting practice
in which full, true and correct entries shall be made of all its respective
property and assets and its respective dealings and business affairs.

     5.9 Inspection of Records and Properties.

     The Borrower will, and will cause each Active Subsidiary to, permit, on
reasonable prior notice from the Agent or any Bank or their respective agents or
representatives (but upon the occurrence and during the continuation of an Event
of Default, without the requirement of reasonable prior notice), to visit during
regular office hours any of their respective properties, to examine their
respective physical assets, books of account and other records, and to discuss
their respective affairs and accounts with, and be advised about them by the
management of the Borrower or any Active Subsidiary, and as often as the Agent
or such Bank may reasonably request.

     5.10 Continued Ownership of Active Subsidiaries.

     Except as permitted by Section 6.5, without the written consent of all of
the Banks, the Borrower shall not sell, transfer or otherwise dispose of any of
its capital stock of an Active Subsidiary.

     5.11 Compliance With Laws.

     The Borrower will, and will cause each Active Subsidiary to, perform and
promptly comply in all material respects, and cause all property of the Borrower
and each Active Subsidiary to be maintained, used and operated in all material
respects in accordance with all Governmental Rules (including, without
limitation, zoning ordinances, building codes and Environmental Laws) of every
duly constituted Governmental Person applicable to the Borrower, each Active
Subsidiary or any of their respective properties) except for those alleged

                                       61



violations which are being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted and if an appropriate
provision, as shall be required by GAAP, shall have been made therefor. The
foregoing notwithstanding, the Borrower shall not be deemed to be in violation
of this Section 5.11 as the result of any failure to comply with such
Governmental Rule if (A) the applicability of such Governmental Rule is being
contested by the Borrower or any Active Subsidiary in good faith and by proper
proceedings appropriately conducted or (B) the non-compliance with such
Governmental Rule would not reasonably be expected to materially and adversely
affect the business operations or financial condition of the Borrower or its
Active Subsidiaries or the ability of the Borrower and its Active Subsidiaries,
taken as a whole, to perform their respective obligations under the Loan
Documents. Without limiting the generality of the foregoing, the Borrower will,
and will cause each Subsidiary to, comply with (i) all applicable Laws, the
violation of which would terminate or materially impair the eligibility of The
Borrower or any Subsidiary for participation, if applicable, in student
financial assistance programs under Title IV, where such termination or material
impairment would have a Material Adverse Effect, (ii) the federal
Truth-in-Lending Act, 15 U.S.C. (S) 1601 et seq., and all other consumer credit
laws applicable to The Borrower or any Subsidiary in connection with the
advancing of student loans, except for such laws and regulations the violation
of which, in the aggregate, will not result in the assessment of penalties and
damages claims against the Borrower or any Subsidiary where such penalties and
damage claims would have a Material Adverse Effect, (iii) all statutory and
regulatory requirements for authorization to provide post-secondary education in
the jurisdictions in which its educational facilities are located, except for
such requirements the violation of which will not have a Material Adverse
Effect, and (iv) if applicable, all requirements for continuing its
accreditations, except for such requirements the violation of which would not
have a Material Adverse Effect (including cases where the governing board of the
institution in good faith elected to seek or permit the termination of such
accreditation which would not have a Material Adverse Effect).

     5.12 Further Assurances.

     At any time and from time to time, upon the Agent's request, the Borrower
shall, and shall cause each Active Subsidiary to, make, execute and deliver, or
cause to be made, executed and delivered, to the Agent and where appropriate
shall cause to be recorded or filed, and from time to time thereafter to be
re-recorded and refiled at such time and in such offices and places as shall be
deemed reasonably desirable by the Banks, any and all such further certificates
and other documents as the Banks may consider necessary or desirable in order to
continue and preserve the obligations of the Borrower under the Notes and other
Loan Documents.

     5.13 Liens and Security Interests.

          If Mortgages are required under Section 3.1, the Borrower shall and
shall cause each Subsidiary which owns Real Property required to be granted as
security for the Obligations hereunder to execute and deliver and shall cause to
be recorded Mortgages and corresponding financing statements in favor of the
Agent for the benefit of the Banks, and shall cause such other documents related
thereto to be delivered to the Agent, as the Agent shall reasonably request.

                                       62



     5.14 Good Standing Certificates.

          Borrower will and will cause the Art Institutes International, Inc. to
deliver to the Agent within thirty (30) days after the Closing Date, a
certificate of good standing issued by the Secretary of State of the
Commonwealth of Pennsylvania.

                         ARTICLE VI. NEGATIVE COVENANTS

          From the date hereof and for so much longer thereafter as the
Revolving Credit Commitment is in effect or any of the Bank Indebtedness remains
unpaid, the Borrower agrees, for the benefit of the Banks, the Issuing Banks and
the Agent, that:

     6.1 Maintenance of Ratio of Total Funded Debt to EBITDA.

     The Borrower will not permit or suffer to exist, as of the end of each
Fiscal Quarter ending hereafter, its ratio of Total Funded Debt, as determined
as of the end of such Fiscal Quarter, to EBITDA, as determined for the
immediately preceding four (4) Fiscal Quarters then ended to be greater than 2.5
to 1.0.

     For purposes of calculating compliance with the foregoing ratio of Total
Funded Debt to EBITDA, as well as for purposes of (a) calculating compliance
with the covenants required to be measured under Section 6.13(v), (b)
calculating the applicable interest rates on the Loans pursuant to Sections
2.5(b)(i) through (iii), and (c) calculating the applicable Commitment Fees and
Letter of Credit Fees under Section 2.1(g) and 2.3(e) respectively, EBITDA shall
be calculated on a pro forma basis using the historical financial statements of
the Borrower and its Subsidiaries, and the other Persons and businesses acquired
pursuant to Permitted Acquisitions.

     6.2 [Intentionally Omitted].

     6.3 Net Worth.

     The Borrower will not permit at any time Net Worth to be less than Base Net
Worth.

     6.4 Fixed Charge Coverage Ratio.

     The Borrower will not permit or suffer to exist, as determined on each
Fiscal Quarter ending hereafter for the immediately preceding four Fiscal
Quarters then ended (i.e. a rolling four Fiscal Quarter basis), its Fixed Charge
Coverage Ratio to be less than 1.10 to 1.0.

     For purposes of calculating compliance with the foregoing Fixed Charge
Coverage Ratio, EBITDA for Subsidiaries owned by the Borrower less than four
Fiscal Quarters at the time of the calculation of the Fixed Charge Coverage
Ratio shall not be subject to the pro forma adjustments provided for in Section
6.1.

     6.5 Disposal of Assets.

     The Borrower will not, nor will it permit any of its Subsidiaries to, sell,
lease or otherwise dispose of, in any one Fiscal Year during the term hereof,
assets having an aggregate

                                       63



fair market value in excess of $5,000,000 or directly or indirectly enter into
an agreement or arrangement whereby the Borrower or any of its Subsidiaries
shall sell or transfer assets having an aggregate fair market value in excess of
$5,000,000; provided, however, that with the consent of the Required Banks, the
Borrower and its Subsidiaries shall be permitted to make such agreements,
arrangements and dispositions of assets having an aggregate fair market value in
excess of $5,000,000 in any one Fiscal Year so long as the net proceeds of such
dispositions in excess of $5,000,000 are paid to the Agent as a mandatory
prepayment of the Loans in accordance with Section 2.4(f). Provided no Event of
Default has occurred and is continuing, the Agent shall release any Encumbrance
of the Agent and the Banks in the assets of the Borrower and its Subsidiaries
disposed of in accordance with the foregoing permitted dispositions. In addition
to the dispositions permitted above, the Borrower and its Subsidiaries may make
the dispositions of assets which consist of (i) the sale of inventory in the
ordinary course of business, (ii) a merger or consolidation otherwise permitted
pursuant to Section 6.10, and (iii) prior to the occurrence and during the
continuation of a Default or Event of Default, the sale and lease-back of owned
real estate and improvements which are not subject to the lien of any of the
Mortgages.

     6.6 Permitted Indebtedness.

     The Borrower will not, and will not permit any Subsidiary to, guarantee or
incur or suffer to exist any Indebtedness for Borrowed Money except:

          (i) the Bank Indebtedness and reimbursement obligations of the
Borrower's Subsidiaries related to Letters of Credit;

          (ii) Indebtedness for Borrowed Money secured by Permitted
Encumbrances;

          (iii) Guarantees of Indebtedness for Borrowed Money to the extent such
Indebtedness for Borrowed Money is permitted by this Section 6.6;

          (iv) Indebtedness for Borrowed Money incurred by any Subsidiary and
due to the Borrower;

          (v) Indebtedness for Borrowed Money not specifically enumerated in
items (i) through (iv) above outstanding on the Closing Date as more fully set
forth on Schedule 6.6, as the same may be extended or renewed but not increased.

          (vi) Guarantees of Teach-Out Obligations and other education-related
obligations of the Borrower or its Active Subsidiaries;

          (vii) Indebtedness incurred in connection with a Permitted
Acquisition;

          (viii) Guarantees of any student loan programs of the Borrower or its
Active Subsidiaries in an aggregate amount of up to $5,000,000;

          (ix) Indebtedness for Borrowed Money in a principal amount of up to
$25,000,000 in the aggregate outstanding in connection with real estate
financings and sale and lease-back real estate transactions (other than sale and
lease-back transactions prohibited by Section 6.5 above), including without
limitation, any reimbursement obligations incurred with

                                       64



respect to a bond financing that is secured by real estate, provided that,
neither the Borrower nor any Subsidiary of the Borrower shall Guarantee any
Indebtedness for Borrowed Money permitted under this Subsection (other than the
Guarantee by Argosy of the Indebtedness for Borrowed Money of Western State
University College of Law ("WSU") in favor of Union Bank of California in
connection with a real estate financing of real property owned by WSU, solely to
the extent that the aggregate principal amount of such Indebtedness subject to
such Guarantee does not exceed $3,500,000) and, further provided that, if such
Indebtedness for Borrowed Money is incurred by a Subsidiary, the Subsidiary
shall execute a Subsidiary Guarantee;

          (x) In addition to the other Indebtedness for Borrowed Money permitted
by this Section 6.6, unsecured Indebtedness for Borrowed Money whether now
outstanding or hereafter incurred by the Borrower or any Subsidiary that when
aggregated with other Indebtedness for Borrowed Money of the type permitted by
this Subsection (x) of the Borrower and all of the Subsidiaries (excluding Bank
Indebtedness) is not more than $125,000,000 at any time; provided, however, that
if Indebtedness for Borrowed Money in excess of $100,000,000 is incurred under
this Section 6.6(x), the Revolving Credit Commitments as well as the ability to
increase such Revolving Credit Commitments provided for in Section 2.1(j) shall,
on the date any such Indebtedness for Borrowed Money is incurred, be
automatically and permanently reduced to the extent such Indebtedness for
Borrowed Money exceeds $100,000,000; provided, further that the Revolving Credit
Commitments shall not be required to be reduced below $250,000,000 pursuant to
this Section 6.6(x); and

          (xi) Indebtedness for Borrowed Money incurred by the Borrower or its
Subsidiaries with respect to any currency swap agreement, interest rate swap,
cap, collar or floor agreement or other interest rate management device,
provided that (w) such agreements or devices are not entered into for
speculative purposes (x) the other party to such agreement shall be a Bank or a
financial institution acceptable to the Agent in its reasonable discretion, (y)
such Bank or financial institution shall calculate its credit exposure in a
reasonable and customary manner utilizing standards and contracts on forms
promulgated by the International Swap Dealers Association, and (z) except for
agreements with Banks and Affiliates of Banks which are secured by the Loan
Documents, the obligations of the Borrower and its Subsidiaries shall be
unsecured.

