10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x           Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2006 or

o            Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                  to                .

Commission File Number       000-22844

LAUREATE EDUCATION, INC.

(Exact name of registrant as specified in its charter)

Maryland	52-1492296
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1001 Fleet Street, Baltimore, Maryland	21202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (410) 843-6100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x. No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  o. No  x

The registrant had 51,390,469 shares of Common Stock, par value [$.01] per share, outstanding as of July 31, 2006.

INDEX

			Page No.
PART I. - FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets — June 30, 2006 and December 31, 2005	1
		Consolidated Statements of Operations — Three-months ended June 30, 2006 and June 30, 2005	3
		Consolidated Statements of Operations — Six-months ended June 30, 2006 and June 30, 2005	4
		Consolidated Statements of Cash Flows — Six-months ended June 30, 2006 and June 30, 2005	5
		Notes to Consolidated Financial Statements — June 30, 2006	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4.	Controls and Procedures	36
PART II. - OTHER INFORMATION
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 3.	Defaults Upon Senior Securities	37
	Item 4.	Submission of Matters to a Vote of Security Holders	37
	Item 5.	Other Information	38
	Item 6.	Exhibits	39
	SIGNATURES		10

i

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar and share amounts in thousands, except per share data)

	June 30,			December 31,
	2006			2005
	(unaudited)			(as restated - Note 2)
				(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	113,859		$	105,106
Available-for-sale securities	5,274			4,768
Receivables:
Accounts receivable	143,740			181,211
Notes receivable	104,901			104,880
Other receivables	15,197			14,208
	263,838			300,299
Allowance for doubtful accounts	(45,186		)	(39,006		)
	218,652			261,293
Inventory	5,448			5,282
Deferred income taxes	18,251			16,978
Income tax receivable	1,645			2,373
Prepaid expenses and other current assets	25,336			17,836
Total current assets	388,465			413,636
Notes receivable, less current portion, net of allowance of $9,106 and $9,328 at June 30, 2006 and December 31, 2005, respectively	86,315			83,813
Property and equipment:
Land	115,537			101,993
Buildings	302,104			256,941
Construction in-progress	49,220			40,856
Furniture, computer equipment and software	249,243			223,143
Leasehold improvements	87,146			81,336
	803,250			704,269
Accumulated depreciation and amortization	(154,735		)	(130,332		)
	648,515			573,937
Goodwill	416,899			412,215
Other intangible assets:
Tradenames and accreditations	216,373			215,112
Other intangible assets, net of accumulated amortization of $16,654 and $14,397 at June 30, 2006 and December 31, 2005, respectively	5,229			7,163
	638,501			634,490
Deferred income taxes	29,381			25,760
Deferred costs, net of accumulated amortization of $16,696 and $14,041 at June 30, 2006 and December 31, 2005, respectively	21,205			21,935
Other assets	22,784			19,651
Net assets of discontinued operations	—			2,906
Total assets	$	1,835,166		$	1,776,128

1

	June 30,		December 31,
	2006		2005
	(unaudited)		(as restated - Note 2)
			(unaudited)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	37,681	$	30,078
Accrued expenses	58,750		50,739
Accrued compensation and benefits	62,617		55,724
Deferred revenue	233,261		273,030
Current portion of long-term debt	59,460		63,044
Current portion of due to shareholders of acquired companies	23,428		18,737
Income tax payable	27,041		31,615
Deferred income taxes	28,880		28,644
Other current liabilities	2,397		3,543
Total current liabilities	533,515		555,154
Long-term debt, less current portion	114,710		99,997
Due to shareholders of acquired companies, less current portion	29,087		46,686
Deferred income taxes	2,759		583
Other long-term liabilities	24,213		22,876
Total liabilities	704,284		725,296
Commitments and contingent liabilities	—		—
Minority interest	89,280		72,354
Stockholders’ equity:
Preferred stock, par value $.01 per share — authorized 10,000 shares, no shares issued and outstanding as of June 30, 2006 and December 31, 2005	—		—
Common stock, par value $.01 per share — authorized 90,000 shares, issued and outstanding shares of 51,353 and 49,861 as of June 30, 2006 and December 31, 2005, respectively	514		499
Additional paid-in capital	528,357		503,791
Retained earnings	473,033		435,735
Accumulated other comprehensive income	39,698		38,453
Total stockholders’ equity	1,041,602		978,478
Total liabilities and stockholders’ equity	$	1,835,166	$	1,776,128

See accompanying notes to financial statements.

2

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Dollar amounts in thousands, except per share data)

	Three months ended June 30,
	2006			2005
				(as restated - Note 2)
	(Unaudited)
Revenues	$	303,119		$	226,969
Costs and expenses
Direct costs	234,718			176,559
General and administrative expenses	11,420			5,800
Total costs and expenses	246,138			182,359
Operating income	56,981			44,610
Other income (expense)
Gain on sale of Chancery Software, Ltd.	9,322			—
Interest and other income	4,282			3,273
Interest expense	(3,142		)	(2,703		)
Foreign currency exchange loss	(203		)	(936		)
	10,259			(366		)
Income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates	67,240			44,244
Income tax expense	(12,134		)	(4,955		)
Minority interest in income of consolidated subsidiaries, net of tax	(14,345		)	(7,865		)
Equity in net loss of affiliates, net of tax	(102		)	(114		)
Income from continuing operations	40,659			31,310
(Loss) Income from discontinued operations, net of income tax expense of $314 in 2006 and $0 in 2005	(1,504		)	3
Loss from disposal of discontinued operations, net of income tax benefit (expense of $415 in 2006 and ($10,531) in 2005	(1,182		)	(9,751		)
Net income	$	37,973		$	21,562
Earnings per common share, basic:
Income from continuing operations	$	0.79		$	0.63
Net income	$	0.74		$	0.44
Earnings per common share, diluted:
Income from continuing operations	$	0.77		$	0.60
Net income	$	0.72		$	0.42

See accompanying notes to financial statements.

3

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Dollar amounts in thousands, except per share data)

	Six months ended June 30,
	2006			2005
				(as restated - Note 2)
	(Unaudited)
Revenues	$	538,229		$	405,646
Costs and expenses
Direct costs	459,950			346,806
General and administrative expenses	21,271			12,496
Total costs and expenses	481,221			359,302
Operating income	57,008			46,344
Other income (expense)
Gain on sale of Chancery Software, Ltd.	9,322			—
Interest and other income	8,004			5,689
Interest expense	(6,748		)	(5,076		)
Foreign currency exchange loss	(314		)	(687		)
	10,264			(74		)
Income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates	67,272			46,270
Income tax expense	(12,367		)	(5,182		)
Minority interest in income of consolidated subsidiaries, net of tax	(14,802		)	(8,246		)
Equity in net loss of affiliates, net of tax	(211		)	(204		)
Income from continuing operations	39,892			32,638
(Loss) Income from discontinued operations, net of income tax (expense) benefit of $(314) in 2006 and $285 in 2005	(1,673		)	615
Loss from disposal of discontinued operations, net of income tax benefit (expense) of $991 in 2006 and $(10,531) in 2005	(921		)	(9,751		)
Net income	$	37,298		$	23,502
Earnings per common share, basic:
Income from continuing operations	$	0.78		$	0.66
Net income	$	0.73		$	0.48
Earnings per common share, diluted:
Income from continuing operations	$	0.75		$	0.63
Net income	$	0.71		$	0.45

See accompanying notes to financial statements.

4

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollar amounts in thousands)

	Six Months Ended June 30,
	2006			2005
				(as restated - Note 2)
	(Unaudited)
Operating activities
Net income	$	37,298		$	23,502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets	23,408			17,636
Amortization	6,367			6,816
Loss on disposal of discontinued operations	921			9,751
Gain on sale of Chancery Software, Ltd.	(9,322		)	—
Non-cash stock compensation expense	6,711			1,194
Minority interest in consolidated subsidiaries	14,802			8,246
Equity in net loss of affiliates	211			204
Deferred income taxes	(4,558		)	(8,585		)
Other non-cash items	(2,076		)	(1,587		)
Changes in operating assets and liabilities:
Receivables	49,549			34,000
Income tax receivable	1,241			15,676
Inventory, prepaid expenses and other current assets	(7,855		)	(3,722		)
Accounts payable and accrued expenses	19,142			(1,366		)
Income tax payable	(4,504		)	(8,413		)
Deferred revenue and other current liabilities	(35,508		)	(24,305		)
Net cash provided by operating activities	95,827			69,047
Investing activities
Purchase of available-for-sale securities	(4,943		)	(25,144		)
Proceeds from sales or maturity of available-for-sale securities	4,512			11,640
Purchase of property and equipment, net	(85,867		)	(44,126		)
Proceeds from sales of discontinued operations, net of cash sold	—			12,654
Cash loaned in exchange for notes receivable	(3,123		)	(4,233		)
Proceeds from repayment of notes receivable	261			—
Cash paid for acquisitions, net of cash acquired	—			(5,996		)
Payment of deferred consideration for prior period acquisitions	(10,440		)	(25,232		)
Expenditures for deferred costs	(2,068		)	(5,048		)
Change in other long-term assets	571			(403		)
Net cash used in investing activities	(101,097		)	(85,888		)
Financing activities
Proceeds from exercise of options	17,862			8,536
Proceeds from issuance of long-term debt	63,240			47,775
Payments on long-term debt	(69,043		)	(67,665		)
Change in other long-term liabilities	1,876			(1,377		)
Net cash provided by (used in) financing activities	13,935			(12,731		)
Effects of exchange rate changes on cash	88			(923		)
Net change in cash and cash equivalents	8,753			(30,495		)
Cash and cash equivalents at beginning of period	105,106			116,261
Cash and cash equivalents at end of period	$	113,859		$	85,766

See accompanying notes to financial statements.

5

Laureate Education, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

(Dollar and share amounts in thousands, except per share data)

Note 1 - Description of Business and Basis of Presentation

The accompanying unaudited consolidated financial statements of Laureate Education, Inc. and subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended December 31, 2005, included in the Company’s Annual Report on Form 10-K/A.  Operating results for the three- and six-month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.  The traditional semester programs in the education industry, with a summer break, result in significant seasonality in the operating results of the Company.  The consolidated balance sheet at December 31, 2005 has been restated to reflect the retrospective application of the Company’s change in revenue recognition policies effective January 1, 2006 as described in Note 2.  In addition, it does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  Certain amounts previously reported for 2005, including certain current and non-current notes receivable and deferred revenue balances, have been reclassified to conform to the 2006 presentation.

The Company is focused exclusively on providing a superior higher education experience to approximately 228,500 students through a leading global network of accredited campus-based and online universities and higher education institutions (“higher education institutions”).  The Company’s educational offerings are delivered through three separate reportable segments: Campus Based - Latin America (“Latin America”), Campus Based - Europe (“Europe”) and Laureate Online Education.  The campus-based segments of Latin America and Europe own or maintain controlling interests in eleven and ten separately accredited higher education institutions, respectively. The Latin America segment has locations in Mexico, Chile, Brazil, Peru, Ecuador, Honduras, Panama, and Costa Rica.  The Europe segment has locations in Spain, Switzerland, France, and Cyprus.  The Laureate Online Education segment provides career-oriented degree programs to working adult students through Walden E-Learning, Inc. (“Walden”), Laureate Online Education BV, and Canter and Associates (“Canter”).

Note 2 — Significant Accounting Policies

Revenue Recognition and Accounting Change

Effective January 1, 2006, the Company made a voluntary preferential change in its revenue recognition policies regarding semester-based tuition for its campus-based universities.  The universities now recognize tuition revenue ratably on a weekly straight-line basis over each academic session instead of the previously used monthly straight-line basis. This change was made to improve transparency and the correlation between the Company’s enrollments, revenues, and actual academic calendars. Tuition revenue is reported net of scholarships and other discounts. Tuition paid in advance or unpaid and unearned tuition included in accounts receivable is recorded as deferred revenue.

All other revenue is recognized as earned over the appropriate service period, including the Company’s online business. Dormitory revenues are recognized over the occupancy period.  Revenue from the sale of educational products is generally recognized when shipped and collectibility is reasonably assured.

The Company has applied this change retrospectively to all prior period financial statements presented in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 154, Accounting Changes and Error Corrections, including retroactive application to all reporting periods presented.  There is no material impact on the previously issued annual results of the Company as a result of this change.

6

The following amounts represent the changes to each financial statement line affected by the Company’s preferential change in revenue recognition for the consolidated balance sheet as of December 31, 2005 and the statement of operations for the three- and six-month periods ended June 30, 2005:

	December 31, 2005
Balance Sheet
Goodwill	$	100
Total assets	$	100
Deferred revenue	$	656
Total liabilities	656
Minority interest	(325		)
Retained earnings	181
Accumulated other comprehensive income	(412		)
Total stockholders’ equity	(231		)
Total liabilities and stockholders’ equity	$	100

	Three-months ended June 30, 2005			Six-months ended June 30, 2005
Statement of Operations
Revenues	$	11,000		$	7,247
Operating income	11,000			7,247
Income from continuing operations before income taxes, minority interest and equity in net loss in affiliates	11,000			7,247
Minority interest in income of consolidated subsidiaries, net of tax	(1,628		)	(994		)
Income tax expense	(216		)	247
Income from continuing operations	9,156			6,500
Net income	$	9,156		$	6,500
Earnings per share, basic:
Income from continuing operations	$	0.18		$	0.13
Net income	$	0.18		$	0.13
Earnings per share, diluted:
Income from continuing operations	$	0.18		$	0.13
Net income	$	0.18		$	0.13

Income Taxes

The Company accounts for income taxes using the liability method pursuant to Financial Accounting Standards Board (“FAS No. 109”).  Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities (i.e. temporary differences) and are measured at prevailing enacted tax rates that will be in effect when these differences are settled or realized.