     6.7 Prohibition on Encumbrances.

          (a) Lien Prohibition. The Borrower will not create, assume, incur or
suffer to exist, or allow any Subsidiary to create, assume, incur or suffer to
exist, any Encumbrance upon any of its assets, whether now owned or hereafter
acquired, nor acquire nor agree to acquire any asset subject to an Encumbrance,
except:

          (i) Encumbrances in favor of the Agent and/or the Banks granted
hereunder or under the other Loan Documents;

          (ii) Encumbrances for taxes or assessments or governmental charges or
levies which are not due or remain payable, without penalty, or which are being
contested in good faith by appropriate proceedings and with respect to which the
Borrower or the affected Subsidiary

                                       65



has created reserves which are determined by the Borrower to be adequate by the
application of GAAP consistently applied;

          (iii) Encumbrances to secure the obligations of the Borrower or any
Subsidiary under workmen's compensation laws, unemployment insurance laws,
social security laws or other similar legislation;

          (iv) Encumbrances to secure the obligations of the Borrower or any
Active Subsidiary directly associated with state licensing or accreditation
requirements;

          (v) Encumbrances in connection with bids, tenders, performance bonds,
contracts or leases (including, without limitation, the posting of collateral
for any operating lease) to which the Borrower or any Subsidiary is a party, or
to secure public or statutory obligations in an amount of up to $1,000,000 in
the aggregate;

          (vi) Encumbrances for landlords', mechanics', carriers', workmen's,
warehousemen's, materialmen's or repairmen's liens or other like Encumbrances in
the ordinary course of business;

          (vii) Encumbrances upon tangible personal property securing loans and
capital leases to any Subsidiary or Borrower or deferred payments by the
Borrower or any Subsidiary for the purchase or lease under a Capitalized Lease
of such tangible personal property, provided that the amount of the Indebtedness
for Borrowed Money secured by the Encumbrance does not exceed the purchase price
of such tangible personal property and the Encumbrances do not extend to any
other property of such Subsidiary or the Borrower;

          (viii) Encumbrances on particular parcels of real estate or buildings
that are given in connection with typical mortgage-type financings to secure
Indebtedness for Borrowed Money that is permitted under Section 6.6(ix);
provided however, such Encumbrances shall not encumber any of the Collateral;
provided further, that such Encumbrances do not secure Indebtedness for Borrowed
Money in excess of $15,000,000;

          (ix) Encumbrances to secure surety, replevin, attachment or appeal
bonds relating to legal proceedings to which the Borrower or any Subsidiary is a
party;

          (x) Encumbrances arising out of judgments or awards against the
Borrower or any Subsidiary with respect to which the Borrower is currently
engaged in proceedings for review or appeal and with respect to which the
Borrower shall have secured a stay of execution pending such proceedings for
review or appeal, provided, that the aggregate amount of the foregoing shall at
no time exceed $5,000,000;

          (xi) minor survey exceptions, minor Encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or Encumbrances incidental to the
conduct of the business of the Borrower or its Subsidiaries or to the ownership
of their properties which were not incurred in connection with Indebtedness for
Borrowed Money or other extensions of credit and which do not in the aggregate
materially

                                       66



adversely affect the value of said properties or materially impair their use in
the operation of the business of the Borrower or such Subsidiaries;

          (xii) Encumbrances to secure any extension, renewal or replacement (or
successive extensions, renewals or replacements) as a whole, or in part, of any
obligations secured by any Encumbrances referred to in the foregoing clauses (i)
through (xi) and clause (xiii), provided that (y) such extended, renewed or
replaced Encumbrances shall be limited to all or a part of the same property
that secured the Encumbrances extended, renewed or replaced (plus improvements
on such property) and (z) the obligations secured by such Encumbrances at such
time are not increased except in accordance with the terms thereof; and

          (xiii) Encumbrances not specifically enumerated in items (i) through
(xii) above which were in existence on the date hereof and described on Schedule
6.7 hereto.

          (b) Agreements Restricting Encumbrances. Except for agreements related
to secured financing permitted under Section 6.7(vii) and (viii), neither the
Borrower, nor any Subsidiary, shall enter into any agreement, with any Person
conditioning, restricting or in any way prohibiting the creation of a security
interest, pledge, lien or other Encumbrance on or against or with respect to any
of its now owned or hereafter acquired right, title or interest real or personal
property in favor of the Agent and the Banks.

     6.8 Advance of Funds and Investments.

          (a) Advance of Funds. The Borrower will not, nor will it permit any
Subsidiary to, make any advance, loan or extension of credit to any Person,
except: (a) extension of trade credit and student loans in the ordinary course
of business; provided, that extension of credit for student loans shall not
exceed an aggregate amount at any time outstanding of (i) $50,000,000 from the
Closing Date to the first anniversary of the Closing Date, (ii) $55,000,000 from
the first anniversary of the Closing Date to the second anniversary of the
Closing Date and (iii) $60,000,000 from and after the second anniversary of the
Closing Date; (b) Indebtedness for Borrowed Money permitted by Subsection 6.6
hereof; (c) advances to employees made by the Borrower or any Subsidiary in the
ordinary course of its business, and (d) other loans and advances made in the
ordinary course of business not to exceed $5,000,000 in the aggregate at any one
time outstanding.

          (b) Investments. The Borrower will not, nor will it permit any
Subsidiary to, make any capital contribution to, purchase any stocks, bonds,
notes, debentures or other securities of, or make any other investment in any
other Person, except (a) existing Subsidiaries; (b) investments in prime
commercial paper rated at least A-1 by Standard and Poor's Ratings Group (S&P)
and P-1 by Moody's Investors Service Inc. ("Moody's") which mature not more than
270 days from the date of acquisition; investments in variable rate demand notes
and auction rate notes rated at least A-minus by S&P or A-3 by Moody's which
mature not more than one year form the date of acquisition; repurchase
agreements and reverse repurchase agreements (i) with any bank (or broker-dealer
subsidiary or affiliate of any bank) provided that the institution has capital
resources in excess of $500,000,000 and is rated at least A-minus by S&P or A-3
by Moody's, or (ii) any primary dealer of United States government securities,
related to marketable, direct obligations or securities issued or
unconditionally guaranteed or insured by

                                       67



the United States of America or any U.S. Government related entity which mature
not more than one year from the date of acquisition; domestic and eurodollar
time deposits, overnight deposits, Bankers' acceptances and certificates of
deposit, maintained at or issued by any branch or any bank or trust company
organized or licensed under the laws of the United States of America or any
state, provided that the institution has capital resources in excess of
$500,000,000 and is rated at least A-minus by S&P or A-3 by Moody's, which
mature no more than one year from the date of acquisition; mutual funds,
including money market mutual funds, which invest primarily in securities listed
in the preceding investments in this item (b) and have assets of at least
$1,000,000,000; (c) acquisitions permitted by Section 6.13 hereof and (d) up to
$10,000,000 of monies invested (or liabilities incurred) subsequent to the
Closing Date in joint ventures and strategic investments in the same line of
business as the Borrower and its Subsidiaries.

     6.9 Dividend and Redemption Restrictions.

          (a) Dividend Restrictions. The Borrower shall not pay cash dividends
or distributions on its capital stock while the Credit Facility is outstanding
except, that so long as no Event of Default is in existence or will result
therefrom and the Borrower is in pro forma compliance with the financial
covenants contained in Sections 6.1, 6.3 and 6.4 hereof prior to and after
giving effect to such dividends or distributions, the Borrower may pay cash
dividends or distributions.

          (b) Redemption Restrictions. The Borrower shall not, nor shall it
permit any Subsidiary to, purchase the Borrower's capital stock while the Credit
Facility is outstanding, except, that so long as no Event of Default is in
existence or will result therefrom, the Borrower may repurchase subsequent to
the Closing Date its publicly traded securities in an aggregate amount of up to
$50,000,000, plus fifty percent (50%) of the net proceeds of any capital stock
or other ownership interest issued by the Borrower after the Closing Date (other
than in connection with Permitted Acquisitions or in connection with capital
stock purchased by officers, directors and employees of the Borrower and its
Subsidiaries), provided however, that the aggregate amount of all such
securities repurchases does not exceed $100,000,000.

          (c) Subsidiary Dividends. No Subsidiary shall enter into any agreement
or covenant that prohibits, conditions or limits such Subsidiary from paying or
declaring dividends or paying any inter-company obligations whether now
outstanding or hereafter arising.

     6.10 Merger.

          (a) The Borrower shall not merge or consolidate with any other Person
unless (i) the Borrower is the surviving corporation, and (ii) no Event of
Default occurs or is reasonably likely to occur as a result of such a merger or
consolidation.

          (b) The Borrower shall not permit any Subsidiary to merge or
consolidate with any Person (other than the Borrower or another Subsidiary)
unless (i) such Subsidiary is the surviving corporation or, if such Subsidiary
is not the surviving corporation, the surviving corporation's stock is owned,
directly or indirectly, by the Borrower and, in the event such Subsidiary is a
Material Subsidiary, such capital stock is subject to the Pledge Agreement
(unless the lien of the Pledge Agreement has terminated in accordance with
Section 3.1), and (ii) no

                                       68



Event of Default occurs or is reasonably likely to occur as a result of such
merger or consolidation.

     6.11 Regulations X, T and U Compliance.

     The Borrower will not, nor shall it permit any of its Subsidiaries to, use,
or permit the use of, the proceeds of any borrowings hereunder to purchase or
carry Margin Stock or otherwise act so as to cause the Banks, in extending
credit hereunder, to be in contravention of Regulations X, T and U.

     6.12 Cohort Default Rates.

     The Borrower will not permit any Active Subsidiary whose operating income
for the most recently completed Fiscal Year equals or exceeds seven and one-half
percent (7-1/2%) of the aggregate operating income of all Active Subsidiaries
for the same fiscal period to have a Cohort Default Rate in excess of
twenty-five percent (25%) per year for the two (2) previous years.

     6.13 Permitted Acquisitions.

          (a) Except for the merger of Subsidiaries permitted under Section
6.10, the Borrower will not, nor will it permit any Subsidiary to acquire all or
substantially all of the assets of any second Person or acquire the stock of any
second Person or make any other investment in any second Person, provided that
the Borrower or any Subsidiary of the Borrower may acquire all the ownership
interests of or substantially all the assets of a second Person (a "Permitted
Acquisition") if each of the following requirements are met:

          (i) the Borrower or the Subsidiary acquiring ownership interests in
such Person shall, in the case of any Person which constitutes a Material
Subsidiary, if required pursuant to Section 3.1, cause such ownership interests
to be pledged to the Agent for the benefit of the Banks pursuant to the Pledge
Agreement and, if required pursuant to Section 3.1, shall cause the Agent to
receive a lien pursuant to a Mortgage on any Real Property acquired in
connection with the Permitted Acquisition;

          (ii) the board of directors or other equivalent governing body of such
Person shall have approved such Permitted Acquisition;

          (iii) the business acquired, or the business conducted by the Person
whose ownership interests are being acquired, as applicable, shall be
substantially the same as one or more line or lines of business conducted by the
Borrower and its Subsidiaries or a reasonable extension of such line or lines of
business and shall comply with Section 6.15;

          (iv) no Default or Event of Default shall exist immediately prior to
and after giving effect to such Permitted Acquisition;

          (v) after giving effect to the Permitted Acquisition, the Borrower
shall be in compliance with Sections 6.1 through 6.4 on a pro forma basis for
the twelve month period ended immediately prior to and after giving effect to
the closing of the Permitted Acquisition,

                                       69



with any pro forma adjustments relating to the Permitted Acquisition to be
acceptable to the Agent. The Borrower shall demonstrate that it shall be in pro
forma compliance with the covenants set forth in Sections 6.1 through 6.4
(including in such computation Indebtedness for Borrowed Money or other
liabilities assumed or incurred in connection with such Permitted Acquisition
and giving pro forma effect to net Consolidated EBITDA of the Person or assets
so acquired) by delivering at least five (5) Business Days prior to such
Permitted Acquisition a certificate in the form of Exhibit "K" evidencing such
compliance;

          (vi) in connection with the closing of any single Permitted
Acquisition, the Consideration for such Permitted Acquisition other than capital
stock of the Borrower, shall not exceed (a) in any Fiscal Year, 0.5 times EBITDA
of the Borrower and its Subsidiaries for the four Fiscal Quarters ended
immediately prior to the execution of the acquisition agreement in connection
with such Permitted Acquisition, and (b) when aggregated with the Permitted
Acquisitions previously consummated in such Fiscal Year of the Borrower, shall
not cause the aggregate Consideration (other than capital stock of the Borrower)
in such Fiscal Year to exceed EBITDA of the Borrower and its Subsidiaries for
the four fiscal quarters ended immediately prior to the execution of the
acquisition agreement in connection with such Permitted Acquisition and (c) when
aggregated with the Permitted Acquisitions previously consummated in such Fiscal
Year of the Borrower, shall not cause the aggregate Consideration (including
capital stock of the Borrower) in such Fiscal Year to exceed one and one half
(1.5) times EBITDA of the Borrower and its Subsidiaries for the four fiscal
quarters ended immediately prior to the execution of the acquisition agreement
in connection with such Permitted Acquisition;

          (vii) in connection with the closing of any single Permitted
Acquisition when the Consideration exceeds $5,000,000, or when the Consideration
for such Permitted Acquisition plus the Consideration for all Permitted
Acquisitions previously consummated in the same Fiscal Year of the Borrower
exceeds $10,000,000, the Borrower shall deliver to the Agent, for redelivery to
the Banks (a) consolidating financial projections of the Borrower and its
Subsidiaries incorporating the pending Permitted Acquisition for a one year
period after the acquisition, including the year of acquisition; and (b)
consolidated financial projections of the Borrower and its Subsidiaries
incorporating the pending Permitted Acquisition for a three year period after
the acquisition, including the year of acquisition; and

          (viii) the Borrower shall deliver to the Agent for redelivery to the
Banks (a) copies of a description and financial statements of the entity or
assets to be acquired and upon the request of the Agent, related due diligence
information obtained by the Borrower, and (b) copies of any agreements entered
into or proposed to be entered into by the Borrower or any Subsidiary in
connection with such Permitted Acquisition and shall deliver to the Agent such
other information about such Person or its assets as the Agent or any Bank may
reasonably require.

     6.14 Change Fiscal Year.

     The Borrower will not, nor shall it permit any of its Subsidiaries to,
change its Fiscal Year.

                                       70



     6.15 Change of Business.

     The Borrower shall not engage, and shall cause each Subsidiaries to refrain
from engaging, in any business other than its primary presently conducted
businesses and other related ancillary businesses.

     6.16 Amendment to Purchase Agreement.

     The Borrower will not, nor shall it permit any of its Subsidiaries to,
amend the AEC Purchase Agreement without the prior written consent of the Agent.

     6.17 Affiliate Transactions.

     The Borrower will not, and will not permit any of its Active Subsidiaries
to, enter into or carry out any transaction (including purchasing property or
services from or selling property or services to any Affiliate or any Borrower
or Subsidiary or other Person) with any Affiliate unless such transaction is not
otherwise prohibited by this Agreement, is entered into in the ordinary course
of business upon fair and reasonable arm's length terms and conditions which are
fully disclosed to the Agent and is in accordance with all applicable
Governmental Rules.

     6.18 Prepayment of Indebtedness.

     Without the prior written consent of the Agent, the Borrower will not, and
will not permit any of its Subsidiaries to, at any time, directly or indirectly,
prepay any Indebtedness for Borrowed Money (other than to the Banks), or
repurchase, redeem, retire or otherwise acquire any Indebtedness for Borrowed
Money of Borrower or any of its Subsidiaries.

                        ARTICLE VII. CONDITIONS PRECEDENT

     7.1 All Revolving Credit Loan, Term Loans, Swing Loan, Supplemental Swing
Loan and All Letters of Credit.

     The obligation to make each Revolving Credit Loan, the Term Loan, each
Swing Loan and each Supplemental Swing Loan and to issue each Letter of Credit
is subject to the performance by each of the Borrower of its obligations under
this Credit Agreement and to the satisfaction of the following further
conditions:

          (a) Request for Revolving Credit Loan or Issuance of Letter of Credit.
(i) Except for a Revolving Credit Disbursement made simultaneously with the
execution of this Credit Agreement, receipt by the Agent, on behalf of the
Banks, of a Request for Revolving Credit Loan, Request for Term Loan, Swing Loan
Request or Supplemental Swing Loan Request satisfying the requirements of this
Agreement or (ii) receipt by the Agent, on behalf of the relevant Issuing Bank,
of a fully-executed and completed application and agreement for Letter of
Credit.

          (b) No Default or Event of Default. The fact that, at the time of each
Revolving Credit Disbursement, the Term Loan, Swing Loan, Supplemental Swing
Loan or issuance of each Letter of Credit, no Default or Event of Default, shall
have occurred and be continuing.

                                       71



          (c) No Material Adverse Change. There shall not have occurred and be
continuing (i) any Material Adverse Change or (ii) any event which has had, or
could reasonably be expected to have, a Material Adverse Effect.

          (d) Compliance With Covenants. The fact that, at the time of each
Revolving Credit Loan, the Term Loan, Swing Loan, Supplemental Swing Loan or
issuance of each Letter of Credit (after giving effect to such Loan or Letter of
Credit), the Borrower shall be in compliance with the covenants contained in
Sections 5 and 6 hereof.

          (e) Representations Correct. The fact that the representations and
warranties contained in this Credit Agreement and the other Loan Documents are
true and correct on and as of the date of borrowing, except to the extent that
such representations and warranties relate solely to an earlier date (in which
case, such representations and warranties shall have been true and correct on
and as of such earlier date).

Each request for a Revolving Credit Disbursement, the Term Loan, a Swing Loan,
Supplemental Swing Loan and each request for the issuance of a Letter of Credit,
whether made orally or in writing, by the Borrower shall be deemed to be, as of
the date of such request, a representation and warranty by the Borrower as to
the facts specified in Subsections 7.l(b), 7.l(c), 7.l(d) and 7.l(e).

     7.2 Conditions Precedent to the Initial Revolving Credit Disbursement and
the Issuance of the Initial Letter of Credit.

     The obligation of the Banks to make the initial Revolving Credit
Disbursement and of the Issuing Banks to issue the initial Letters of Credit,
are subject to the satisfaction of each of the following conditions precedent in
addition to the applicable conditions precedent set forth in Section 7.1 above:

          (a) Credit Agreement. Receipt by the Agent of a counterpart original
of this Credit Agreement duly executed by each Bank, the Issuing Banks, the
Borrower and the Agent.

          (b) Revolving Credit Notes. Receipt by the Agent, for redelivery to
each Revolving Credit Bank, of a duly executed Revolving Credit Note made
payable to such Revolving Credit Bank in an amount equal to its respective
Commitment Amount for Revolving Credit Loans.

          (c) Swing Loan Note. Receipt by the Agent, for redelivery to National
City Bank, of a duly executed Swing Loan Note made payable to National City Bank
in an amount equal to its Swing Loan Commitment.

          (d) Supplemental Swing Loan Notes. Receipt by the Agent, for
redelivery to each Supplemental Swing Loan Bank, of a duly executed Supplemental
Swing Loan Note made payable to such Supplemental Swing Loan Bank in an amount
equal to its respective Supplement Swing Loan Commitment.

          (e) [Intentionally omitted.]

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          (f) Liens and Security Interests. Receipt by the Agent, on behalf of
the Banks, of the Pledge Agreement, duly executed and delivered by the Borrower
and the Subsidiaries, as the case may be, accompanied by such financing
statements, stock certificates, stock powers, acknowledgements and other related
documents as shall be necessary to perfect the security interest of the Agent
for the benefit of the Banks.

          (g) Insurance. The Borrower shall have delivered evidence acceptable
to the Agent that adequate insurance in compliance with Section 4.24 is in full
force and effect and that all premiums then due thereon have been paid.