7

For interim purposes, the Company also applies Financial Accounting Standards Board Interpretation (“FIN”) No. 18, Accounting for Income Taxes in Interim Periods (an interpretation of APB Opinion No. 28).  FIN No. 18 measures the seasonality of any subsidiary, or controlled entity, that operates at an annual loss for which no income tax benefit is recognized.  This seasonality can cause volatility in the interim effective rates.  However, FIN No. 18 has no effect on the Company’s annual effective tax rate.

Equity-Based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), using the modified prospective transition method and therefore has not restated results for prior periods. Under this transition method, equity-based compensation expense for the three- and six-months ended June 30, 2006 includes compensation expense for all equity-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Equity-based compensation expense for all equity-based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R.  The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award.  SFAS No. 123R clarifies and expands the guidance in SFAS No. 123 in several areas, including measuring fair value and attributing compensation cost to reporting periods.  Changes to SFAS No. 123 fair value measurement and service period provisions prescribed by SFAS 123R include a requirement to estimate forfeitures of share-based awards at the date of grant, rather than recognizing forfeitures as incurred as permitted by SFAS No. 123.  The Company estimates the forfeiture rate based on the historical experience subsequent to the sale of the K-12 business units on June 30, 2003.

The Company uses the Black-Scholes-Merton method to calculate the fair value of stock options.  The use of option valuation models requires the input of highly subjective assumptions, including the expected stock price volatility and the expected term of the option.  In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB No. 107”) regarding the SEC’s interpretation of SFAS No. 123R and the valuation of share-based payments for public companies.  For options issued subsequent to January 1, 2006, the Company has applied the provisions of SAB No. 107 in its adoption of SFAS No. 123R.  Under SAB No. 107, the Company has estimated the expected term of granted options to be the weighted average mid-point between the vesting date and the end of the contractual term.  The Company estimates the volatility rate based on the weekly historical closing stock price since the sale of the K-12 business units on June 30, 2003.

Prior to the adoption of SFAS No. 123R, the Company recognized equity-based compensation expense in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”.  In addition, the Company presented the cash flows related to income tax deductions in excess of the compensation cost recognized on stock options exercised during the period (“excess tax benefits”) as operating cash flows in the consolidated statement of cash flows. SFAS No. 123R requires excess tax benefits to be classified as financing cash flows.

The Company records compensation expense for stock options granted to non-employees who are not directors in an amount equal to their estimated fair value at the earlier of the performance commitment date or the date at which performance is complete, determined using the Black-Scholes-Merton option pricing model.  The compensation expense is recognized ratably over the vesting period.

Impact of Recently Issued Accounting Standards

On July 13, 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company will adopt FIN 48 on January 1, 2007.  An enterprise is required to disclose the cumulative effect of the change on retained earnings in the statement of financial position as of the date of adoption and such disclosure is required only in the year of adoption.  The Company is in the process of analyzing the implications of FIN 48.

8

Note 3 — Equity-Based Compensation

Equity-Based Compensation Plans

The Board of Directors may grant options under six equity-based compensation plans to selected employees, officers and directors of the Company to purchase shares of the Company’s common stock at a price not less than the fair market value of the stock at the date of the grant.  The 2005 Stock Incentive Plan (“2005 Plan”) is the only plan with significant stock option awards available for grant.  Options outstanding under all six of the Company’s stock option plans have been granted at prices which are equal to or exceed the market value of the stock on the date of grant and vest ratably over periods not exceeding five years.

At the Company’s annual shareholder meeting on June 28, 2006, approval was obtained to increase the number of shares reserved under the 2005 Plan by 4,000 shares, with no more than 1,000 of that increased number being granted in the form of non-options (referred to as “2005 Plan Amendment No. 1”).  Approval of the 2005 Plan Amendment No. 1 added 4,000 issuable shares, increasing available shares from 1,250 to 5,250 shares, of which no more than a total of 1,313 shares can be granted in the form of restricted shares or units.

Stock option awards under plans prior to the 2005 Plan are subject to time-based vesting over five years with a life of ten years.   Stock options awards under the 2005 Plan are subject to time-based vesting generally over four years with a life of seven years.  Stock options under the 2005 Plan vest ratably over a four year period; the first year vests on the first anniversary date and the remaining three years vest quarterly.  Stock options granted to non-employee Directors vested immediately prior to January 1, 2006.  Subsequent to January 1, 2006, options granted to non-employee Directors vest monthly over a one year period.  Restricted stock and restricted stock unit (“RSU”) awards granted prior to December 2005 are subject to time-based vesting generally over five years.  Restricted stock and restricted stock unit awards granted subsequent to December 2005 are performance-based and are generally eligible for vesting over four years.

Stock Options

The following table summarizes the stock option activity of the Company for the six-month period ended June 30:

	Options		Weighted- Average Exercise Price			Aggregate Intrinsic Value
Outstanding at December 31, 2005	6,188		$	19.45
Granted	125		$	47.98
Exercised	(1,425	)	$	13.34
Forfeited	—		—
Outstanding at June 30, 2006	4,888		$	22.01		$		132,402
Exercisable at June 30, 2006	3,663		$		15.43	$	123,156
Vested and expected to vest at June 30, 2006	4,680		$		22.01	$	126,651

The weighted average remaining contractual term of options outstanding is 4.2 years.  The weighted average contractual term of exercisable options outstanding is 3.4 years.  The total intrinsic value, measured as the pre-tax difference between the exercise price and the market price on the date of exercise, of all options exercised during the six-month period ended June 30, 2006 was $55,818.

The Company uses the Black-Scholes-Merton option pricing model to fair value stock options.  The use of option valuation models requires the input of highly subjective assumptions, including the expected term and the expected stock price volatility.  The weighted average estimated fair values of stock options granted for the three- and six-months ended June 30, 2006 was $14.45 and $14.53 respectively.  The total compensation expense related to stock options was $1,371 and $2,685 net of the impact of estimated forfeitures, for the three- and six-month periods ended June 30, 2006, respectively.

As of June 30, 2006, $14,770 of total unrecognized equity-based compensation cost related to stock options is expected to be recognized over a weighted average period of 2.5 years.

9

Nonvested Restricted Stock and Restricted Stock Units

Nonvested restricted stock and RSU awards as of June 30, 2006 and changes during the six-month period ended June 30, 2006 is as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2005	594		$	38.18
Granted	44		$	44.62
Lapsed	(64	)	$	22.20
Forfeited	—		—
Nonvested at June 30, 2006	574		$	40.48

Of the nonvested restricted stock and RSU awards above, 239 shares with a weighted-average grant date fair value of $51.49 per share, are subject solely to performance-based conditions.  The awards are eligible for lapse annually on the anniversary date of the award over a four year period.  A fixed percentage of shares are eligible for vesting each year, with the potential to fully vest in subsequent years if performance warrants.  No shares will vest if required performance levels are not achieved during the four-year period and the applicable catch up period.  The compensation expense associated with these awards is evaluated on a quarterly basis for progress toward achievement of pre-determined performance targets. The compensation expense is recognized when it is probable that the performance levels will be met.

As of June 30, 2006, there was $16,176 of unrecognized equity-based compensation expense related to nonvested restricted stock and RSU awards.  The cost is expected to be recognized over a weighted-average period of 3.1 years, assuming that all performance conditions are met.

The fair value of the nonvested restricted stock and RSU awards is measured using the close price of the Company’s stock on the date of grant.  The total compensation expense related to restricted stock and RSU awards was $1,781 and $3,661 for the three- and six-month periods ended June 30, 2006, respectively.

For the three-months ended June 30, 2006 and 2005, total equity-based compensation expense was allocated as follows:

	2006				2005
Direct costs	$		1,780		$	296
General and administrative expenses	1,476				118
Equity-based compensation expense before income taxes	3,256				414
Income tax benefit	(1,195			)	(142		)
Total equity-based compensation expense after income taxes	$	2,061			$	272

For the six-months ended June 30, 2006 and 2005, total equity-based compensation expense was allocated as follows:

	2006				2005
Direct costs	$		3,585		$	594
General and administrative expenses	3,126				600
Equity-based compensation expense before income taxes	6,711				1,194
Income tax benefit	(2,464			)	(435			)
Total equity-based compensation expense after income taxes	$	4,247			$		759

Prior to January 1, 2006, the Company provided pro forma disclosure amounts in accordance with SFAS No. 123, as if the fair value method defined by SFAS No. 123 had been applied to its equity-based compensation.

The following average assumptions were used in calculating pro forma equity-based compensation expense for the six-months ended June 30, 2005 and recorded equity-based compensation for the six-months ended June 30, 2006:

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	2006		2005
Average risk-free interest rate	4.8	%	3.9	%
Expected dividend yield	0.0	%	0.0	%
Expected lives	1-4.75 years		0-5 years
Average expected volatility	27.8	%	30.7	%

The pro forma table below reflects net income and basic and diluted net earnings per share for the three- and six-months ended June 30, 2005 had the Company applied the fair value recognition provisions of SFAS No. 123:

	Three-months ended June 30, 2005			Six-months ended June 30, 2005
Net income, as reported (as restated — Note 2)	$	21,562		$	23,502
Equity-based employee compensation expense included in net income, as reported, net of tax	272			759
Equity-based employee compensation expense as if the fair value method had been applied, net of tax	(795		)	(2,259		)
Pro forma net income	$	21,039		$	22,002
Earnings per share:
Basic - as reported	$	0.44		$	0.48
Basic - pro forma	$	0.42		$	0.45
Diluted - as reported	$	0.42		$	0.45
Diluted - pro forma	$	0.41		$	0.42

Pro forma compensation expense recognized under SFAS No. 123 does not consider estimated forfeitures.  The terms and nature of the 2006 equity-based compensation awards create computational differences between the pro forma compensation presented above and the equity compensation recognized in 2006 that render the calculations incomparable.

As a result of adopting SFAS No. 123R, for the three-month period ended June 30, 2006, income before income taxes and net income was $1,371 and $861 lower, respectively, than if the Company had continued to account for equity-based compensation under APB No. 25. For the six-month period ended June 30, 2006, income before income taxes and net income was $2,685 and $1,686 lower, respectively, than if the Company had continued to account for equity-based compensation under APB No. 25.  The impact on both basic and diluted earnings per share using the Company’s effective tax rate for the three- and six-month periods ended June 30, 2006 was $0.02 and $0.05 per share, respectively. In addition, prior to the adoption of SFAS No. 123R, the Company presented the tax benefit of stock option exercises as operating cash flows.  Upon the adoption of SFAS No. 123R, tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are classified as financing cash flows.  Under SFAS No. 123R, these excess tax benefits are not recognized until the tax deductions result in a reduction of tax liability instead of creating or increasing net operating losses.  There was no excess tax benefit recorded for the three- and six-months ended June 30, 2006.

 Note 4 - Discontinued Operations

The Company reached a decision in 2005 to sell the operations of Institut Francais de Gestion Langues (“IFG Langues”), a non-strategic part of IFG, and accordingly the business was classified as discontinued operations.  Also, during the first quarter of 2005, the Company completed the sale of its Wall Street Institute (“WSI”) business.  The operations and cash flows of the business components comprising the IFG Langues business, WSI, India, and K-12 educational services businesses were or will be eliminated from ongoing operations as a result of the sale or abandonment and the Company will not have any significant continuing involvement in the operations after the disposal transactions.  Therefore, these operations are classified as discontinued operations for all periods.

WSI Business

During the first quarter of 2006, the Company recorded a net gain of $261, including a tax benefit of $576, related to the settlement of franchisee law suits related to the WSI business.  During the second quarter of 2006, the Company recorded a net gain of $700 due to the re-assessment of income tax accruals related to the disposal.

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During the third quarter of 2005, WSI Education S.a.r.l. received a preliminary field audit report assessing Italian value added taxes (“VAT”) owed related to services provided by the WSI business unit in 2003 prior to its disposition.  Under the terms of the sale agreement with WSI, the Company agreed to indemnify WSI from obligations that may arise as a result of an Italian VAT assessment related to periods prior to the closing of the sale of the WSI business unit on February 28, 2005. However the Company is entitled to the value of the tax benefit of any indemnification.  In the first quarter of 2005, the Company issued a $12,000 standby letter of credit in favor of WSI Education S.a.r.l for a tax indemnification related to the sale of WSI.  The Company has filed, on behalf of WSI Education S.a.r.l., an appeal with the Italian authorities and a complaint against the Italian Republic at the European Union Commission for restraint of trade based on the VAT exemption only being available to Italian owned companies.  Subsequent to June 30, 2006, the Company received notification that the Italian Court denied the stay of payment request, which sought to defer payment of the tax and interest portion of the obligation that is normally required to proceed with court proceedings.  As a result, the Company deposited approximately $3,000 with the Italian tax authority, representing approximately 50% of the total tax and interest assessed to-date, in exchange for an expedited hearing on the merits of the case.  The Company continues to believe that it is not possible to estimate the ultimate outcome of this issue.  As a result, no accrual for any potential adverse outcome of this matter has been made in the consolidated financial statements.  The Company intends to vigorously pursue these cases.