          (h) Corporate Documents. Receipt by the Agent, on behalf of the Banks,
of a copy, duly certified as of the Closing Date by the secretary or assistant
secretary of the Borrower and the Subsidiaries executing and delivering the
Pledge Agreement of (i) the charter documents of such corporation, (ii) the
By-Laws of such corporation, (iii) the resolutions of the applicable board of
directors authorizing the borrowings hereunder and the execution and delivery of
the Loan Documents to be executed by it, (iv) all documents evidencing all other
necessary corporate action and (v) all approvals or consents, if any, with
respect to this Credit Agreement and the other Loan Documents to be executed by
it.

          (i) Incumbency Certificates. Receipt by the Agent, on behalf of the
Banks, of a certificate of the secretary or assistant secretary of the Borrower
and the Subsidiaries executing and delivering the Pledge Agreement and the
Mortgages, certifying the names and offices of the officers of each such
corporation authorized to sign this Credit Agreement and the other Loan
Documents, and all other documents or certificates to be delivered hereunder,
together with the true signatures of such officers.

          (j) Good Standing Certificates. Receipt by the Agent, on behalf of the
Banks, of a certificate of good standing for the Borrower issued by the
Secretary of State for each state in which the Borrower is authorized to do
business, other than Pennsylvania, issued no more than thirty (30) days prior to
the Closing Date.

          (k) Certificates of Incorporation. Receipt by the Agent, on behalf of
the Banks, of a copy, duly certified by the appropriate governmental official,
of the Articles of Incorporation of the Borrower.

          (l) Closing Certificate. Receipt by the Agent, on behalf of the Banks,
of a certificate duly executed by an Authorized Officer of the Borrower
certifying that the conditions precedent set forth in Subsection 7.l(b), 7.l(c),
7.l(d) and 7.l(e) above have been satisfied as of the Closing Date.

          (m) Closing Fees. Receipt by the Agent, on behalf of the Banks, of the
Closing Fees and all other fees and expenses to be paid by the Borrower under
the Loan Documents.

          (n) Opinion of Borrower's Counsel. Receipt by the Agent, on behalf of
the Banks, of an opinion of Kirkpatrick & Lockhart LLP, counsel to the Borrower
and its Subsidiaries, substantially in the form of Exhibit "L" attached hereto,
and such other opinions of counsel as required by the Agent.

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          (o) Regulatory Approvals. All regulatory approvals, licenses and
permits from Governmental Persons or other Persons to conduct the business
conducted by the Borrower and its Subsidiaries and to enter into the
transactions contemplated hereby shall have been obtained.

          (p) [Intentionally omitted.]

          (q) [Intentionally omitted.]

          (r) Lien Searches. Receipt of the Agent, on behalf of the Banks, of
satisfactory evidence that there are no liens or security interests in property
of the Borrower and the Subsidiaries other than Permitted Encumbrances, and that
the liens and security interest granted to the Agent for the benefit of the
Banks under the Pledge Agreement and the Mortgages constitutes a Prior Security
Interest.

          (s) No Actions or Proceedings. No litigation, investigation or
proceeding before or by any arbitrator or Governmental Person shall be
continuing or threatened against Borrower, any Subsidiary, or against the
officers or directors of Borrower or any Subsidiary (A) in connection with the
Loan Documents or any of the transactions contemplated thereby and which, in the
reasonable opinion of Agent, is deemed material or (B) which could, in the
reasonable opinion of Agent, cause a Material Adverse Change; and (ii) no
injunction, writ, restraining order or other order of any nature materially
adverse to Borrower or any Subsidiary or the conduct of its business or
inconsistent with the due consummation of the transactions contemplated herby
shall have been issued by any Governmental Person.

          (t) Proceedings Satisfactory. Receipt by the Agent, on behalf of the
Banks, of evidence that all proceedings taken in connection herewith and the
consummation of the transactions contemplated hereby and all documents and
papers relating hereto have been completed or duly executed, and receipt by the
Agent, on behalf of the Banks, of such documents and papers, all in form and
substance reasonably satisfactory to the Agent and the Agent's special counsel,
as the Agent or its special counsel may reasonably request in connection
therewith.

          (u) Refinancing. To permit the refinancing by the Banks of the
revolving credit loans, all as outstanding under the Existing Credit Agreement,
Borrower shall have delivered to the Agent not later than 11:00 A.M.
(Pittsburgh, Pennsylvania time) three (3) Business Days prior to the first
borrowing hereunder an appropriately completed irrevocable Loan Request pursuant
to which Loans in an amount sufficient to refinance the revolving credit loans
and prepay the term loans under the Existing Credit Agreement shall be
requested. Each Bank which was a lender under the Existing Credit Agreement by
execution of this Agreement, waives all notice of prepayment of loans and all
notice of termination of the commitments under the Existing Credit Agreement.
All letters of credit issued and outstanding under the Existing Credit Agreement
shall from and after the Closing Date be deemed to be Letters of Credit
outstanding under Section 2.3 of this Credit Agreement, and the Letter of Credit
Exposure shall be reallocated to the Banks under this Credit Agreement in
accordance with the respective Commitment Amount of each Bank.

                                       74



                         ARTICLE VIII. EVENTS OF DEFAULT

     An Event of Default shall mean the occurrence or existence of any one or
more of the following events or conditions (whatever the reason therefore and
whether voluntary, involuntary or effected by operation of Governmental Rule):

     8.1 Payment Default.

          (i) Default in the payment of principal of any of the Notes or
reimbursement obligations with respect to any Letter of Credit.

          (ii) Default in the payment of any interest on or the payment of the
Commitment Fee or the Agent's Fee or any other amount due under the Bank
Indebtedness and continuance of any such nonpayment for ten (10) days after due
date.

     8.2 Cross Defaults.

     Failure of the Borrower or any of its Subsidiaries to pay when due any
Indebtedness for Borrowed Money aggregating in excess of $5,000,000 ("Material
Indebtedness"); or the default by the Borrower or any of its Subsidiaries in the
performance (beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event shall occur
or condition exist, the effect of which default or event is to cause, or to
permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof.

     8.3 Insolvency.

          (a) Involuntary Proceedings. A proceeding shall have been instituted
in a court having jurisdiction seeking a decree or order for relief in respect
of the Borrower or any Subsidiary in an involuntary case under the Federal
bankruptcy laws, or any other similar applicable Federal, state or foreign law,
now or hereafter in effect, or for the appointment of a receiver, liquidator,
trustee, sequestrator or similar official for the Borrower, or any Subsidiary or
for a substantial part of its property, or for the winding up or liquidation of
its affairs, and such shall remain undismissed or unstayed and in effect for a
period of sixty (60) days.

          (b) Voluntary Proceedings. The Borrower or any Subsidiary shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under the Federal bankruptcy laws, or
any other similar applicable Federal, state or foreign law now or hereinafter in
effect, or shall consent or acquiesce in or to the filing of any such petition
or shall consent to or acquiesce in the appointment of a receiver, liquidator,
trustee, sequestrator or similar official for the Borrower or any Subsidiary or
for a substantial part of its property, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or action shall be taken by the Borrower or any
Subsidiary in furtherance of any of the aforesaid purposes.

                                       75



     8.4 Dissolution.

     The existence of the Borrower or any Active Subsidiary is terminated,
unless permitted in accordance with Section 6.10.

     8.5 Adverse Judgments.

     Any court shall render a final judgment or judgments against the Borrower
or any Subsidiary in an aggregate amount of $5,000,000 or more in excess of any
insurance protecting against such liability and such judgment or judgments shall
not be satisfactorily appealed, stayed, discharged, vacated or set aside within
thirty (30) days after entry; or any property of the Borrower or any Subsidiary
shall be attached under a claim or claims in an aggregate amount of $5,000,000
or more in excess of any insurance protecting against the liabilities on which
such attachments are based and such attachments shall not be released or
provided for to the satisfaction of the Banks within thirty (30) days.

     8.6 Failure to Comply With Certain Covenants.

     Default by the Borrower in the performance of any of the agreements and
covenants set forth in Section 5.9 or in Article VI hereof or default by any of
the Subsidiaries in the performance of the material agreements and material
covenants set forth in the other Loan Documents to which it is a party.

     8.7 Failure to Comply With Other Covenants.

     Default by the Borrower in the performance of any of the agreements and
covenants set forth in Article V hereof (other than Section 5.9) or in any of
the Loan Documents (other than material agreements and material covenants
constituting an Event of Default under Section 8.6) and continuance thereof for
thirty (30) days after notice thereof to the Borrower from the Agent as directed
by the Required Banks.

     8.8 Material Adverse Change.

     The occurrence of any Material Adverse Change subsequent to the Closing
Date or subsequent to the delivery of the information provided by the Borrower
to the Agent and the Banks prior to the Closing Date.

     8.9 Misrepresentation.

     Any representation or warranty made by the Borrower in (i) this Credit
Agreement or (ii) any of the other Loan Documents is untrue in any material
respect, or any schedule, statement, report, notice or writing furnished by the
Borrower or on behalf of the Borrower to the Agent or the Banks is untrue in any
material respect on the date as of which the facts set forth are stated or
certified.

     8.10 Change of Control.

     A Change of Control shall occur.

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     8.11 Events Relating to Plans or Benefit Arrangements.

     Any of the following occurs: (i) any Reportable Event, which the Agent
determines in good faith constitutes grounds for the termination of any Plan by
the PBGC or the appointment of a trustee to administer or liquidate any Plan,
shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; (v) the Borrower or any
member of the Controlled Group shall fail to make any contributions when due to
a Plan or a Multiemployer Plan; (vi) the Borrower or any member of the
Controlled Group shall withdraw completely or partially from a Multiemployer
Plan; (vii) the Borrower or any member of the Controlled Group shall withdraw
(or shall be deemed under Section 4062(e) of ERISA to withdraw) from a plan
subject to Section 4063 of ERISA in which the Controlled Group is considered to
be a substantial employer for purposes of Section 4063; or (viii) the Borrower
or any member of the Controlled Group shall make any amendment to a Plan with
respect to which security is required under Section 307 of ERISA; and, in the
case of the occurrence of (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii)
above, the Agent determines in good faith that the amount of the Borrower's
liability is likely to exceed the greater of 10% of its Consolidated Tangible
Net Worth or $1,000,000;.

     8.12 Consequences of an Event of Default.

          (a) Consequence of an Event of Default Set Forth in Sections 8.3 and
8.4. Upon the occurrence of an Event of Default set forth in Section 8.3 or 8.4
hereof, the Revolving Credit Commitment, the Swing Loan Commitment and the
Supplemental Swing Loan Commitment shall automatically terminate and the amounts
outstanding under the Notes shall become immediately due and payable, without
necessity of demand, presentation, protest, notice of dishonor or notice of
default. Thereafter, the Banks shall have no further obligation to make any
additional Loans or issue any additional Letters of Credit hereunder. Upon the
occurrence of an Event of Default set forth in Section 8.3 or Section 8.4, the
Banks shall have the full panoply of rights and remedies granted to them under
this Credit Agreement and the other Loan Documents and all those rights and
remedies granted by law to creditors. No exercise of one right or remedy shall
be deemed a waiver of other rights or remedies.

          (b) Consequences of Remaining Events of Default. During the
continuance of any Event of Default set forth in Sections 8.1, 8.2, 8.5, 8.6,
8.7, 8.8, 8.9, 8.10 or 8.11 hereof (unless remedied, waived or cured to the
satisfaction of the Banks required pursuant to Section 10.1), the Banks shall
have no further obligation to make any additional Loans or issue any additional
Letters of Credit hereunder; and the Agent may, and at the request of the
Required Banks shall, by written or telegraphic notice to the Borrower, declare
the Revolving Credit Commitment, the Swing Loan Commitment and the Supplemental
Swing Loan Commitment terminated and the Notes then outstanding and interest
accrued thereon and all other liabilities of the Borrower hereunder to the Banks
to be forthwith due and payable. Thereupon the Revolving Credit Commitment, the
Swing Loan Commitment and the Supplemental Swing Loan Commitment shall be
terminated and all amounts due hereunder and under any Notes outstanding shall
be due and payable without presentment, demand, protest or other notice of any

                                       77



kind to the Borrower, all of which are hereby expressly waived. Upon the
occurrence of an Event of Default set forth in Sections 8.1, 8.2, 8.5, 8.6, 8.7,
8.8, 8.9, 8.10 or 8.11 hereof, the Banks shall have the full panoply of rights
and remedies granted to them under this Credit Agreement and the other Loan
Documents and all those rights and remedies granted by law to creditors. No
exercise of one right or remedy shall be deemed a waiver of other rights or
remedies.

                        ARTICLE IX. AGREEMENT AMONG BANKS

     9.1 Appointment and Grant of Authority.

     Each of the Banks hereby appoints and designates National City Bank, and
National City Bank hereby agrees to act as, the initial Agent under this Credit
Agreement and the other Loan Documents. As such Agent, National City Bank shall
have and may exercise such powers under this Credit Agreement and the other Loan
Documents as are specifically delegated to the Agent, by the terms hereof or
thereof, together with such other powers as are incidental thereto. Without
limiting the foregoing, each Bank, and each holder of a Note by its acceptance
of such Note, hereby authorizes the Agent, on behalf of the Banks, to execute
all of the Loan Documents (other than this Credit Agreement) and to accept all
of the Loan Documents and all other agreements, documents or instruments
reasonably required to carry out the intent of the parties to this Credit
Agreement. The Agent may perform any of its duties hereunder or under the Loan
Documents by and through its officers, directors, agents, employees or
affiliates.

     Each of the Banks hereby appoints and designates Wachovia Bank, National
Association, as Syndication Agent, SunTrust Bank, as Syndication Agent, Fleet
National Bank, as Documentation Agent, and JPMorgan Chase Bank, as Documentation
Agent, and each such Bank hereby agrees to act in such capacity under this
Credit Agreement and the other Loan Documents. As either Syndication Agent or
Documentation Agent, each such Bank shall have and may exercise only such powers
as are specifically delegated to it by the Agent from time to time and which it
agrees to exercise. Such Banks shall not be deemed to have assumed any duties or
responsibilities under this Credit Agreement and the other Loan Documents by
reason of its designation as Syndication Agent or Documentation Agent.

     9.2 Non-Reliance on Agent.

     Each Bank agrees that it has, independently and without reliance on the
Agent, based on such documents and information as it has deemed appropriate,
made its own credit analysis and evaluation (including but not limited to an
environmental review) of the Borrower and its operations, and decision to enter
into this Credit Agreement. Further, each Bank agrees that it will,
independently and without reliance upon the Agent, and based on such documents
and information as it shall deem reasonable and appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Credit Agreement and the other Loan Documents. Each Bank acknowledges
that a copy of this Credit Agreement and the exhibits and schedules hereto have
been made available to it and to its legal counsel for review and each Bank
acknowledges that it is satisfied with the form and substance of this Credit
Agreement and the exhibits and schedules hereto. Except as otherwise provided in
this Credit Agreement, the Agent shall have no duty or responsibility, either
initially or on a continuing

                                       78



basis, to keep any Bank or any holder of a Note informed as to the performance
or observance by the Borrower of this Credit Agreement or any other document or
instrument referred to or provided for in this Credit Agreement or to inspect
the properties or books of the Borrower. The Agent, in the absence of gross
negligence or willful misconduct, shall not be liable to any Bank for its
failure to relay or furnish to the Bank any information.

     9.3 Responsibility of Agent and Other Matters.

          (a) Ministerial Nature of Duties. As between the Banks and themselves,
the Agent shall have no duties or responsibilities except those expressly set
forth in this Credit Agreement or in the other Loan Documents, and those duties
and responsibilities shall be subject to the limitations and qualifications set
forth in this Article IX. The duties of the Agent shall be ministerial and
administrative in nature.

          (b) Limitation of Liability. As between the Banks and Agent, neither
the Agent nor any of its directors, officers, employees, agents or affiliates
shall be liable for any action taken or omitted (whether or not such action
taken or omitted is within or without the Agent's responsibilities and duties
expressly set forth in this Credit Agreement) under or in connection with this
Credit Agreement or any other instrument or document executed or delivered in
connection herewith except for gross negligence or willful misconduct. Without
limiting the foregoing, neither the Agent nor any of its directors, officers,
employees, agents or affiliates shall be responsible for, or have any duty to
examine (i) the genuineness, execution, validity, effectiveness, enforceability,
collectibility, value or sufficiency of (A) this Credit Agreement or any of the
other Loan Documents or (B) any other document or instrument furnished pursuant
to or in connection with this Credit Agreement, (ii) the collectibility of any
amounts owed by the Borrower to the Banks, (iii) the truthfulness of any
recitals, statements, representations or warranties made to the Agent or the
Banks in connection with this Credit Agreement or any other Loan Documents, (iv)
any failure of any party to this Credit Agreement to receive any communication
sent, including any telegram, telex, teletype, facsimile transmission or
telephone message or any writing, application, notice, report, statement,
certificate, resolution, request, order, consent letter or other instrument or
paper or communication entrusted to the mails or to a delivery service, or (v)
the assets, liabilities, financial condition, results of operations or business,
or creditworthiness of the Borrower.

          (c) Reliance. The Agent shall be entitled to act, and shall be fully
protected in acting upon, any telegram, facsimile transmission or any writing,
application, notice, report, statement, certificate, resolution, request, order,
consent, letter or other instrument, paper or communication believed by the
Agent in good faith to be genuine and correct and to have been signed or sent or
made by a proper Person. The Agent may consult counsel (including counsel of the
Borrower), independent public accountants and other experts selected by it and
shall be entitled to act, and shall be fully protected in any action taken in
good faith, in accordance with advice given by such counsel, independent public
accountants and other experts. The Agent may employ agents and attorneys-in-fact
and shall not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by the Agent with reasonable care. The Agent shall
not be bound to ascertain or inquire as to the performance or observance of any
of the terms, provisions or conditions of this Credit Agreement or any of the
other Loan Documents on the part of the Borrower, the other Loan Parties or any
other party thereto.

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     9.4 Action on Instructions.

     As between the Agent and the Banks, the Agent shall be required to act and
shall be fully protected in so acting and shall be entitled to refrain from
acting, and shall be fully protected in refraining from so acting, under this
Credit Agreement, the other Loan Documents or any other instrument or document
executed or delivered in connection herewith or therewith, in accordance with
written instructions from the Required Banks or, in the case of the matters set
forth in items (A) through (F) of Section 10.l, from all of the Banks.

     9.5 Action in Event of Default.

     As between the Agent and the Banks, if an Event of Default has occurred and
is continuing, the Banks shall promptly consult with one another in an attempt
to agree upon a mutually acceptable course of conduct. Failing unanimous
agreement upon a course of conduct and if the Banks wish to exercise any of
their rights and remedies under the Credit Agreement or under any other Loan
Document, the Agent will exercise the rights of the Banks hereunder or
thereunder as directed by the Required Banks.

     9.6 Indemnification.

     To the extent the Borrower does not reimburse and save harmless the Agent
according to the terms of this Credit Agreement for and from all costs, expenses
and disbursements in connection herewith, such costs, expenses and disbursements
shall be borne by the Banks ratably. Each Bank hereby severally agrees on such
basis (i) to reimburse and indemnify the Agent for such Bank's pro rata share of
all such reasonable costs, expenses and disbursements on request and (ii) to the
extent of each such Bank's pro rata share, to indemnify and save harmless the
Agent against and from any and all liabilities, losses, obligations, damages,
penalties, claims, actions, judgments and suits and other costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent, arising out of or in connection with this
Credit Agreement, the other Loan Documents or any other agreement, instrument or
document executed or delivered in connection herewith or therewith, or any
request of the Required Banks or all of the Banks, as the case may be, including
without limitation the reasonable costs, expenses and disbursements in
connection with defending themselves against any claim or liability, or
answering any subpoena or other process related to the exercise or performance
of any of its powers or duties under this Credit Agreement, the other Loan
Documents, or any of the other agreements, instruments or documents executed or
delivered in connection herewith. The foregoing notwithstanding, no Bank shall
be liable for any portion of such losses, obligations, damages, penalties,
claims, actions, judgments and suits, and other costs, expense and disbursements
resulting from or as a consequence of (A) the Agent's gross negligence or
willful misconduct, (B) a claim against the Agent or the Banks with respect to
which each Bank was not given notice and the opportunity to participate (at its
own expense) in the defense thereof or (C) a compromise and settlement agreement
entered into without the consent of all of the Banks.

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     9.7 Agent's Rights as a Bank.

     With respect to the commitment of the Agent as a Bank hereunder, the other
Loan Documents and any other agreements, instruments and documents delivered
pursuant hereto and any Loans of the Agent under this Credit Agreement, and any
other amounts due to the Agent under this Credit Agreement or the other Loan
Documents, the Agent shall have the same rights and powers, duties and
obligations under this Credit Agreement, the other Loan Documents or other
agreement, instrument or document as any Bank and may exercise such rights and
powers and shall perform such duties and fulfill such obligations as though it
were not the Agent. The terms "Banks", "Required Banks", "holder" or any similar
term shall, unless the context clearly indicates otherwise, include the Agent in
its individual capacity. The Agent may accept deposits from, lend money to, and
generally engage, and continue to engage, in any kind of banking, trust or other
business with the Borrower, any Subsidiary of the Borrower or any Affiliate
thereof as if it were not the Agent hereunder and may accept fees and other
consideration from the Borrower, any Subsidiary of the Borrower or any Affiliate
thereof for services in connection with the Credit Agreement or otherwise
without having to account for the same to the Banks.