Other

During the second quarter of 2006, the Company entered into a binding agreement with an unrelated third party (the “Buyer”) to sell IFG Langues, a non-strategic business in the European segment.  Under the agreement, the Buyer will purchase all assets and assume substantially all third party liabilities of the business.  It is anticipated that the transaction will close in the third quarter of 2006.  As a result of comparing the carrying value of the net assets held for sale of the IFG Langues business to the estimated net realizable value of the business upon completion of the sale, the Company has estimated an additional pre-tax loss of $2,310 during the second quarter and, accordingly, has included this amount as a component of loss from discontinued operations for the three- and six-months ended June 30, 2006.

Summarized Financial Information of Discontinued Operations

Summarized operating results from the discontinued operations included in the Company’s consolidated statement of operations were as follows for the three-months ended June 30:

	WSI					Other
	2006			2005		2006			2005
Revenues	$	—		$	—	$	1,988		$	1,820
Pretax (loss) income from discontinued operations	$	(14	)	$	—	$	(1,176	)	$	3

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Six-months ended June 30:

	WSI					Other
	2006			2005		2006				2005
Revenues	$	—		$	12,310	$		3,787		$	3,501
Pretax (loss) income from discontinued operations	$	(25	)	$	480	$	(1,334		)	$		(150	)

Net assets of the other discontinued operations were as follows:

	December 31, 2005
Current assets	$	2,192
Property and equipment, net	386
Tradename/accreditation	165
Other assets	163
Total net assets of discontinued operations	$	2,906

Note 5 — Notes Receivable (Long-term)

Notes receivable (long-term) consists of the following:

	June 30, 2006		December 31, 2005
Trade notes receivable (long-term), net of allowance of $9,106 and $9,328 at June 30, 2006 and December 31, 2005, respectively	$	33,992	$	34,762
Notes receivable (long-term):
Kendall College	29,185		25,395
WSI Education S.a.r.l.	14,530		13,448
Other	8,608		10,208
	$	86,315	$	83,813

Of the balance of long-term other trade notes receivable, $8,530 was unearned as of June 30, 2006 and is included in deferred revenue on the Company’s balance sheet.  Tuition revenues are generally billable, and the full amount of notes receivable and related deferred revenue are recorded, when a note agreement is signed by the student.

Note 6— Other Intangible Assets

The following table summarizes other intangible assets as of June 30, 2006:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Subject to amortization:
Student rosters	$	19,365	$	(15,010	)	$	4,355
Non-compete agreements	1,320		(900		)	420
Other	1,198		(744		)	454
Total	$	21,883	$	(16,654	)	$	5,229

Amortization expense for intangible assets was $1,128 and $2,276 for the three and six months ended June 30, 2006, respectively, and $2,110 and $3,472 for the three and six months ended June 30, 2005 respectively. The estimated future amortization expense for intangible assets for the remaining six-month period of 2006 is $1,924. The estimated future amortization expense for intangible assets for each of the five years subsequent to December 31, 2006 is as follows: 2007 - $2,424; 2008 - $556; 2009 - - $325; 2010 and beyond - $0.

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Note 7 - Long-Term Debt

Long-term debt consists of the following:

	June 30,		December 31,
	2006		2005
Mortgage notes payable bearing interest at variable rates ranging from 3.30% to 8.50%	$	54,096	$	52,429
Various unsecured lines of credit bearing interest at variable rates ranging from 3.45% to 8.80%	51,571		51,332
Notes payable secured by fixed assets, bearing interest at rates ranging from 3.81% to 10.00%	27,592		24,239
Capital lease obligations bearing interest at rates ranging from 3.85% to 9.00%	23,644		12,374
Various notes payable bearing interest at fixed rates ranging from 3.00% to 13.72%	15,580		19,742
Various notes payable bearing interest at variable rates ranging from 3.15% to 9.27%	1,687		2,925
	174,170		163,041
Less: current portion of long-term debt	59,460		63,044
Total long-term debt, net of current portion	$	114,710	$	99,997

Note 8 - Due to Shareholders of Acquired Companies

Due to shareholders of acquired companies consists of the following amounts payable in cash:

	June 30,		December 31,
	2006		2005
Amounts payable to former shareholders of:
Universidade Anhembi Morumbi (“UAM”)	$	15,362	$		13,658
Universidad Andres Bello (“UNAB”)	13,501		24,929
Universidad Tecnologica Centroamericana (“UNITEC”)	14,601		14,814
Universidad Interamericana (“UI”)	4,200		4,200
Universidad Peruana de Ciencias Aplicadas (“UPC”)	2,996		2,859
Universidad del Noroeste (“UNO”)	1,755		1,890
Universidad Latinoamericana de Ciencia y Tecnologia (“ULACIT”)	100		100
Cyprus College	—		2,973
	52,515		65,423
Less: current portion of due to shareholders	23,428		18,737
Total due to shareholders, net of current portion	$	29,087	$	46,686

During 2006, the amount payable to the former shareholders of Cyprus College was re-evaluated under the terms of the purchase agreement.  As a result, the liability and corresponding goodwill recorded in the transaction were decreased.

Note 9 - - Income Taxes

The Company’s income tax provisions for all periods consist of federal, state, and foreign income taxes. The tax provisions for the three- and six-month periods ended June 30, 2006 and 2005 were based on the estimated effective tax rates applicable for the 2006 and 2005 full years, after giving effect to significant items related specifically to the interim periods. The Company’s effective tax rate from continuing operations was 18.0% and 18.4% for the three- and six-months ended June 30, 2006 respectively and 11.2% and 11.2% for the three- and six-months ended June 30, 2005, respectively. For the six months ended June 30, 2006, the effective rate includes the impact of FIN No. 18.  FIN No. 18 only applies to interim periods and has no effect on the Company’s annual effective rate.  The effective rate for both the three- and six- months ended June 30, 2006, excluding the impact of FIN No. 18 and the discrete events described below, was 8.7%.  For the three- and six-month periods ended June 30, 2005, the Company’s effective tax rate was 11.2% and 11.2%, and the impact of FIN No. 18 was immaterial. Recent acquisitions in lower-taxed jurisdictions and foreign tax

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planning initiatives have decreased the 2006 forecasted effective tax rate below the 2005 effective tax rate.  The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States. Generally lower tax rates in these foreign jurisdictions along with the Company’s intent and ability to permanently reinvest foreign earnings outside of the United States results in an effective tax rate significantly lower than the United States statutory rate.

During the second quarter of 2006, Laureate Education, LLC (“Ventures”), a subsidiary of the Company, recorded a receivable of $9,322 from the sale of Chancery Software, Ltd (see Note 15).  Because this event monetized the last significant remaining uncertain asset of Ventures, the Company has accelerated its plans for the liquidation of Ventures.  The Company recorded income tax expense of $6,991 as a result of the Chancery transaction and accelerated liquidation plans.

As previously reported, on February 8, 2006, the Company received notice of certain adjustments proposed by the Internal Revenue Service (the “IRS”) with respect to the Company’s 2000 federal income tax return. The proposed adjustments primarily relate to the gain on the sale of the Company’s Prometric testing subsidiary in 2000 for $775,000. The IRS claims that the Company owes additional taxes of approximately $54,600 plus penalties. The Company filed a protest with the IRS during the second quarter and will contest vigorously the IRS’s determination and believes that it has properly reported the transaction.  Consequently, the Company does not believe at this point that a loss from this matter is probable, nor is it possible to estimate the ultimate outcome if the Company does not prevail.  As a result, no accrual for any potential adverse outcome of this matter has been made in the consolidated financial statements; however, the Company can provide no assurance that the eventual outcome will not result in a material adverse amount.

As previously reported, on February 23, 2006, the Company received a Notice of Deficiency from the IRS for the Company’s 1997 tax year disagreeing with the Company’s exclusion from income of a break-up fee it received in its attempted acquisition of NEC. The Company is appealing the Notice of Deficiency and paid the current amount of the assessment, $8,100, and the associated interest due of $6,700, in May 2006.   These amounts had been previously accrued based upon the Company’s assessment of the probability of loss and its ability to reasonably estimate that loss.  The Company is preparing its appeal which is expected to be filed in a court of law having jurisdiction over such matters in the third quarter of 2006.  The Company believes that it properly excluded the break up fee from income and intends to vigorously contest the IRS’s determination. Although the ultimate disposition of this issue is uncertain, based on current information, it is the opinion of management that the ultimate disposition of this issue will not have a material effect on the Company’s consolidated financial position, liquidity, or results of operations.

In April 2006, the IRS began a field examination of the Company’s 2003 tax year.  In addition, there are several other income tax audits in progress, which includes an IRS examination of Walden for the 2003 tax year; an examination of two of the Company’s Dutch subsidiaries, Sylvan I BV and Sylvan International BV for the 2000 to 2003 tax years; and an examination of the net operating loss carryforwards that were included in Laureate Online Education BV when it was purchased from third parties in 2004.  No assurance can be given as to the eventual outcome of these audits.

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Note 10 — Stockholders’ Equity

The components of stockholders’ equity are as follows:

										Accumulated
				Additional						Other		Total
	Common			Paid-In			Retained			Comprehensive		Stockholders’
	Stock			Capital			Earnings			Income		Equity
Balance at December 31, 2005 (as restated - Note 2)	$	499		$		503,791	$	435,735		$	38,453	$	978,478
Options exercised for purchase of 1,411 shares of common stock, net of 22 replenishment shares	14			17,848			—			—		17,862
Non cash stock compensation modification for former employee	—			365			—			—		365
Non-cash stock compensation	—			6,346			—			—		6,346
Other	1			7			—			—		8
Comprehensive income:
Net income for the six months ended June 30, 2006	—			—			37,298			—		37,298
Foreign currency translation adjustment	—			—			—			1,236		1,236
Unrealized gain on available-for-sale securities	—			—			—			9		9
Total comprehensive income	—			—			—			—		38,543
Balance at June 30, 2006	$		514	$	528,357		$		473,033	$	39,698	$	1,041,602

Note 11 — Comprehensive Income

The components of comprehensive income, net of related income taxes, are as follows:

	Three-months ended June 30,							Six-months ended June 30,
					2005					2005
	2006				(as restated — Note 2)			2006		(as restated — Note 2)
Net income	$	37,973			$	21,562		$	37,298	$	23,502
Foreign currency translation adjustment	412				(6,812		)	1,236		(23,044		)
Unrealized (loss) gain on available-for-sale securities, net of tax	(6			)	39			9		53
Minimum pension liability adjustment	—				—			—		(22		)
Comprehensive income	$		38,379		$	14,789		$	38,543	$	489

Note 12 - Earnings Per Share

The following table summarizes the computations of basic and diluted earnings per share:

	Three-months ended June 30,						Six-months ended June 30,
				2005							2005
	2006			(as restated — Note 2)			2006				(as restated — Note 2)
Numerator used in basic and diluted earnings per common share:
Income from continuing operations	$	40,659		$	31,310		$		39,892		$	32,638
(Loss) Income from discontinued operations, net of tax	(1,504		)	3			(1,673			)	615
Loss on disposal of discontinued operations, net of tax	(1,182		)	(9,751		)	(921			)	(9,751			)
Net income	$	37,973		$	21,562		$	37,298			$		23,502
Denominator for basic earnings per share — weighted-average common shares outstanding	51,429			49,566			50,940				49,402
Net effect of dilutive securities based on treasurystock method	1,669			2,378			1,943				2,478

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Denominator for diluted earnings per share — weighted average common shares outstanding	53,098			51,944			52,883			51,880
Earnings per common share, basic:
Income from continuing operations	$	0.79		$	0.63		$	0.78		$	0.66
(Loss) Income from discontinued operations, net of tax	(0.03		)	0.00			(0.03		)	0.01
Loss on disposal of discontinued operations, net of tax	(0.02		)	(0.20		)	(0.02		)	(0.20		)
Earnings per common share	$	0.74		$	0.44		$	0.73		$	0.48
Earnings per common share, diluted:
Income from continuing operations	$	0.77		$	0.60		$	0.75		$	0.63
(Loss) Income from discontinued operations, net of tax	(0.03		)	0.00			(0.03		)	0.01
Loss on disposal of discontinued operations, net of tax	(0.02		)	(0.19		)	(0.02		)	(0.19		)
Earnings per common share	$	0.72		$	0.42		$	0.71		$	0.45

Per share amounts may not sum due to rounding differences.

Note 13 — Commitments and Contingencies

This chart is intended to be a high-level summary of purchase obligations and contingent arrangements.  Please refer to additional disclosure in the footnotes to the chart. 