     9.8 Advances by Agent.

     Unless the officers of the Agent responsible for administering this Credit
Agreement shall have been notified in writing by a Bank prior to the date of any
Disbursement that such Bank will not make the amount which would constitute its
pro rata share of such Disbursement available to the Agent on the date of such
Loan, the Agent may (but shall not be required to) assume that such Bank has
made such amount available to the Agent on the date of such Loan and the Agent,
in reliance upon such assumption, may make available to the Borrower a
corresponding amount. If such pro rata share is made available to the Agent on a
date after the date of such Disbursement, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) during each day included in the
period referred to in (iii) below, the Federal Funds Rate during each day
included in such period, multiplied by (ii) the amount of such Bank's pro rata
share of such Disbursement, multiplied by (iii) a fraction, the numerator of
which is the number of days that elapse from and including the date of such Loan
to the date on which such pro rata share of such Disbursement shall become
immediately available to the Agent and the denominator of which is 360. A
statement of the Agent submitted to such Bank with respect to any amounts owing
under this Section 9.8 shall be prima facie evidence as to the amount owed by
such Bank to the Agent. If such Bank's pro rata share is not in fact made
available to the Agent by such Bank within three (3) Business Days of such
Borrowing Date, the Agent shall be entitled to recover such amount with interest
thereon at the rate per annum equal to the Base Rate during such period, on
demand, from such Bank.

     9.9 Payment to Banks.

     Promptly after receipt by the Agent from the Borrower of any principal
repayment of the Loans, interest due on the Loans, any fees or other amounts due
under any Loan Document (except for such amounts which are payable for the sole
account of any Bank or the Agent), the Agent shall distribute to each Bank that
Bank's pro rata share of the funds so received; provided that in the event
payments are received by 1:30 P.M., (Pittsburgh, Pennsylvania time) by the Agent
with respect to the Loans and such payments are not distributed to the Banks on
the same

                                       81



day received by the Agent, the Agent shall pay the Banks the Federal Funds Rate,
with respect to the amount of such payments for each day held by the Agent and
not distributed to the Banks.

     9.10 Pro Rata Sharing.

     All interest and principal payments on the Loans, all Commitment Fees, the
Closing Fee and any other fees (specifically excluding the Agent's Fee and the
fee payable to the relevant Issuing Bank in connection with the issuance of any
Letter of Credit) are to be divided pro rata among the Banks. Any sums obtained
from the Borrower by any Bank by reason of the exercise of its rights of setoff,
banker's lien or in collection shall be shared (net of costs) pro rata among the
Banks. Nothing in this Section 9.10 shall be deemed to require the sharing among
the Banks of collections specifically relating to, or of the proceeds of any
collateral securing, any other Indebtedness of the Borrower to any Bank.

     9.11 Successor Agent.

          (a) Resignation of the Agent. Subject to a successor Agent being
appointed and such Person accepting the duties and obligations of the Agent
hereunder and under the Loan Documents, the Agent may resign from the
performance of its functions and duties hereunder and under the other Loan
Documents at any time by giving at least sixty (60) days prior written notice to
the Banks and the Borrower. In the event that the Agent gives notice of its
desire to resign from the performance of its functions and duties hereunder and
under the Loan Documents, then the Borrower and the Agent shall use all
reasonable commercial efforts to identify, and the Required Banks shall appoint,
a successor who shall be reasonably satisfactory to the Required Banks and the
Borrower (provided that such approval of the Borrower shall not be unreasonably
withheld and that no such approval of the Borrower shall be required after the
occurrence and during the continuance of an Event of Default). If a successor
Agent shall not have been appointed within said sixty (60) day period, the
Required Banks shall, after consultation with the Borrower, appoint a successor
Agent from among the Banks. Any such successor agent shall succeed to the
rights, powers and duties of the Agent.

          (b) Rights of the Former Agent. Upon the appointment of such successor
agent, the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Credit Agreement. After any retiring Agent's
resignation hereunder as administrative agent for the Banks hereunder, the
provisions of this Article IX shall inure to the benefit of such retiring Agent
as to any actions taken or omitted to be taken by it while it was Agent under
this Credit Agreement.

                            ARTICLE X. MISCELLANEOUS

     10.1 Amendments and Waivers.

          (a) Amendments to Credit Agreement or Any Loan Document. Subject to
the remaining provisions of this Section 10.1, the Agent, the Banks, the Issuing
Banks, the Borrower and the other Loan Parties may, from time to time, enter
into amendments, modifications, extensions, supplements and replacements to and
of this Credit Agreement or any other Loan Document and the Banks or the
Required Banks, as the case may be, may, from time to time,

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waive compliance with a provision hereof or thereof. No amendment or waiver of
any provision of this Credit Agreement, the Notes or any other Loan Document
(other than amendments or waivers to any interest rate protection agreement with
a Bank or an Affiliate of a Bank entered into in accordance with Section
6.6(xi), which amendment or waiver shall comply with Section 6.6(xi) and require
consent of such Bank or Affiliate), nor any consent to any departure therefrom
by the Borrower shall be effective unless the same shall be in writing and
signed by the Borrower or other Person, whichever is the obligor of the document
to be amended or the provisions of which are being waived, and the Agent and the
Required Banks, and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

     The foregoing notwithstanding, no amendment, waiver or consent shall do any
of the following unless in writing and signed by all of the Banks (or the Agent
with the consent of all of the Banks):

          (A) subject to Section 2.1(j), increase the Revolving Credit
Commitment, the Commitment Amount of any Bank, the Commitment Percentage of any
Bank, the Swing Loan Commitment, the Supplemental Swing Loan Commitment or the
maximum aggregate principal amount of any of the Notes;

          (B) except as contemplated in this Credit Agreement, reduce the
interest rate on the Loans or Letters of Credit or any fees in connection
therewith;

          (C) postpone the Repayment Date or the date any payment of principal,
interest or fees are due in connection with the Loans, or any reimbursement
obligations are due in connection with the Letters of Credit;

          (D) release any collateral securing the Bank Indebtedness other than
pursuant to the terms of this Credit Agreement or release the Borrower of its
obligations under the Guaranty Agreement;

          (E) amend this Section 10.1; or

          (F) amend the definition of "Required Banks".

In the case of any waiver or consent relating to any provision of this Credit
Agreement, the parties shall be restored to their former positions and rights
hereunder, and the Event of Default so waived or consented to shall be deemed to
be cured and not continuing; but no such waiver or consent shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.

Any such supplemental agreement shall apply equally to the Borrower, the
affected party, if any, and each of the Banks and shall be binding upon the
Borrower, the Banks, the Agent and all future holders of the Notes.

          (b) Waivers. No delay on the part of the Banks in the exercise of any
power or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right. In the

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case of any waiver, the Borrower, the Banks and the Agent shall be restored to
their former positions and rights, and any Event of Default waived shall be
deemed to be cured and not continuing, but no such waiver shall extend to any
subsequent or other Event of Default, or impair any right consequent thereon.

     10.2 Notices.

          (a) Notice to the Borrower. All notices required to be sent to the
Borrower shall be sent to the Borrower to following address, by hand delivery,
by recognized national overnight courier service, by facsimile transmission or
other means of electronic data communication, or by the United States Mail,
first class, postage prepaid:

If by United States Mail:                If by other means:

Education Management Corporation         Education Management Corporation
210 Sixth Avenue                         210 Sixth Avenue
33rd Floor                               33rd Floor
Pittsburgh, Pennsylvania 15222           Pittsburgh, Pennsylvania 15222
Attention: Chief Financial Officer       Attention: Chief Financial Officer
                                         Telecopier: (412) 471-2945
                                         Telephone: (412) 562-0900

          (b) Notice to the Agent. All notices required to be sent to the Agent
shall be sent to the following address, by hand delivery, by recognized national
overnight courier service, by facsimile transmission or other means of
electronic data communication, or by the United States Mail, first class,
postage prepaid:

If by United States Mail:                If by other means:

National City Bank of Pennsylvania       National City Bank of Pennsylvania
National City Center                     National City Center
629 Euclid Avenue                        629 Euclid Avenue
Location Number 3028                     Location Number 3028
Cleveland, OH 44114                      Cleveland, OH 44114
Attention: Debra Dombos, Agent Services  Attention: Debra Dombos, Agent Services
Telephone: (216) 222-3599                Telephone: (216) 222-3599
Telecopier: (216) 222-0103               Telecopier: (216) 222-0103
Telecopier (Lending): (216) 222-0012     Telecopier (Lending): (216) 222-0012

          (c) Notice to the Banks. All notices required to be delivered to the
Banks pursuant to this Credit Agreement and the other Loan Documents shall be in
writing and shall be sent to the address set forth on Schedule 1.1, by hand
delivery, by recognized national overnight courier service, by facsimile
transmission or other means of electronic data communication, or by the United
States mail, first class, postage prepaid.

          (d) Receipt of Notices. All such notices shall be effective three (3)
days after mailing, one (1) day after deposit with the courier service, the date
of electronic transmission (receipt confirmed) or when received, whichever is
earlier. The Borrower, the Banks and the

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Agent may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.

     10.3 Holiday Payments.

     If any payments to be made by the Borrower hereunder shall become due on a
date not a Business Day, such payments shall be made on the next succeeding
Business Day.

     10.4 Tax Withholding.

          Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
(and, upon the written request of the Agent, each other Bank or assignee or
participant of a Bank) agrees that it will deliver to each of the Borrower and
the Agent two (2) duly completed appropriate valid Withholding Certificates (as
defined under (S) 1.1441-1(c)(16) of the Income Tax Regulations (the
"Regulations")) certifying its status (i.e. U.S. or foreign person) and, if
appropriate, making a claim of reduced, or exemption from, U.S. withholding tax
on the basis of an income tax treaty or an exemption provided by the Internal
Revenue Code. The term "Withholding Certificate" means a Form W-9; a Form
W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and
certifications as required under (S) 1.1441-1(e)(2) and/or (3) of the
Regulations; a statement described in (S) 1.871-14(c)(2)(v) of the Regulations;
or any other certificates under the Internal Revenue Code or Regulations that
certify or establish the status of a payee or beneficial owner as a U.S. or
foreign person. Each Bank, assignee or participant required to deliver to the
Borrower and the Agent a Withholding Certificate pursuant to the preceding
sentence shall deliver such valid Withholding Certificate as follows: (A) each
Bank which is a party hereto on the Closing Date shall deliver such valid
Withholding Certificate at least five (5) Business Days prior to the first date
on which any interest or fees are payable by the Borrower hereunder for the
account of such Bank; (B) each assignee or participant shall deliver such valid
Withholding Certificate at least five (5) Business Days before the effective
date of such assignment or participation (unless the Agent in its sole
discretion shall permit such assignee or participant to deliver such valid
Withholding Certificate less than five (5) Business Days before such date in
which case it shall be due on the date specified by the Agent). Each Bank,
assignee or participant which so delivers a valid Withholding Certificate
further undertakes to deliver to each of the Borrower and the Agent two (2)
additional copies of such Withholding Certificate (or a successor form) on or
before the date that such Withholding Certificate expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent
Withholding Certificate so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by the Borrower or
the Agent. Notwithstanding the submission of a Withholding Certificate claiming
a reduced rate of or exemption from U.S. withholding tax, the Agent shall be
entitled to withhold United States federal income taxes at the full 30%
withholding rate if in its reasonable judgment it is required to do so under the
due diligence requirements imposed upon a withholding agent under (S)
1.1441-7(b) of the Regulations. Further, the Agent is indemnified under (S)
1.1461-1(e) of the Regulations against any claims and demands of any Bank or
assignee or participant of a Bank for the amount of any tax it deducts and
withholds in accordance with regulations under (S) 1441 of the Internal Revenue
Code.

                                       85



     At least five (5) Business Days prior to the first date on which interest
or fees are payable hereunder for the account of each Bank, each Bank that is
not incorporated under the laws of the United States of America or a state
thereof agrees that it will deliver to the Agent and the Borrower two (2) duly
completed copies of either (i) IRS Form W-9, 1001 or 4224 or such other
applicable form prescribed by the IRS, certifying in each case that such Bank is
entitled to receive payments under this Credit Agreement or its Note(s), as the
case may be, without deduction or withholding of United States federal income
taxes, or is subject to such tax at a reduced rate under an applicable tax
treaty or (ii) IRS Form W-8 or such other applicable form prescribed by the IRS
or a certificate of such Bank indicating that no such exemption or reduced rate
of taxation is allowable with respect to such payments. Each Bank which delivers
an IRS Form W-8, W-9, 4224 or 1001 further undertakes to deliver to the Agent
and the Borrower two (2) additional copies of any such form (or any successor
form) on or before the date on which that form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Borrower or the Agent, either certifying
that such Bank is entitled to receive payments under this Credit Agreement or
its Note(s), as the case may be, without deduction or withholding of any United
States federal income taxes or is subject to such tax at a reduced rate under an
applicable tax treaty or stating the date on which that no such exemption or
reduced rate is allowable. The Agent shall be entitled to withhold, from each
payment made to such Bank hereunder or under the Note(s) payable to it, United
States federal income taxes at the full withholding rate unless each Bank
referred to in the first sentence of this Section 10.4 establishes an exemption
or at the applicable reduced rate established pursuant to the above provisions.

     10.5 Survival.

     Until payment in full of the Bank Indebtedness and expiration of all
outstanding Letters of Credit, and the termination of the Revolving Credit
Commitment, the Swing Loan Commitment and the Supplemental Swing Loan
Commitment, all covenants, agreements, warranties and representations made
herein and in all certificates or other documents delivered in connection with
this Credit Agreement by or on behalf of the Borrower, shall survive the
advances of money made by the Banks to the Borrower hereunder and the delivery
of the Notes, and all such covenants, agreements, warranties and representations
shall inure to the benefit of the successors and assigns of the Banks and the
Agent whether or not so expressed.

     10.6 Costs.

     The Borrower shall pay:

          (i) All reasonable costs and expenses of the Agent (including without
limitation the reasonable fees and disbursements of the Agent's counsel),
incurred in connection with the preparation, negotiation, execution and delivery
of this Credit Agreement and the other Loan Documents and any and all other
documents and instruments prepared in connection herewith, including but not
limited to all amendments, extensions, modifications, waivers, consents and
other documents and instruments prepared or entered into from time to time,
including after the Closing Date;

                                       86



          (ii) All reasonable costs and expenses of the Agent and the Banks
(including without limitation the reasonable fees and disbursements of the
Agent's and each of the Bank's counsel) in connection with (A) the enforcement
of this Credit Agreement and the other Loan Documents (whether through
negotiations, legal proceedings or otherwise) arising pursuant to a breach by
the Borrower of any of the terms, conditions, representations, warranties or
covenants of any Loan Document to which it is a party, and (B) defending or
prosecuting any actions, suits or proceedings relating to any of the Loan
Documents.

All of such costs and expenses shall be payable by the Borrower to the Banks or
the Agent, as the case may be, upon demand or as otherwise agreed upon by the
Banks or the Agent and the Borrower, and shall constitute Bank Indebtedness
under this Credit Agreement. The Borrower's obligation to pay such costs and
expenses shall survive the termination of this Credit Agreement and the
satisfaction of all of the Borrower's obligations hereunder.

     10.7 Certain Taxes.

     The Borrower agrees to pay, and save the Banks harmless from, all liability
for any stamp or other taxes which may be payable with respect to the execution
or delivery of this Credit Agreement or the Loan Documents or the issuance of
the Notes, which obligation of the Borrower shall survive the termination of
this Credit Agreement.

     10.8 Successors, Assigns and Participations.

          (a) Benefit of Agreement. Subject to the remaining provisions of this
Section 10.8, this Credit Agreement shall be binding upon the Borrower, the
Agent and the Banks and their respective successors and assigns, and shall inure
to the benefit of the Borrower, the Agent and the Banks and the successors and
assigns of the Agent and the Banks; provided, however that the Borrower may not
assign its rights or duties hereunder or under any other Loan Document without
the prior written consent of the Banks and the Agent.

          (b) Assignments. Subject to the remaining provisions of this
Subsection 10.8(b), any Bank, at any time, in the ordinary course of its
commercial banking business and in accordance with applicable law, may sell to
one or more Purchasing Banks (which Purchasing Banks may be Affiliates of the
Transferor Bank), a portion or all of its rights and obligations under this
Credit Agreement and the Note(s) then held by it pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit "M" and executed by
the Transferor Bank and such Purchasing Bank and, if required pursuant to this
Section 10.8, consented to by the Agent and the Borrower which consent shall not
be withheld without a good faith reason; subject, however to the following
requirements:

          (i) The Borrower and the Agent must give their prior consent to any
such assignment (other than an assignment made by a Bank to another Bank or an
Affiliate of a Bank) which consent shall not be unreasonably withheld;

          (ii) Each such assignment must be in a minimum amount of $5,000,000 or
the remaining amount of the Transferor Bank's Commitment Amount if less, or, if
in excess thereof, in integral multiples of $1,000,000, unless otherwise agreed
by the Borrower and the Agent, and each such assignment of a Revolving Credit
Commitment shall include the same percentage of

                                       87



the Supplemental Swing Loan Commitment of the Transferor Bank as the percentage
of the Revolving Credit Commitment being transferred by the Transferor Bank;

          (iii) [Intentionally omitted]

          (iv) No Purchasing Bank may make assignments unless otherwise agreed
by the Borrower, such consent to not be unreasonably withheld by the Borrower;
and

          (v) On the date such assignment is made, the Transferor Bank shall pay
to the Agent a $3,500 service fee for each assignment;

provided, however the restrictions set forth in Subsection 10.8(b)(i), (ii),
(iii) and (iv) above shall not apply in the case of any assignment by any
Transferor Bank upon the occurrence and during the continuation of an Event of
Default.

          Upon the execution, delivery, acceptance and recording of any such
Assignment and Assumption Agreement, from and after the Transfer Effective Date
set forth in such Assignment and Assumption Agreement, (a) the Purchasing Bank
thereunder shall be a party hereto as a Bank and, to the extent provided in such
Assignment and Assumption Agreement, shall have the rights and obligations of a
Bank hereunder with a Commitment Amount and Commitment Percentage, and (b) the
Transferor Bank thereunder shall be released from its obligations as a Bank
under this Credit Agreement to the extent provided in such Assignment and
Assumption Agreement. Such Assignment and Assumption Agreement shall be deemed
to amend this Credit Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Bank as a Bank and the resulting
adjustment of Commitment Percentages arising from the purchase by such
Purchasing Bank of all or a portion of the rights and obligations of such
Transferor Bank under this Credit Agreement and its Note(s), as the case may be.
On or prior to the Transfer Effective Date, the Borrower shall execute and
deliver to the Agent, in exchange for the surrendered Note(s) held by the
Transferor Bank, a new Note(s) to the order of such Purchasing Bank in an amount
equal to the Commitment Amount assumed by it and purchased by it pursuant to
such Assignment and Assumption Agreement, and new Note(s) to the order of the
Transferor Bank in an amount equal to the Commitment Amount retained by it
hereunder, if any.

          (c) Assignment Register. The Agent shall maintain, at its address
referred to in Subsection 10.2(b) hereof, a copy of each Assignment and
Assumption Agreement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Banks, and the amount of the
Commitment Amount of each Bank, if any, then in effect, and the amount of the
Loans owing to each Bank, from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register as the
owner of the Loans for all purposes of this Credit Agreement. The Register shall
be available at the office of the Agent set forth in Subsection 10.2(b) hereof
for inspection by the Borrower or any Bank at any reasonable time and from time
to time upon reasonable prior notice.

          (d) Participations. Any Bank, in the ordinary course of its commercial
banking business and in accordance with applicable law, may sell to one or more
Participants a

                                       88



Participation in any Loan owing to such Bank, the interest of such Bank in (i)
any Revolving Credit Note or (ii) the Commitment Amount of such Bank. In the
event of any such sale by a Bank of a Participation to a Participant, such
Bank's obligations under this Credit Agreement to the other parties to this
Credit Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
its Note(s) for all purposes under this Credit Agreement (including voting
rights hereunder), and the Borrower, the other Banks and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Credit Agreement or the other Loan
Documents; provided, however, that no Bank shall transfer or grant any
Participation under which the Participant shall have rights to approve any
amendment, modification or waiver of this Credit Agreement or any other Loan
Document except to the extent such amendment, modification or waiver would (i)
reduce or increase the principal amount of such Participant's Participation over
the amount then in effect, (ii) decrease the interest rate relating to the
Loans, (iii) reduce the Commitment Fee or any other Fee payable to the
Participant, (iv) postpone any date fixed for any payment of principal of or
interest on the Loans, reimbursement obligations, the Commitment Fee or any
other Fees or obligations of the Borrower set forth in Article II or (v) release
any collateral granted to the Agent, on behalf of the Bank, to secure the Bank
Indebtedness.