Higher Education Institution	Date of Contingency	Additional Ownership Share	Terms of Commitment or Contingent Transaction
Purchase Obligations:
Ecole Centrale d’Electronique (“ECE”) 1	December 31, 2008	30%	$8,954
IFG 2	on or before July 31, 2007 July 31, 2007	16% 23%	$1,604 $2,389
Put Right Arrangements:
IFG 2	October through November 2008	10%	$1,023
Universidad de Las Americas (“UDLA”) 3	April 1, 2008	20%	Approximately 4.5 times average recurring earnings before interest and taxes (“EBIT”) for specified periods
UNAB and Academia de Idiomas y Estudios Profesionales (“AIEP”) 4	April 1, 2009	20%	Variable purchase price based on average recurring EBIT for specified periods
UAM5	March 1, 2009	29%	Approximately 4 times recurring earnings before interest, taxes, depreciation and amortization (“EBITDA”) for certain specified periods
	Beginning March 1, 2013 through March 1, 2023	20%	Variable purchase price based on recurring EBITDA for certain specified periods
Cyprus College 6	July 1, 2012 or up to five years thereafter	20%	Payable based on a variable scale for new enrollments and EBITDA related to the year prior to exercise

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Call Right Arrangements:
UDLA 3	April 1, 2009	20%	Approximately 5 times average recurring EBIT for specified periods
UNAB and AIEP 4	April 1, 2009	20%	Variable purchase price based on average recurring EBIT for specified periods
UAM 5	March 1, 2009	29%	The greater of 4 times recurring EBITDA for certain specified periods or equivalent per share valuation of the Company’s initial 51% acquisition of UAM, adjusted for inflation
	Beginning March 1, 2013 through March 1, 2023	20%	Variable purchase price based on recurring EBITDA for certain specified periods.
Cyprus College 6	July 1, 2006	35%	6% - Payable April 2007 based on 6.25 times 2006 audited recurring EBITDA
			29% - Payable April 2012 based on a variable scale for new enrollments and 2011 EBITDA
	July 1, 2012 or up to five years thereafter	20%	Payable April in the year following exercise based on a variable scale for new enrollments and EBITDA related to the year prior to exercise
Contingent Earnouts (cash payments):
UDLA 7	March 31, 2006 or 45 days after receipt of financial statements March 31, 2007 or 45 days after receipt of financial statements		$81,700 (estimated based on 2004 and 2005 reported EBIT) (currently in negotiation) $18,500 (estimated based on 2005 reported EBIT)
Laureate Online Education BV 8	April 1, 2007		Approximately 75% of 4 times 2006 EBITDA, not to exceed $10,000
	April 1, 2008		Approximately 4 times the average of 2006 and 2007 EBITDA less the April 1, 2007 payment, not to exceed $10,000

Obligations and contingent payments (except for the contingent earnout on Laureate Online Education BV) are denominated in foreign currency and are subject to foreign currency risk.

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Purchase Obligations

1 As part of the acquisition of ECE, the Company committed to purchase the remaining 30% ownership from the sellers on December 31, 2008 for approximately $8,954.  The purchase obligation is denominated in Euros, and is subject to foreign currency exchange rate risk on the date of payment.

2 As part of the acquisition of IFG, the Company committed to additional capital contributions, which will increase the Company’s share of ownership.  The agreement provides that, no later than July 31, 2006 and July 31, 2007, the Company shall contribute approximately $1,604 and $2,389 resulting in an increase in ownership share of 16% and 23%, respectively. In addition, during the period October through November 2008, the sellers may exercise a put option requiring the Company to purchase the remaining 10% ownership for approximately $1,023.  During the second quarter of 2006, the Company negotiated an amendment to the agreement that provides that the first additional capital contribution of $1,604 can be extended through July 31, 2007, instead of July 31, 2006.  There were no other material amendments made to the agreement.  The purchase obligation is denominated in Euros, and is subject to foreign currency exchange rate risk on the dates of payment.

Contingent Payments

In connection with certain acquisitions, variable amounts of contingent consideration are payable to the sellers based upon specified terms.  All existing contingent consideration agreements are predicated upon improved operating profitability of the acquired entities and utilize multiples consistent with those used to calculate the initial purchase price.  The Company will record the contingent consideration when the contingencies are resolved and the additional consideration is payable.

3 Effective April 1, 2008 the minority owners of UDLA have a put right to require the Company to purchase their remaining 20% interest in Decon, the holding company that controls and operates UDLA, for a variable purchase price based on 4.5 times average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire the remaining 20% interest for a variable purchase price based on 5.0 times average EBIT for certain specified periods.

4 Effective April 1, 2009 the minority owners of UNAB and AIEP have a put right to require the Company to purchase their 20% interest for a variable purchase price based on average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire this 20% interest under a similar methodology for certain specified periods.

5 Effective March 1, 2009 the minority owners of UAM have a put right to require the Company to purchase an equity interest of 29% from the minority owners at a variable purchase price based on 4.0 times recurring EBITDA for certain specified periods. Also effective March 1, 2009, the Company has a call right to acquire the same 29% interest from the minority owners for a variable purchase price equal to the greater of 4.0 times recurring EBITDA for certain specified periods or the equivalent per share valuation of the Company’s initial 51% acquisition of UAM, as adjusted for local inflation. Beginning March 1, 2013 and continuing for ten years the minority owners and the Company have similar put and call rights, respectively, on the remaining 20% interest of the minority owners, with the purchase price determined based on a similar formula.

6 Effective January 1, 2012 and exercisable up to five years thereafter, the minority owners of Cyprus College have a put right to require the Company to purchase an equity interest of 20% from the minority owners at a variable purchase price based on a variable scale for new enrollments and EBITDA for the calendar year preceding the exercise date.  Effective January 1, 2006, the Company has a call right to acquire up to a 35% interest from the minority owners for a variable purchase price based on a variable scale for new enrollment and 2006 EBITDA.  Effective January 1, 2012 and exercisable up to five years thereafter, the Company has the call right to acquire the remaining 20% interest from the minority owners for a variable purchase price based on a variable scale for new enrollment and EBITDA for the calendar year preceding the exercise date.

Contingent Earnouts (cash payments)

7 Additional amounts of contingent consideration are due the sellers of UDLA based on operating results for the three years ending December 31, 2006.  The agreement stipulates that on the later of March 31, 2006 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 60% of six times (i) average recurring EBIT for 2004 and 2005, less (ii) 2000 EBIT; this result is reduced by (iii) 42% of certain

19

specified debt.  The Company has reviewed the Decon audited financials and the parties are presently engaged in negotiations regarding the amount due in respect of the contingent payment obligation.  Excluding adjustments of non-recurring EBIT items and any other negotiated amounts, the computed formula yields an estimated earnout of $81,700, although the actual amount to be mutually agreed upon with the sellers or otherwise determined under the applicable agreements may differ from this amount.  This amount is net of approximately $8,800 of amounts owed to the Company from the sellers related to consideration from a prior acquisition of another university.  On the later of March 31, 2007 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 20% of four times (i) average recurring EBIT for 2005 and 2006; this result is reduced by (ii) 20% of certain specified debt and (iii), $6,500.  Excluding adjustments of non-recurring EBIT items and any other negotiated amounts as well as including 2006 estimates and projections, the Company would be obligated to the sellers for approximately $18,500.  The Company has pledged its shares of Decon as security for its payment obligations to the sellers. The Company cannot dispose of, place any lien on or encumber the shares without the prior approval of the sellers.

8 Additional amounts of contingent consideration, not to exceed $10,000, are due the sellers of Laureate Online Education BV equal to four times the average of the audited EBITDA for the calendar years ending December 31, 2006 and 2007.

Loss Contingencies

The Company is subject to legal actions arising in the ordinary course of its business. In management’s opinion, the Company has adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions and does not believe any settlement would materially affect the Company’s financial position.

Guarantees

Subsequent to the June 2003 divestiture of the Company’s K-12 business segments, all leases related to Sylvan Learning Centers were renegotiated or assigned in the name of Educate, Inc. (“Educate”) during the third quarter of 2003.  Leases with remaining payments of $4,981 through December 2010 are guaranteed by the Company.  Under the terms of the Asset Purchase Agreement with Educate, the Company is indemnified against any losses suffered as a result of these lease guarantees.  During 2004, the Company entered into an agreement to guarantee equipment lease payments owed by Kendall College (“Kendall”) to Key Equipment Finance. Equipment leases with remaining payments of $3,986 through December 2011 are guaranteed by the Company. The fair value of the guarantees has been recorded as other long-term liabilities in the consolidated balance sheets.

Standby Letters of Credit

The Company has $14,600 outstanding in standby letters of credit.  The Company is self-insured for workers compensation and other insurable risks up to predetermined amounts above which third party insurance applies.  The Company is contingently liable to insurance carriers under certain of these policies and has provided a letter of credit in favor of the insurance carriers for $1,100.  The Company has also issued a standby letter of credit in the amount of $1,500 assuring the collectibility of a line of credit at AIEP, which is being used for working capital purposes.  The outstanding balance on the line of credit was $1,900 at June 30, 2006 and is also covered by other guarantees by other affiliated entities.

Commitments

Under terms of note agreements with Kendall, the Company has committed to providing total additional funding to Kendall of up to $1,200.  In the event the Company does not exercise its agreement to acquire Kendall, Kendall is obligated to enter into a lease agreement with the Company beginning September 1, 2007 to lease office space.  The lease commitment specifies a term of 36 months and annual rent of $1,000.

As a part of the acquisition of Cyprus College, the Company committed to making a contribution of approximately $3,165 between the closing date and three years thereafter.  The contributions will fund certain capital projects, if approved, and will not alter the relative equity interests.  The contribution commitment is denominated in Cypriot Pounds and is subject to foreign currency exchange rate risk on the dates of payment.

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Note 14 - Business and Geographic Segment Information

The Company is focused exclusively on providing a superior higher education experience to approximately 228,500 students through a leading global network of accredited campus-based and online higher education institutions. The Company’s educational services are offered through three reportable segments:  Latin America, Europe and Laureate Online Education.

The accounting policies of the segments are the same as those described in the significant accounting policies.  The Company evaluates performance based on profit or loss from operations before income taxes, corporate general and administrative expenses, and campus-based overhead expenses.

The Latin America segment consists of ten separately accredited universities and one professional institute, and has operations in Mexico, Chile, Brazil, Peru, Ecuador, Honduras, Panama and Costa Rica.  Latin America higher education institutions currently enroll approximately 180,000 students and offer more than 100 degree programs through 44 campuses. The schools primarily serve 18- to 24-year-old students and offer an education that emphasizes career-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines, including international business, law, health sciences, information technology and engineering.

The Europe segment consists of two accredited universities and eight other accredited post-secondary institutions, and has operations in Spain, Switzerland, France and Cyprus.  Europe higher education institutions currently enroll approximately 19,300 students and offer more than 75 degree programs through 9 campuses.  The schools primarily serve 18- to 24-year-old students and offer an education that emphasizes career-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines, including international business, hotel management, health sciences, architecture and engineering.

The Company believes that all of its campus-based higher education institutions benefit from strong academic reputations and brand awareness, and established operating histories.  Each school also has flexible, non-tenured, teaching-focused faculty and is led by an experienced local management team.

The Laureate Online Education segment offers undergraduate and graduate degree programs to working professionals through distance learning.  Laureate Online Education consists of Walden, Canter, and Laureate Online Education BV, which collectively offer degree programs including education, psychology, health and human services, management, engineering, and information technology.  Laureate Online Education institutions currently enroll approximately 29,200 students.

These reportable segments are business units that offer distinct services and are managed separately.  The campus-based reportable segments of Latin America and Europe are not aggregated with Laureate Online Education as Laureate Online Education offers services to a different class of customer, through a different delivery system, and with different economic characteristics.  The Latin America and Europe segments are managed separately and have certain differences in classes of customer and economic characteristics, and thus are not aggregated together.

The following table sets forth information on the Company’s reportable segments:

Three-months ended June 30, 2006	Latin America		Europe		Laureate Online Education		Total
Revenues	$	190,805	$	57,297	$	55,017	$	303,119
Segment profit	59,063		7,100		8,146		74,309
Three-months ended June 30, 2005 (as restated — Note 2)	Latin America		Europe		Laureate Online Education		Total
Revenues	$	131,151	$	50,241	$	45,577	$	226,969
Segment profit	41,573		6,650		5,341		53,564
Six-months ended June 30, 2006	Latin America		Europe		Laureate Online Education		Total
Revenues	$	313,306	$	117,200	$	107,723	$	538,229
Segment profit	56,753		19,635		12,466		88,854

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Six-months ended June 30, 2005 (as restated — Note 2)	Latin America		Europe		Laureate Online Education		Total
Revenues	$	214,123	$	106,484	$	85,039	$	405,646
Segment profit	41,275		17,054		6,509		64,838

The following tables reconcile the reported information on segment profit to income from continuing operations before income taxes, minority interest, and equity in net loss of affiliates reported in the statements of operations:

	Three-months ended June 30,						Six-months ended June 30,
	2006			2005 (as restated — Note 2)			2006			2005 (as restated — Note 2)
Total profit for reportable segments	$	74,309		$	53,564		$	88,854		$	64,838
Campus-based segments’ overhead	(5,908		)	(3,154		)	(10,575		)	(5,998		)
General and administrative expense	(11,420		)	(5,800		)	(21,271		)	(12,496		)
Net non-operating income (loss)	10,259			(366		)	10,264			(74		)
Income from continuing operations before income taxes, minority interest and equity in net loss of affiliates	$	67,240		$	44,244		$	67,272		$	46,270

Revenue information of continuing operations by geographic area is as follows:

	Three months ended June 30,				Six months ended June 30,
	2006		2005 (as restated — Note 2)		2006		2005 (as restated — Note 2)
Revenues
Chile	$	79,248	$	64,026	$	96,617	$		77,473
Mexico	59,039		48,174		129,644		106,844
United States	50,524		42,476		99,308		79,058
Spain	30,885		29,910		61,520		61,484
Brazil	25,900		—		43,851		—
Other foreign countries	57,523		42,383		107,289		80,787
Consolidated total	$	303,119	$	226,969	$	538,229	$	405,646

Revenues are attributed to countries based on the location of the customer.

Note 15 — Other Financial Information

On June 28, 2006, the Company acquired a 27.5 year leasehold on property in downtown Paris for approximately $16,800.  The Company financed approximately $11,500 through a 12 year loan with a third party lender.  The financing agreement is denominated in Euros, and is subject to foreign currency exchange rate risk on the date of payment.

On June 30, 2003, the Company sold stock of certain investments held by Ventures which were considered non-strategic assets, including Chancery Software, Ltd., for contingent consideration to Porter Capital (“Porter”).  During the year ended December 31, 2003, the Company wrote-off the balance of its equity method investment in Chancery Software, Ltd. through a charge to equity in net loss of affiliates.  On June 7, 2006, Porter sold all of the shares of stock it held in Chancery Software, Ltd.  In accordance with the sale agreement between Porter and the Company, Porter will pay the Company $9,322.  The Company recorded, in June 2006, an accounts receivable and a non-operating gain of $9,322.  There is an additional amount in escrow, approximating $2,400, for certain indemnity claims to be made over the next two years.  Due to the uncertainty of receipt of this escrow, the Company has not recorded any receivable or gain related to these additional funds.

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Note 16 — Subsequent Events

Effective July 1, 2006, the Company entered into a series of agreements which allows Walden to participate in the School as Lender Program under the Higher Education Act’s Federal Family Education Loan Program (“Title IV”).  Under the “eligible lender trustee” arrangement, Walden designated Wells Fargo Bank to serve as trustee for their Title IV loans.  Sallie Mae provides a $100,000 line of credit facility to fund the origination of Title IV loans as well as a sale/purchase agreement to purchase all of the eligible Title IV loans from the trustee immediately after funding.  Through their purchases of the loans, Sallie Mae will incur all financial risk.  Since credit is both drawn and repaid on the date of loan origination, it is anticipated that no indebtedness will be outstanding as of the end of any period and that no interest expense will be incurred. The terms of the agreement are for a two-year period ending June 30, 2008 and may be extended up to four additional years by mutual consent.

During July 2006, the Company completed the sale of IFG Langues to an unrelated third party.  See Note 4 for information related to this disposal.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained herein include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “anticipate,” “goal,” “may,” “will,” “expect,” “hope,” “believe,” “intend,” “plan,” “estimate,” “project,” “should” and other similar terms.  Such forward-looking statements are based on the current facts and circumstances and management’s current strategic plan and are subject to a number of risks and uncertainties that could significantly affect the Company’s current goals and future financial condition.

For a comprehensive description of the types of risks and uncertainties the Company faces, see Item 1.A. “Risk Factors” of this Report and of the Company’s Annual Report on Form 10-K/A.  Please note the forward-looking statements included in this Report are made only as of the date of this report.  The Company assumes no obligation to publicly update any forward-looking statements. Investors should not unduly rely on our forward-looking statements when evaluating the information presented in our filing and reports.

Overview

Laureate is focused exclusively on providing a superior higher education experience to approximately 228,500 students through the leading global network of accredited campus-based and online higher education institutions.  The Company’s educational services are offered through three separate reportable segments: Campus Based - Latin America (“Latin America”), Campus Based - Europe (“Europe”) and Laureate Online Education.  Latin America and Europe own or maintain controlling interests in eleven and ten separately accredited higher education institutions, respectively.  The Latin America segment has locations in Mexico, Chile, Brazil, Peru, Ecuador, Honduras, Panama, and Costa Rica. The Europe segment has locations in Spain, Switzerland, France, and Cyprus.  The Laureate Online Education segment provides career-oriented degree programs through Walden E-Learning, Inc. (“Walden”), Laureate Education Online BV, and Canter and Associates (“Canter”).

Sale of Business Units

The Company reached a decision in 2005 to sell the operations of Institut Francais de Gestion Langues (“IFG Langues”), a non-strategic part of IFG, and accordingly the business was classified as discontinued operations.  Also, during the first quarter of 2005, the Company completed the sale of its Wall Street Institute (“WSI”) business.  The operations and cash flows of the business components comprising the IFG Langues and WSI were or will be eliminated from ongoing operations as a result of the sale or abandonment and the Company will not have any significant continuing involvement in the operations after the disposal transactions.  Therefore, these operations are classified as discontinued operations for all periods.  See Note 4 to the consolidated financial statements for more information regarding these transactions.

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Critical Accounting Policies

Equity Compensation Plans

The Company has equity-based compensation plans which authorize the granting of various equity-based incentives including stock options, restricted stock and restricted stock units to employees and nonemployee directors. The expense for these equity-based incentives is based on their fair value at date of grant and amortized over their vesting period.

The fair value of each stock option granted is estimated on the date of grant using a closed-form pricing model. The pricing model requires assumptions such as the expected term of the stock option and expected volatility of the Company’s stock over the expected term, which significantly impact the assumed fair value. The Company uses historical data to determine the expected volatility assumption and uses Staff Accounting Bulletin (“SAB”) No. 107 to estimate the expected term of the stock option.  In addition, judgment is required in estimating the amount of equity-based awards that are expected to be forfeited.  If these pricing model assumptions change significantly for future grants or if forfeiture experience differs from estimates, share-based compensation expense will fluctuate in future years. The fair value of restricted stock grants is equal to the market price of the Company’s stock at date of grant.

Income Taxes

The Company accounts for income taxes using the liability method.  Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities (i.e. temporary differences) and are measured at prevailing enacted tax rates that will be in effect when these differences are settled or realized.

The Company also measures its interim income tax provision using Financial Accounting Standards Board Interpretation (“FIN”) No. 18, Accounting for Income Taxes in Interim Periods.  FIN No. 18 measures the seasonality of any subsidiary or controlled entity that operates at an annual loss for which no income tax benefit is recognized.  This seasonality can cause volatility in the interim effective tax rates.  FIN No. 18, however, has no effect on the Company’s annual effective tax rate.

Seasonality

Most of the schools in the Company’s network have a summer break when classes are generally not in session and during which minimal revenues are recognized.  Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the schools continue to incur fixed expenses during summer breaks.  As a result, the fourth quarter is the Company’s strongest quarter because all of its higher education institutions are in session.  The second quarter is also strong as most schools have classes in session, although the Company’s largest school, located in Mexico, is in session for only part of that quarter.  The first and third quarters are weaker quarters because the majority of the Company’s schools have summer breaks for some portion of one of these two quarters. Due to this seasonality, revenues and profits in any quarter are not necessarily indicative of results in subsequent quarters.

The following chart shows the enrollment cycles for each higher education institution.  In the chart, shaded areas represent periods when classes are generally in session and revenues are recognized.  Areas that are not shaded represent summer breaks during which revenues are not typically recognized.  The large circles indicate the Primary Intake start dates of the Company’s schools, and the small circles represent Secondary Intake start dates (smaller intake cycles).

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Reportable Segments

The following table is derived from the Company’s consolidated financial statements and represents financial information of the Company’s reportable segments for the three-months ended June 30, 2006 and 2005, excluding discontinued operations:

							Laureate
	Latin						Online
	America			Europe			Education			Unallocated			Consolidated
	(in thousands)
2006
Segment revenues	$	190,805		$	57,297		$	55,017		$	—		$	303,119
Segment direct costs	(131,742		)	(50,197		)	(46,871		)	—			(228,810		)
Campus-based segment’s overhead	—			—			—			(5,908		)	(5,908		)
Segment profit (loss)	59,063			7,100			8,146			(5,908		)	68,401
General and administrative expenses	—			—			—			(11,420		)	(11,420		)
Operating income (loss)	$	59,063		$	7,100		$	8,146		$	(17,328	)	$	56,981
2005 (as restated - Note 2)
Segment revenues	$	131,151		$	50,241		$	45,577		$	—		$	226,969
Segment direct costs	(89,578		)	(43,591		)	(40,236		)	—			(173,405		)
Campus-based segment’s overhead	—			—			—			(3,154		)	(3,154		)
Segment profit (loss)	41,573			6,650			5,341			(3,154		)	50,410
General and administrative expenses	—			—			—			(5,800		)	(5,800		)
Operating income (loss)	$	41,573		$	6,650		$	5,341		$	(8,954	)	$	44,610

The following table is derived from the Company’s consolidated financial statements and represents financial information of the Company’s reportable segments for the six-months ended June 30, 2006 and 2005, excluding discontinued operations:

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							Laureate
	Latin						Online
	America			Europe			Education			Unallocated			Consolidated
	(in thousands)
2006
Segment revenues	$	313,306		$	117,200		$	107,723		$	—		$	538,229
Segment direct costs	(256,553		)	(97,565		)	(95,257		)	—			(449,375		)
Campus-based segment’s overhead	—			—			—			(10,575		)	(10,575		)
Segment profit (loss)	56,753			19,635			12,466			(10,575		)	78,279
General and administrative expenses	—			—			—			(21,271		)	(21,271		)
Operating income (loss)	$	56,753		$	19,635		$	12,466		$	(31,846	)	$	57,008
2005 (as restated - Note 2)
Segment revenues	$	214,123		$	106,484		$	85,039		$	—		$	405,646
Segment direct costs	(172,848		)	(89,430		)	(78,530		)	—			(340,808		)
Campus-based segment’s overhead	—			—			—			(5,998		)	(5,998		)
Segment profit (loss)	41,275			17,054			6,509			(5,998		)	58,840
General and administrative expenses	—			—			—			(12,496		)	(12,496		)
Operating income (loss)	$	41,275		$	17,054		$	6,509		$	(18,494	)	$	46,344

The Company’s direct costs include all expenses incurred by operating units including selling and administrative expenses.  The Company’s campus-based segments’ overhead represents centralized costs incurred in support of the international network of universities, relating primarily to strategic planning, resource allocation, identification of acquisition targets, and oversight of acquisition transactions.  As such, these costs are not properly allocable to the operating results of Latin America and Europe.

The following comparison of results of operations focuses on the continuing operations of the Company.

Comparison of results for the three-months ended June 30, 2006 to results for the three-months ended June 30, 2005.

Revenues.  Total revenues increased by $76.2 million, or 34%, to $303.1 million for the three-months ended June 30, 2006 (the “2006 fiscal quarter”) from $227.0 million for the three-months ended June 30, 2005 (the “2005 fiscal quarter”). This revenue increase was driven primarily by increased total enrollment at the Company’s higher education institutions, plus the impact of acquisitions within the last two years.

Latin America revenue for the 2006 fiscal quarter increased by $59.7 million, or 45%, to $190.8 million compared to the 2005 fiscal quarter.  Enrollment increases of 14.4% in schools owned in both fiscal quarters added revenues of $18.6 million over the 2005 fiscal quarter, and acquisitions within the last 12 months contributed additional revenue of $28.3 million.  For schools owned in both fiscal quarters, the Company increased local currency tuition by a weighted average of 5.5%, which served to increase revenues by $6.1 million.  Each institution in the segment offers tuitions at various prices based upon the degree program.  For the 2006 fiscal quarter, the effects of enrollments at varying price points (“product mix”) resulted in a $0.1 million reduction in revenue compared to the 2005 fiscal quarter.  The effects of currency translation increased revenues by $6.8 million, primarily due to the stronger Chilean Peso relative to the U.S. Dollar. Latin America revenue represented 63% of total revenues for the 2006 fiscal quarter, and 58% of total revenues for the 2005 fiscal quarter.

Europe revenue for the 2006 fiscal quarter increased by $7.1 million, or 14%, to $57.3 million compared to the 2005 fiscal quarter. Enrollment increases of 4.4% in schools owned in both fiscal quarters saw an increase in revenues of $2.4 million over the 2005 fiscal quarter, and acquisitions within the last 12 months contributed additional revenue of $3.7 million.  For schools owned in both fiscal quarters, the Company increased local currency tuition by a weighted average of 3.6%, which served to increase revenues by $1.8 million.  Each institution in the segment offers tuitions at various prices based upon degree or certificate program.  For the 2006 fiscal quarter, the effects of product mix resulted in a $0.3 million reduction in revenue compared to the 2005 fiscal quarter.  The effects of currency translation decreased revenues by $0.5 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar.  Europe revenue represented 19% of total revenues for the 2006 fiscal quarter, and 22% of total revenues for the 2005 fiscal quarter.