          (e) Other Assignments. Notwithstanding the foregoing provisions of
this Section 10.8, any Bank may, at any time and from time to time, assign all
or any portion of its rights under this Credit Agreement and its Note(s) to a
Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank. No such assignment shall release any assigning Bank from
its obligations hereunder.

          (f) Disclosure. The Borrower authorizes each Bank to disclose to any
Participant or Purchasing Bank and any prospective Participant or Purchasing
Bank any and all financial information in such Bank's possession concerning the
Borrower and its Subsidiaries which has been delivered to such Bank by or on
behalf of the Borrower pursuant to this Credit Agreement or in connection with
such Bank's credit evaluation of the Borrower prior to becoming a party to this
Credit Agreement.

     10.9 Confidentiality.

     Unless otherwise agreed to in writing by the Borrower, the Agent and the
Banks hereby agree to keep all Proprietary Information confidential and not to
disclose or reveal any Proprietary Information to any Person other than the
Agent's or the Banks' directors, officers, employees, Affiliates and agents and
to actual or potential Purchasing Banks and Participants, and then only on a
confidential basis; provided, however, that the Agent or the Banks may disclose
Proprietary Information (i) as required by any Governmental Rule, (ii) to their
respective attorneys and accountants, (iii) as requested or required by any
state, federal or foreign authority or examiner regulating banks or banking; or
(iv) in connection with any litigation or enforcement proceedings; and further,
provided, that the Agent or the Banks may not disclose any confidential
information concerning identified students before giving the Borrower notice of
such proposed disclosure and affording it a reasonable opportunity to obtain a
judicial protective order from a court of competent jurisdiction.
Notwithstanding anything herein to the contrary, the information subject to this
Section 10.9 shall not include, and the Agent and each Bank may

                                       89



disclose without limitation of any kind, any information with respect to the
"tax treatment" and "tax structure" (in each case, within the meaning of
Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are provided to the Agent or such Bank relating to such tax treatment and tax
structure; provided that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this sentence shall only apply
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the Loans, Letters of Credit and transactions
contemplated hereby.

     10.10 Indemnification.

     The Borrower will indemnify and hold harmless the Agent and the Banks, any
of their respective directors, officers or employees and each Person, if any,
who controls the Agent or the Banks within the meaning of the Securities Act of
1933 or the Securities and Exchange Act of 1934 (any and all of whom are
referred to as an "Indemnified Party") from and against any and all losses,
claims, damages and liabilities (including but not limited to any Environmental
Claim or the liability of any Bank thereon), joint or several (including but not
limited to all legal fees or other expenses reasonably incurred by any
Indemnified Party in connection with the preparation for or defense of any
pending or threatened claim, action or proceeding, whether or not resulting in
any liability), to which such Indemnified Party may become subject (whether or
not such Indemnified Party is a party thereto) under any applicable federal or
state law or otherwise caused by or arising out of, or allegedly caused by or
arising out of, this Credit Agreement or any transaction contemplated hereby,
other than losses, claims, damages or liabilities resulting from the transfer of
any of the Notes in violation of any applicable law or regulation; provided, the
Borrower shall not be liable where any action or failure to act was due to the
gross negligence or willful misconduct of the Indemnified Party.

Promptly after receipt by an Indemnified Party of notice of any claim, action or
proceeding with respect to which an Indemnified Party is entitled to indemnity
hereunder, such Indemnified Party will notify the Borrower of such claim or the
commencement of such action or proceeding, provided that the failure of an
Indemnified Party to give notice as provided herein shall not relieve the
Borrower of its obligations under this Section 10.10 with respect to such
Indemnified Party, except to the extent that the Borrower is actually prejudiced
by such failure. The Borrower will assume the defense of such claim, action or
proceeding and will employ counsel satisfactory to the Indemnified Party and
will pay the fees and expenses of such counsel. Notwithstanding the preceding
sentence, the Indemnified Party will be entitled, at the expense of the
Borrower, to employ counsel separate from counsel for the Borrower and for any
other party in such action if the Indemnified Party reasonably determines that a
conflict of interest or other reasonable basis exists which makes representation
by counsel chosen by the Borrower not advisable, provided that the Borrower
shall not be obligated to pay for the fees and expenses of more than one counsel
for all Indemnified Parties. In the event an Indemnified Party appears as a
witness in any action or proceeding brought against the Borrower (or any of
their respective officers, directors or employees) in which an Indemnified Party
is not named as a defendant, the Borrower agrees to reimburse such Indemnified
Party for all necessary, out-of-pocket expenses incurred by it (including fees
and expenses of counsel) in connection with its appearing as a witness.

                                       90



The Borrower's obligations under this Section 10.10 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.

     10.11 Integration.

     This Credit Agreement together with the other Loan Documents constitutes
the entire agreement between the parties relating to this financing transaction
and its supersedes all prior understandings and agreements, whether written or
oral between the parties hereto concerning the transactions provided for herein.

     10.12 Severability.

     Any provision of this Credit Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

     10.13 APPLICABLE LAW.

     THIS CREDIT AGREEMENT AND THE NOTES, SHALL BE CONTRACTS MADE UNDER AND
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO
THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW.

     10.14 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.

     THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS SHALL
BE COMMENCED IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA OR
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF
PENNSYLVANIA AND EACH PARTY AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN
ACTION OR PROCEEDING IN EITHER OF SUCH COURTS SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED PERSONALLY OR BY CERTIFIED MAIL TO THE
PARTY IN RESPECT OF THE BORROWER OR THE AGENT, AT ITS ADDRESS SET FORTH IN
SECTION 10.2 HEREOF AND IN RESPECT OF ANY BANK, AT ITS ADDRESS SET FORTH ON
SCHEDULE 1.1 OR ON THE ASSIGNMENT AND ASSUMPTION AGREEMENT TO WHICH SUCH BANK IS
A PARTY, OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. FURTHER, THE BORROWER, THE AGENT AND THE BANKS HEREBY SPECIFICALLY
CONSENT TO THE PERSONAL JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY
COUNTY, PENNSYLVANIA AND THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF PENNSYLVANIA AND WAIVE AND HEREBY ACKNOWLEDGE THAT THE BORROWER, THE
AGENT AND THE BANKS ARE ESTOPPED FROM RAISING ANY CLAIM THAT EITHER SUCH COURT
LACKS PERSONAL JURISDICTION OVER THE BORROWER, THE AGENT OR THE BANKS SO AS TO
PROHIBIT EITHER SUCH COURT FROM ADJUDICATING ANY ISSUES RAISED IN A COMPLAINT
FILED WITH

                                       91



EITHER SUCH COURT CONCERNING THIS CREDIT AGREEMENT OR THE NOTES. THE BORROWER,
THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS CREDIT
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.

     10.15 Counterparts.

     This Credit Agreement may be executed in as many identical counterparts as
may be convenient and by the different parties hereto on separate counterparts.
This Credit Agreement shall become binding when the Agent, the Banks and the
Borrower have executed at least one counterpart. Immediately after the execution
of counterparts and solely for the convenience of the parties hereto, the
Borrower and the Banks will execute sufficient counterparts so that Borrower
shall have counterparts executed by it, and the Banks shall have counterparts
executed by it and the Borrower. All counterparts shall constitute but one and
the same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       92



             [SIGNATURE PAGE 1 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

              Executed as of the day and year first above Written.

                                        EDUCATION MANAGEMENT CORPORATION


                                        By: /s/ Kristen P. Gribble
                                            ------------------------------------
                                        Name: Kristen P. Gribble
                                        Title: Treasurer



             [SIGNATURE PAGE 2 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        NATIONAL CITY BANK OF PENNSYLVANIA,
                                        individually and as Agent


                                        By /s/ Vincent J. Delie, Jr.
                                           -------------------------------------
                                        Name: Vincent J. Delie, Jr.
                                        Title: Vice President



             [SIGNATURE PAGE 3 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        WACHOVIA BANK, NATIONAL
                                        ASSOCIATION, individually and as
                                        Syndication Agent


                                        By /s/ Patrick J. Kaufmann
                                           -------------------------------------
                                           Name: Patrick J. Kaufmann
                                           Title: Vice President



             [SIGNATURE PAGE 4 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        SUNTRUST BANK, individually and as
                                        Syndication Agent


                                        By /s/ Michael Pugsley
                                           -------------------------------------
                                        Name: Michael Pugsley
                                        Title: Director



             [SIGNATURE PAGE 5 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        FLEET NATIONAL BANK, individually and as
                                        Documentation Agent


                                        By /s/ Edward McKenney
                                           -------------------------------------
                                        Name: Edward McKenney
                                        Title: Senior Vice President



             [SIGNATURE PAGE 6 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        JPMORGAN CHASE BANK, individually and as
                                        Documentation Agent


                                        By /s/ John Maconte
                                           -------------------------------------
                                        Name: John Maconte
                                        Title: Vice President



             [SIGNATURE PAGE 7 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        BANK ONE, NA
                                        (Main Office Chicago)


                                        By /s/ Jeffrey Lubatkin
                                           -------------------------------------
                                        Name: Jeffrey Lubatkin
                                        Title: Managing Director



             [SIGNATURE PAGE 8 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        FIFTH THIRD BANK


                                        By /s/ Christopher S. Helmeci
                                           -------------------------------------
                                        Name: Christopher S. Helmeci
                                        Title: Vice President



             [SIGNATURE PAGE 9 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        UNION BANK OF CALIFORNIA, N.A.


                                        By /s/ Cliffort F. Cho
                                           -------------------------------------
                                        Name: Clifford F. Cho
                                        Title: Assistant Vice President



             [SIGNATURE PAGE 10 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        LASALLE BANK NATIONAL ASSOCIATION


                                        By /s/ Shaun Kleinman
                                           -------------------------------------
                                        Name: Shaun Kleinman
                                        Title: Vice President



             [SIGNATURE PAGE 11 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        CITIZENS BANK OF PENNSYLVANIA


                                        By /s/ John J. Ligday, Jr.
                                           -------------------------------------
                                        Name: John J. Ligday, Jr.
                                        Title: Vice President



             [SIGNATURE PAGE 12 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        FIRSTMERIT BANK, N.A.


                                        By /s/ Edward D. Yannayon
                                           -------------------------------------
                                        Name: Edward D. Yannayon
                                        Title: Senior Vice President



             [SIGNATURE PAGE 13 OF 13 TO AMENDED AND RESTATED CREDIT
                                   AGREEMENT]

                                        BANK OF AMERICA, N.A.


                                        By /s/ Adam M. Goettsche
                                           -------------------------------------
                                        Name: Adam M. Goettsche
                                        Title: Vice President