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Laureate Online Education revenue increased by $9.4 million, or 21%, to $55.0 million for the 2006 fiscal quarter compared to the 2005 fiscal quarter.  Enrollment increases added revenues of $4.2 million. The increase in tuition by a weighed average of 4.3% served to increase revenues $2.2 million.  Other factors, primarily a favorable change in degree program mix, added $3.0 million.  Laureate Online Education revenue represented 18% of total revenues for the 2006 fiscal quarter, and 20% of total revenues for the 2005 fiscal quarter.

Direct Costs.Total direct costs of revenues increased $58.1 million, or 33%, to $234.7 million for the 2006 fiscal quarter from $176.6 million for the 2005 fiscal quarter.  Direct costs were 77% of total revenues in the 2006 fiscal quarter and 78% of total revenues in the 2005 fiscal quarter.

Latin America direct costs increased by $42.1 million to $131.7 million, or 69% of Latin America revenue for the 2006 fiscal quarter, compared to $89.6 million or 68% of Latin America revenue for the 2005 fiscal quarter.  An increase of $16.8 million in expenses reflected higher expenses due to increased enrollments and expanded operating activities compared to the 2005 fiscal quarter.  Acquired businesses increased expenses by $22.2 million.  For the 2006 fiscal quarter, the effects of currency translations increased expenses by $3.1 million, primarily due to the strengthening of the Chilean Peso against the U.S. Dollar.

Europe direct costs increased by $6.6 million to $50.2 million, or 88% of Europe revenue for the 2006 fiscal quarter, compared to $43.6 million, or 87% of Europe revenue for the 2005 fiscal quarter.  Higher enrollments and expanded operations at the higher education institutions compared to the 2005 fiscal quarter increased expenses by $3.0 million, and acquired businesses increased expenses by $3.8 million.  For the 2006 fiscal quarter, the effects of currency translations decreased expenses by $0.2 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar.

Campus-based segments overhead expense increased by $2.7 million to $5.9 million for the 2006 fiscal quarter, compared to $3.2 million for the 2005 fiscal quarter.  The increase is primarily attributable to the accrual of performance-based compensation as well as increased professional fees, payroll and management travel expenses in support of the growth of the Company’s international operations.  In addition, there was an increase in  equity-based compensation of $0.8 million, including the impact of expensing of stock options of $0.5 million under Statement of Financial Accounting Standard (“SFAS”) No. 123R, Share-Based Payment.

Laureate Online Education direct costs increased by $6.7 million to $46.9 million, or 85% of Laureate Online Education revenue for the 2006 fiscal quarter, compared to $40.2 million, or 88% of Laureate Online Education revenue for the 2005 fiscal quarter.  The decrease in direct costs as a percentage of revenues is primarily due to Walden achieving significantly higher profit margins on higher revenue due to efficiencies that resulted from scale.

General and Administrative Expenses.  General and administrative expenses increased by $5.6 million to $11.4 million for the 2006 fiscal quarter from $5.8 million for the 2005 fiscal quarter.  The increase is primarily attributable to the accrual of performance-based compensation as well as higher payroll and other employee related costs resulting from increased headcount, professional fees and travel expenses to support the rapid growth in the Company’s global operations.  In addition, there was an increase in equity-based compensation of $1.4 million, including the impact of expensing stock options of $0.4 million under SFAS No. 123R.

Non-Operating Income/Expenses.  Non-operating income/expense increased to income of $10.3 million for the 2006 fiscal quarter from expense of $0.4 million in the 2005 fiscal quarter.  The increase is primarily attributable to the gain on sale of Chancery Software, Ltd. of $9.3 million in the 2006 fiscal quarter.

Interest and other income increased $1.0 million to $4.3 million from $3.3 million in the 2005 fiscal quarter, primarily due to additional interest income earned on long-term student receivables as well as an increase in income earned on higher cash balances.

Interest expense increased $0.4 million primarily due to increased borrowings on outstanding lines of credit used for acquisition purposes as well as indebtedness assumed with the Company’s 2005 acquisitions.

Income Taxes.  The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States.  Approximately 83% of the Company’s revenues were generated outside the United States for the three-months ended June 30, 2006.  The Company’s effective tax rate from continuing operations was 18.0% and 11.2% for the three-months ended June 30, 2006 and 2005, respectively. For the three-months ended June 30, 2006, the effective rate

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includes the impact of FIN No. 18.  FIN No. 18 only applies to interim periods, and has no effect on the Company’s annual effective rate. The Company’s effective rate for the three-months ended June 30, 2006, excluding the impact of FIN No. 18 and discrete events for which the income tax effect was recorded in its entirety in the second quarter was 8.7%.  For the period ended June 30, 2005, the Company’s effective tax rate was 11.2%, and the impact of FIN No. 18 was immaterial. The forecasted effective tax rate for 2006 will decrease from the 2005 effective tax rate due to the impact of recent acquisitions in lower taxed jurisdictions and foreign tax planning initiatives implemented during the first quarter of 2006.

Minority Interest in Income of Consolidated Subsidiaries, Net of Tax.  Minority interest in income of consolidated subsidiaries increased $6.4 million to $14.3 million in the 2006 fiscal quarter from $7.9 million in the 2005 fiscal quarter.  This increase was primarily due to an increase in net income in the Latin American segment causing an increase of $3.5 million in minority interest.  In addition, the acquisitions of interests in Cyprus College and Universidade Anhembi Morumbi (“UAM”) caused an increase in minority interest of $2.7 million.

Comparison of results for the six-months ended June 30, 2006 to results for the six- months ended June 30, 2005.

Revenues.  Total revenues increased by $132.6 million, or 33%, to $538.2 million for the six-months ended June 30, 2006 (the “2006 fiscal six-month period”) from $405.6 million for the six-months ended June 30, 2005 (the “2005 fiscal six-month period”).  This revenue increase was driven primarily by increased total enrollment at the Company’s higher education institutions, plus the impact of acquisitions within the last two years.

Latin America revenue for the 2006 fiscal six-month period increased by $99.2 million, or 46%, to $313.3 million compared to the 2005 fiscal six-month period.  Enrollment increases of 14.4% in schools owned in both fiscal six-month periods added revenues of $30.8 million over the 2005 fiscal six-month period.  The acquisitions of Universidad Tecnologica Centroamericana (“UNITEC”) and UAM within the last 12 months contributed additional revenue of $49.7 million.  For schools owned in both fiscal six-month periods, the Company increased local currency tuition by a weighted average of 5.5%, which served to increase revenues by $11.1 million.  Each institution in the segment offers programs at various prices based upon degree program.  For the 2006 fiscal six-month period, the effects of product mix resulted in a $4.2 million reduction in revenue compared to the 2005 fiscal six-month period, primarily due to lower-priced working adult and high school enrollments.  The effects of currency translation increased revenues by $11.8 million, primarily due to the strengthening of the Chilean Peso and Mexican Peso relative to the U.S. Dollar.  Latin America revenue represented 58% of total revenues for the 2006 fiscal six-month period and 53% of total revenues for the 2005 fiscal six-month period.

Europe revenue for the 2006 fiscal six-month period increased by $10.7 million, or 10%, to $117.2 million compared to the 2005 fiscal six-month period. Enrollment increases of 4.4% in schools owned in both fiscal six-month periods added revenues of $5.3 million over the 2005 fiscal six-month period, and the acquisition of an interest in Cyprus College within the last 12 months contributed additional revenue of $8.8 million.  For schools owned in both fiscal six-month periods, the Company increased local currency tuition by a weighted average of 3.6%, which served to increase revenues by $3.8 million.  Each institution in the segment offers programs at various prices based upon degree or certificate program.  For the 2006 fiscal six-month period, the effects of product mix resulted in a $1.5 million reduction in revenue compared to the 2005 fiscal six-month period, primarily due to lower-priced post-graduate enrollment growth in Spain and Hospitality (Swiss Hotel Association Hotel Management School Les Roches (“Les Roches”) and Glion Institute of Higher Education (“Glion”)) exceeding undergraduate enrollment growth.  The effects of currency translation decreased revenues by $5.7 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar.  Europe revenue represented 22% of total revenues for the 2006 fiscal six-month period and 26% for the 2005 fiscal six-month period.

Laureate Online Education revenue increased by $22.7 million, or 27%, to $107.7 million for the 2006 fiscal six-month period compared to the 2005 fiscal six-month period.  Enrollment increases added revenues of $7.4 million.  The increase in tuition by a weighed average of 4.3% served to increase revenues $4.0 million and other factors, primarily a favorable change in degree program mix, added $11.3 million.  Laureate Online Education revenue represented 20% of total revenues for the 2006 fiscal six-month period and 21% of total revenues for the 2005 fiscal six-month period.

Direct Costs.Total direct costs of revenues increased $113.2 million, or 33%, to $460.0 million for the 2006 fiscal six-month period from $346.8 million for the 2005 fiscal six-month period.  Direct costs represented 85% of total revenues in both the 2006 fiscal six-month period and the 2005 fiscal six-month period.

Latin America direct costs increased by $83.7 million to $256.6 million, or 82% of Latin America revenue for the 2006 fiscal six-month period, compared to $172.9 million or 81% of Latin America revenue for the 2005 fiscal six-month period.

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An increase of $31.6 million in direct costs reflected higher expenses due to increased enrollments and expanded operating activities compared to the 2005 fiscal six-month period.  Acquired businesses increased direct costs by $43.0 million.  For the 2006 fiscal six-month period, the effects of currency translations increased direct costs by $9.0 million, primarily the strengthening of the Chilean Peso and Mexican Peso against the U.S. Dollar.

Europe direct costs increased by $8.2 million to $97.6 million, or 83% of Europe revenue for the 2006 fiscal six-month period, compared to $89.4 million, or 84% of Europe revenue for the 2005 fiscal six-month period.  Higher enrollments and expanded operations at the higher education institutions compared to the 2005 fiscal six-month period increased direct costs by $5.0 million, and acquired businesses increased direct costs by $7.4 million.  For the 2006 fiscal six-month period, the effects of currency translations decreased direct costs by $4.2 million, due to the weakening of the Euro and Swiss Franc against the U.S. Dollar.

Campus-based segments’ overhead expense increased by $4.6 million to $10.6 million for the 2006 fiscal six-month period, compared to $6.0 million for the 2005 fiscal six-month period.  The increase is primarily attributable to the accrual of performance-based compensation as well as increased professional fees, payroll and management travel expenses in support of the growth of the Company’s international operations.  In addition, there was an increase in equity-based compensation of $1.6 million, including the impact of expensing of stock options of $1.0 million under SFAS No. 123R.

Laureate Online Education direct costs increased by $16.8 million to $95.3 million, or 88% of Laureate Online Education revenue for the 2006 fiscal six-month period, compared to $78.5 million, or 92% of Laureate Online Education revenue for the 2005 fiscal six-month period.  The decrease in direct costs as a percentage of revenues is primarily due to Walden achieving significantly higher profit margins on higher revenue due to efficiencies that resulted from scale.

General and Administrative Expenses.  General and administrative expenses increased by $8.8 million to $21.3 million for the 2006 fiscal six-month period from $12.5 million for the 2005 fiscal six-month period.  The increase is primarily attributable to the accrual of performance-based compensation as well as higher payroll and other employee related costs resulting from increased headcount, professional fees and travel expenses to support the rapid growth in the Company’s global operations.  In addition, there was an increase in equity-based compensation of $2.5 million, including the impact of expensing stock options of $0.8 million under SFAS No. 123R.

Non-Operating Income/Expense.  Non-operating income/expenses increased to $10.3 million for the 2006 fiscal six-month period.  The increase is primarily attributable to the gain on sale of Chancery Software, Ltd. of $9.3 million in the 2006 fiscal six-month period.

Interest and other income increased $2.3 million to $8.0 million from $5.7 million in the 2005 fiscal six-month period, primarily due to additional interest income earned on long-term student receivables as well as an increase in income earned on higher cash balances.

Interest expense increased $1.7 million primarily due to increased borrowings on outstanding lines of credit used for acquisition purposes as well as indebtedness assumed with the Company’s 2005 acquisitions.

Income Taxes.  The Company has operations in multiple countries, many of which have statutory tax rates lower than the United States.  Approximately 82% of the Company’s revenues were generated outside the United States for the six-months ended June 30, 2006.  The Company’s effective tax rate from continuing operations was 18.4% and 11.2% for the six-months ended June 30, 2006 and 2005, respectively. For the six-months ended June 30, 2006, the effective rate includes the impact of FIN No. 18.  FIN No. 18 only applies to interim periods, and has no effect on the Company’s annual effective rate. The Company’s effective rate for the six-months ended June 30, 2006, excluding the impact of FIN No. 18 and discrete events for which the income tax effect was recorded in its entirety in the 2006 fiscal six-month period was 8.7%, which approximates the Company’s forecasted annual effective tax rate for 2006. For the six-months ended June 30, 2005, the Company’s effective tax rate was 11.2%, and the impact of FIN No. 18 was immaterial. The forecasted effective tax rate for 2006 will decrease from the 2005 effective tax rate due to the impact of recent acquisitions in lower taxed jurisdictions and foreign tax planning initiatives implemented during the first quarter of 2006.

Minority Interest in Income of Consolidated Subsidiaries, Net of Tax.  Minority interest in income of consolidated subsidiaries increased $6.6 million to $14.8 million in the 2006 fiscal six-month period from $8.2 million in the 2005 fiscal six-month period.  This increase was due to an increase in net income in the Latin American segment causing an

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increase of $2.6 million in minority interest.  In addition, the acquisitions of interests in Cyprus College and UAM caused an increase in minority interest of $3.6 million.

Liquidity and Capital Resources

Cash provided by operations was $95.8 million for the 2006 fiscal six-month period, an increase of $26.8 million from $69.0 million for the 2005 fiscal six-month period.  This increase was caused by several factors including a $13.8 million increase in net income for the 2006 fiscal six-month period.  Adjustments for significant non-cash income and expense included a $5.3 million increase in depreciation and amortization, a $8.8 million decrease in the loss on disposal of discontinued operations, a $9.3 million increase in the gain on sale of Chancery Software, Ltd., a $5.5 million increase in equity-based compensation, which includes the impact of expensing stock options, a $6.6 million increase in minority interest in consolidated subsidiaries, and a $4.0 million increase in deferred income taxes in the 2006 fiscal six-month period.  The operating assets and liabilities increased $10.2 million to a source of cash of $22.1 million in the 2006 fiscal six-month period compared to a source of cash of $11.9 million in the 2005 fiscal six-month period.

Cash used in investing activities increased $15.2 million from $85.9 million for the 2005 fiscal six-month period to $101.1 million for the 2006 fiscal six-month period.  Purchases of property and equipment were $41.7 million higher in the 2006 fiscal six-month period than in the 2005 fiscal six-month period.  Non-recurring activities taking place in the 2005 fiscal six-month period included $12.7 million in net proceeds from sales of discontinued operations relating to WSI, and $6.0 million in payments made for acquisitions.  In addition, net purchases of available-for-sale securities decreased $13.1 million in the 2006 fiscal six-month period compared to the 2005 fiscal six-month period, as well as a decrease of $3.0 million in expenditures for deferred costs and a decrease of $1.1 million in cash loaned for notes receivable.  Payments of deferred consideration for prior period acquisitions decreased $14.8 million in the 2006 fiscal six-month period compared to the 2005 fiscal six-month period.

Cash provided by financing activities increased $26.7 million to cash provided by financing activities of $13.9 million in the 2006 fiscal six-month period from cash used in financing activities of $12.7 million in the 2005 fiscal six-month period.  The most significant components of this change are a net increase in the proceeds from the exercise of stock options of $9.3 million and a decrease of $14.1 million in net repayments of long-term debt.

The foreign currency effect on the cash balances resulted in an increase of $1.0 million to $0.1 million in the 2006 fiscal six-month period from ($0.9) million in the 2005 fiscal six-month period.

In the fourth quarter of 2005, the Company entered into a 364-day, $120.0 million Credit Agreement (the “Agreement”) with Bank of America, N.A. (“Bank of America”).  The Agreement has a material covenant, which states that the Company is limited in total net debt, defined as debt minus unrestricted cash, to 2.5 times consolidated EBITDA, as defined.  The following subsidiaries of the Company are guarantors under the Agreement: Walden E-Learning, Inc., Walden University, Inc., The Canter Group of Companies, and Canter and Associates, Inc.  The outstanding balance on the line of credit was $31.5 million at June 30, 2006.  The Company is in compliance with its covenant requirements as of June 30, 2006.

The Company anticipates that cash flow from operations, available cash and existing credit facilities will be sufficient to meet its recurring operating requirements.  The Company will require additional liquidity in order to meet certain obligations, including contingent consideration to be paid to minority owners of its institutions and tax settlement obligations.  In order to meet these obligations, the Company recently announced its intention to enter into a $250 million Revolving Credit facility (the “Bank Facility”) with a group of banks.  Among other terms, the Bank Facility will have a 5-year term and a LIBOR-based interest rate based on a total leverage ratio.  This line of credit will be expandable up to an additional $100 million under similar terms.  The financial covenants will include a maximum leverage of 3.5 times EBITDA.  The Company’s existing $120 million facility will be canceled in conjunction with the closing of the new credit facility.  Additionally, the Company continues to examine opportunities in the educational services industry for potential synergistic acquisitions, which will require additional liquidity.

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Contractual Obligations and Contingent Matters

                The following tables reflect the Company’s contractual obligations and other commercial commitments as of June 30, 2006:

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Due in less than 1 year		Due in 1-3 years		Due in 4-5 years		Due after 5 years
Long-term debt 1	$	174,170	$	59,460	$	40,025	$	20,002	$	54,683
Interest payments 2	31,488		8,150		14,129		5,587		3,622
Operating leases 3	399,029		40,921		119,256		68,813		170,039
Due to shareholders of acquired companies 4	52,515		23,428		17,800		1,427		9,860
Other long term liabilities 5	1,200		1,200		—		—		—
Total contractual cash obligations	$	658,402	$	133,159	$	191,210	$	95,829	$	238,204

	Amount of Commitment Expiration Per Period (in thousands)
Commercial Commitments	Total Amounts Committed		Due in less than 1 year		Due in 1-3 years		Due in 4-5 years		Due after 5 years
Guarantees 6	$	8,966	$	3,430	$	4,393	$	1,143	$	—
Purchase Obligations 7	16,112		—		16,112		—		—
Standby letters of credit 8	14,600		14,600		—		—		—
Total commercial commitments	$	39,678	$	18,030	$	20,505	$	1,143	$	—

1 On October 26, 2005, the Company entered into the Agreement with Bank of America and certain other parties.  The Agreement expires on October 25, 2006 and is comprised of two tranches: Tranche A for $90.0 million and Tranche B for $30.0 million.  Tranche B has a $20.0 million sublimit for standby letters of credit.  The Agreement effectively supercedes the existing $30.0 million Credit Agreement dated June 30, 2003 by incorporating it as Tranche B in the Agreement.  The outstanding balance on the line of credit was $31.5 million at June 30, 2006.  Individual units within campus-based operations have unsecured lines of credit, which total $61.8 million, primarily for working capital purposes.  The aggregate outstanding balance on the campus-based segments’ lines of credit was $16.9 million at June 30, 2006, which is included in the current portion of long-term debt. The weighted average short term borrowing rates were 5.8% and 7.0% at June 30, 2006 and June 30, 2005 respectively.

2 Interest payments for variable rate long-term debt were calculated using the variable interest rate in effect at June 30, 2006.

3In February 2006, the Company entered into a 15-year, approximately 140,000 square foot lease with Harbor East Parcel B — Commercial, LLC.  The lease has a 10-year non-cancellable lease term commencing in the first quarter of 2007.  Upon completion, the leased facility will become the Company’s corporate headquarters.

4 Refer to Footnote 8, “Due to Shareholders of Acquired Companies”.

5 Under terms of note agreements with Kendall College (“Kendall”), the Company has committed to providing total additional funding to Kendall of up to $1.2 million.  In the event the Company does not exercise its agreement to acquire Kendall, Kendall is obligated to enter into a lease agreement with the Company beginning September 1, 2007 to lease office space.  The lease commitment specifies a term of 36 months and annual rent of $1.0 million.

6  Subsequent to the divestiture of the K-12 segments, all leases related to Sylvan Learning Centers acquired by Educate, Inc. (“Educate”) were renegotiated or assigned in the name of Educate during the third quarter of 2003.  Leases with remaining

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payments of $5.0 million through December 2010 are guaranteed by the Company.  Under the terms of the Asset Purchase Agreement with Educate, the Company is indemnified against any losses suffered as a result of these lease guarantees. During 2004, the Company entered into an agreement to guarantee lease payments owed by Kendall to Key Equipment Finance. Leases with remaining payments of $4.0 million through December 2011 are guaranteed by the Company under this agreement.

7   As part of the acquisition of Ecole Centrale d’Electronique (“ECE”), the Company committed to purchase the remaining 30% ownership from the sellers on December 31, 2008 for approximately $9.0 million.  The agreement is denominated in Euros, and is subject to foreign currency exchange rate risk on the date of payment. As part of the acquisition of Institut Francais de Gestion (“IFG”), the Company committed to additional capital contributions, which will increase the Company’s share of ownership.  The agreement provides that, no later than July 31, 2006 and July 31, 2007, the Company shall contribute approximately $1.6 million and $2.4 million resulting in an increase in ownership share of 16% and 23%, respectively.  During the second quarter of 2006, the Company negotiated an amendment to the agreement that provides that the first additional capital contribution can be extended through July 31, 2007 instead of July 31, 2006.  There were no other material amendments made to the agreement.  The agreement is denominated in Euros, and is subject to foreign currency exchange rate risk on the dates of payment.  As part of the acquisition of Cyprus College, the Company committed to making a contribution of approximately $3.2 million between the closing date and three years thereafter.  The contributions will fund certain capital projects, if approved, and will not alter the relative equity interests.  The contribution commitment is denominated in Cypriot Pounds and is subject to foreign currency exchange rate risk on the dates of payment.

8  The Company has approximately $14.6 million outstanding in standby letters of credit.  The Company is self-insured for workers compensation and other insurable risks up to predetermined amounts above which third party insurance applies.  The Company is contingently liable to insurance carriers under certain of these policies and has provided a letter of credit in favor of the insurance carriers for approximately $1.1 million.  The Company has also issued a standby letter of credit in the amount of $1.5 million assuring the collectibility of a line of credit at Academia de Idiomas y Estudios Profesionales (“AIEP”), which is being used for working capital purposes.  The outstanding balance on the AIEP line of credit was $1.9 million at June 30, 2006.  In the first quarter of 2005, the Company issued a $12.0 million standby letter of credit in favor of WSI Education S.a.r.l. for a tax indemnification related to the sale of WSI.

Contingent Matters

                This chart is intended to be a high-level summary of purchase obligations and contingent arrangements.  Please refer to additional disclosure in the footnotes to the chart.

Higher Education Institution	Date of Contingency	Additional Ownership Share	Terms of Commitment or Contingent Transaction
Put Right Arrangements:
IFG7	October through November 2008	10%	$1.0 million
Universidad de Las Americas (“UDLA”) 1	April 1, 2008	20%	Approximately 4.5 times average recurring earnings before interest and taxes (“EBIT”) for specified periods
Universidad Andres Bello (“UNAB”) and Academia de Idiomas y Estudios Profesionales (“AIEP”) 2	April 1, 2009	20%	Variable purchase price based on average recurring EBIT for specified periods
UAM3	March 1, 2009	29%	Approximately 4 times recurring earnings before interest, taxes, depreciation and amortization (“EBITDA”) for certain specified periods
	Beginning March 1, 2013 through March 1, 2023	20%	Variable purchase price based on recurring EBITDA for certain specified periods

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Cyprus College 4	July 1, 2012 or up to five years thereafter	20%	Payable based on a variable scale for new enrollments and EBITDA related to the year prior to exercise
Call Right Arrangements:
UDLA 1	April 1, 2009	20%	Approximately 5 times average recurring EBIT for specified periods
UNAB and AIEP 2	April 1, 2009	20%	Variable purchase price based on average recurring EBIT for specified periods
UAM 3	March 1, 2009	29%	The greater of 4 times recurring EBITDA for certain specified periods or equivalent per share valuation of the Company’s initial 51% acquisition of UAM, adjusted for inflation
	Beginning March 1, 2013 through March 1, 2023	20%	Variable purchase price based on recurring EBITDA for certain specified periods.
Cyprus College 4	July 1, 2006	35%	6% - Payable April 2007 based on 6.25 times 2006 audited recurring EBITDA
			29% - Payable April 2012 based on a variable scale for new enrollments and 2011 EBITDA
	July 1, 2012 or up to five years thereafter	20%	Payable April in the year following exercise based on a variable scale for new enrollments and EBITDA related to the year prior to exercise
Contingent Earnouts (cash payments):
UDLA 5	March 31, 2006 or 45 days after receipt of financial statements		$81.7 million (estimated based on 2004 and 2005 reported EBIT) (currently in negotiation)
	March 31, 2007 or 45 days after receipt of financial statements		$18.5 million (estimated based on 2005 reported EBIT)
Laureate Online Education BV 6	April 1, 2007		Approximately 75% of 4 times 2006 EBITDA, not to exceed $10.0 million
	April 1, 2008		Approximately 4 times the average of 2006 and 2007 EBITDA less the April 1, 2007 payment, not to exceed $10.0 million

Obligations and contingent payments (except for the contingent earnout on Laureate Online Education BV) are denominated in foreign currency and are subject to foreign currency risk.

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Contingent Payments

In connection with certain acquisitions, variable amounts of contingent consideration are payable to the sellers based upon specified terms.  All existing contingent consideration agreements are predicated upon improved operating profitability of the acquired entities and utilize multiples consistent with those used to calculate the initial purchase price.  The Company will record the contingent consideration when the contingencies are resolved and the additional consideration is payable.

1 Effective April 1, 2008 the minority owners of UDLA have a put right to require the Company to purchase their remaining 20% interest in Decon, the holding company that controls and operates UDLA, for a variable purchase price based on 4.5 times average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire the remaining 20% interest for a variable purchase price based on 5.0 times average EBIT for certain specified periods.

2 Effective April 1, 2009 the minority owners of UNAB and AIEP have a put right to require the Company to purchase their 20% interest for a variable purchase price based on average recurring EBIT for certain specified periods. Effective April 1, 2009 the Company has a call right to acquire this 20% interest under a similar methodology for certain specified periods.

3 Effective March 1, 2009 the minority owners of UAM have a put right to require the Company to purchase an equity interest of 29% from the minority owners at a variable purchase price based on 4.0 times recurring earnings before EBITDA for certain specified periods. Also effective March 1, 2009, the Company has a call right to acquire the same 29% interest from the minority owners for a variable purchase price equal to the greater of 4.0 times recurring EBITDA for certain specified periods or the equivalent per share valuation of the Company’s initial 51% acquisition of UAM, as adjusted for local inflation. Beginning March 1, 2013 and continuing for ten years the minority owners and the Company have similar put and call rights, respectively, on the remaining 20% interest of the minority owners, with the purchase price determined based on a similar formula.

4 Effective January 1, 2012 and exercisable up to five years thereafter, the minority owners of Cyprus College have a put right to require the Company to purchase an equity interest of 20% from the minority owners at a variable purchase price based on a variable scale for new enrollments and EBITDA for the calendar year preceding the exercise date.  Effective January 1, 2006, the Company has a call right to acquire up to a 35% interest from the minority owners for a variable purchase price based on a variable scale for new enrollment and 2006 EBITDA.  Effective January 1, 2012 and exercisable up to five years thereafter, the Company has the call right to acquire the remaining 20% interest from the minority owners for a variable purchase price based on a variable scale for new enrollment and EBITDA for the calendar year preceding the exercise date.

⁷ As a part of the acquisition of IFG, the sellers may exercise a put option requiring the Company to purchase the remaining 10% ownership for approximately $1.0 million during the period October through November 2008.

Contingent Earnouts (cash payments)

5 Additional amounts of contingent consideration are due the sellers of UDLA based on operating results for the three years ending December 31, 2006.  The agreement stipulates that on the later of March 31, 2006 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 60% of six times (i) average recurring EBIT for 2004 and 2005, less (ii) 2000 EBIT; this result is reduced by (iii) 42% of certain specified debt.  The Company has reviewed the Decon audited financials and the parties are presently engaged in negotiations regarding the amount due in respect of the contingent payment obligation.  Excluding adjustments of non-recurring EBIT items and any other negotiated amounts, the computed formula yields an estimated earnout of $81.7 million, although the actual amount to be mutually agreed upon with the sellers or otherwise determined under the applicable agreements may differ from this amount.  This amount is net of approximately $8.8 million of amounts owed to the Company from the sellers related to consideration from a prior acquisition of another university.  On the later of March 31, 2007 or 45 days after the Company receives the audited financial statements of Decon, the Company is obligated to the sellers for an amount equal to 20% of four times (i) average recurring EBIT for 2005 and 2006; this result is reduced by (ii) 20% of certain specified debt and (iii), $6.5 million.  Excluding adjustments of non-recurring EBIT items and any other negotiated amounts as well as including 2006 estimates and projections, the Company would be obligated to the sellers for approximately $18.5 million.  The Company has pledged its shares of Decon as security for its payment obligations to the sellers. The Company cannot dispose of, place any lien on or encumber the shares without the prior approval of the sellers.

6 Additional amounts of contingent consideration, not to exceed $10.0 million, are due the sellers of Laureate Online Education BV equal to four times the average of the audited EBITDA for the calendar years ending December 31, 2006 and 2007.

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Impact of Recently Issued Accounting Standards

On July 13, 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure,and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006.  The Company will be adopt FIN 48 on January 1, 2007.  An enterprise is required to disclose the cumulative effect of the change on retained earnings in the statement of financial position as of the date of adoption and such disclosure is required only in the year of adoption.  The Company is in the process of analyzing the implications of FIN 48.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of financial instruments.  The Company is exposed to financial market risks, including changes in foreign currency exchange rates, interest rates, equity prices and investment values.  The Company occasionally uses derivative financial instruments to protect against adverse currency movements related to significant foreign transactions. Exposure to market risks related to operating activities is managed through the Company’s regular operating and financing activities.

Foreign Currency Risk

The Company derived approximately 82% of its revenues from students outside the United States for the six-months ended June 30, 2006.  This business is transacted through a network of international subsidiaries, generally in the local currency that is considered the functional currency of that foreign subsidiary.  Expenses are also incurred in the foreign currencies to match revenues earned, which minimizes the Company’s exchange rate exposure to operating margins.  A hypothetical 10% adverse change in average  foreign currency exchange rates would have decreased operating income and cash flows for the six-months ended June 30, 2006 by $9.4 million. The Company generally views its investment in most of its foreign subsidiaries as long-term. The effects of a change in foreign currency exchange rates on the Company’s net investment in foreign subsidiaries are reflected in other comprehensive income (loss) on the Company’s balance sheets.  A 10% depreciation in functional currencies relative to the U.S. dollar would have resulted in a decrease in the Company’s net investment in foreign subsidiaries of approximately $76.4 million at June 30, 2006.

The Company occasionally enters into foreign exchange forward contracts to reduce the earnings impact of non-functional currency denominated receivables.  The primary business objective of such activity is to protect the U.S. dollar value of the Company’s assets and future cash flows with respect to exchange rate fluctuations.  At June 30, 2006, the Company had one forward contract with an expiration date in 2009.  The gains and losses on these contracts are deferred in accumulated other comprehensive income until the changes in the underlying financial instruments are recorded in the income statement. At that time, the deferred gains and losses will be reclassified from accumulated other comprehensive income on the balance sheet to the income statement.

Interest Rate Risk

The Company holds its cash and cash equivalents in high quality, short-term, fixed income securities.  Consequently, the fair value of the Company’s cash and cash equivalents would not be significantly impacted by either a 100 basis point increase or decrease in interest rates due to the short-term nature of the Company’s portfolio.  The Company’s revolving credit facility bears interest at variable rates, and the fair value of this instrument is not significantly affected by changes in market interest rates.  A 100 basis point decrease in interest rates would have decreased net interest income for the 2006 fiscal six-month period by $0.1 million.

The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates.  The table presents cash flows of weighted-average interest rates and principal payments for the following years ending June 30.  The fair value of the debt below approximates book value.

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Total debt and due to shareholders of acquired companies (in millions of US dollars):	2007			2008			2009			2010			2011			Thereafter			Total
	(in millions)
Fixed rate (Chilean peso)	$	21.0		$	7.2		$	1.3		$	0.1		$	0.1		$	0.2		$	29.9
Average interest rate	6.0		%	5.5		%	5.5		%	8.5		%	8.5		%	8.5		%	—
Fixed rate (Swiss franc)	2.4			2.4			2.4			2.4			2.4			23.2			35.2
Average interest rate	2.1		%	2.2		%	2.4		%	2.6		%	2.8		%	3.1		%	—
Fixed rate (Euro)	3.6			2.6			2.2			3.8			2.3			22.8			37.3
Average interest rate	4.4		%	5.5		%	5.6		%	5.6		%	5.7		%	5.9		%	—
Fixed rate (Brazilian Real)	5.3			5.0			5.0			—			—			—			15.3
Average interest rate	0.0		%	0.0		%	0.0		%	—			—			—			—
Fixed rate (Honduran Lempira)	0.3			0.5			0.5			2.1			0.7			10.6			14.7
Average interest rate	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%	0.0		%	—
Fixed rate (other)	4.3			—			—			—			—			—			4.3
Average interest rate	5.9		%	—			—			—			—			—			—
Variable rate (Chilean peso)	5.6			1.5			1.4			1.4			1.4			1.1			12.4
Average interest rate	6.5		%	6.1		%	6.0		%	5.8		%	5.3		%	4.3		%	—
Variable rate (Swiss franc)	0.1			0.1			0.2			0.2			0.2			6.1			6.9
Average interest rate	4.0		%	4.0		%	4.0		%	4.0		%	3.9		%	3.9		%	—
Variable rate (Euro)	0.6			0.6			0.6			0.7			1.8			5.1			9.4
Average interest rate	3.4		%	3.4		%	3.4		%	3.4		%	3.4		%	3.4		%	—
Variable rate (Cypriot pound)	1.0			1.2			1.2			1.2			1.2			4.6			10.4
Average interest rate	6.0		%	6.0		%	6.0		%	6.0		%	6.0		%	6.0		%	—
Variable rate (Mexican Peso)	5.9			1.7			—			1.7			—			—			9.3
Average interest rate	2.1		%	0.7		%	—			0.3		%	—			—			—
Variable rate (other)	32.8			2.2			2.2			2.2			1.2			1.0			41.6
Average interest rate	7.0		%	10.0		%	10.0		%	10.0		%	10.0		%	10.0		%	—

The weighted-average interest rates for the variable debt were calculated using the interest rate in effect as of June 30, 2006 for each debt instrument.

Investment Risk

                The Company has an investment portfolio that includes short-term investments in available-for-sale debt and equity securities.  The Company’s investment portfolio is exposed to risks arising from changes in these investment values.

                All the potential impacts noted above are based on sensitivity analysis performed on the Company’s financial position at June 30, 2006.  Actual results may differ materially.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the chief executive officer and the principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2006. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Act of 1934, including in this Quarterly Report on Form 10-Q is appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the chief executive officer and principal financial officer, to allow timely decisions regarding required disclosure.  Based on that evaluation, the chief executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of June 30, 2006.

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Changes in Internal Control over Financial Reporting

The Company’s management, including the chief executive officer and principal financial officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2006.  As previously disclosed in our Annual Report on Form 10-K/A, as of December 31, 2005, the Company identified a material weakness pertaining to insufficient controls over the accounting for income taxes as there was insufficient review of detailed analyses and supporting documentation by management with appropriate knowledge of income tax accounting, which resulted in an error in previously issued interim financial statements.  As a result of this assessment the Company has implemented several improvements in an overall program to remediate the material weakness.  During the six-months ended June 30, 2006, the Company conducted a complete review of the internal control structure for all tax processes and has implemented revisions to its reviews and controls of routine and non-routine transactions. The Company also stopped its involvement in providing tax services to former subsidiaries of the Company effective July 1, 2006.  In addition, the Company engages third party consultants for complex accounting and tax issues.  The Company continues to improve its documentation and standardization of tax related matters.  The Company also remains focused on increasing the quality and the depth of its tax resources, internally and externally.  Each of these corrective actions constitutes a change in the Company’s internal controls.  No other changes were made in the Company’s internal controls during the quarter ended June 30, 2006 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

The Company is not currently a party to any litigation that management believes to be material.

Item 1A.  Risk Factors

                There has been no material change in the information provided in Item 1A of the Form 10-K/A Annual Report for the year ended December 31, 2005.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders

(a)	The Company held its Annual Meeting of Stockholders on June 28, 2006.
(b)	The following sets forth information regarding each matter voted upon at the Annual Meeting. There were 51,258,419 shares of common stock outstanding as of April 28, 2006, the record date for, and entitled to vote at the Annual Meeting.
	Proposal No. 1. The stockholders approved election of all of the nominees to the board of directors. The tabulation of votes on this proposal was as follows:

Nominee	For	Withheld
Isabel Aguilera	43,990,969	1,484,140
Wolf H. Hengst	24,288,836	21,186,273
William Pollock	44,694,962	790,147

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Continuing Directors

Douglas L. Becker

R. Christopher Hoehn-Saric

James H. McGuire

David Wilson

Richard W. Riley

John A. Miller

Proposal No. 2.  The stockholders ratified the Laureate Education, Inc. 2005 Stock Incentive Plan. The tabulation of votes on this proposal was as follows:

For Approval	33,704,943
Against Approval	6,298,708
Abstain	59,220
Total Shares Voted	40,062,871
Broker Non-Vote	5,412,238

Proposal No. 3. The stockholders approved and ratified the Amendment to Laureate Education, Inc. 2006 Executive    Annual Incentive Plan.  The tabulation of votes on this proposal was as follows:

For Approval	38,549,845
Against Approval	1,442,231
Abstain	7,195
Total Shares Voted	39,998,271
Broker Non-Vote	5,412,238

Proposal No. 4. The stockholders ratified the selection of Ernst & Young LLP as the Company’s independent auditors   for the year ending December 31, 2006. The tabulation of votes on this proposal was as follows:

For Approval	44,109,088
Against Approval	903,870
Abstain	25,809
Total Shares Voted	44,903,993

Item 5.    Other Information

Effective July 1, 2006, the Company entered into a series of agreements which allows Walden to participate in the School as Lender Program under the Higher Education Act’s Federal Family Education Loan Program (“Title IV”).  Under the “eligible lender trustee” arrangement, Walden designated Wells Fargo Bank to serve as trustee for their Title IV loans.  Sallie Mae provides a $100 million line of credit facility to fund the origination of Title IV loans as well as a sale/purchase agreement to purchase all of the eligible Title IV loans from the trustee immediately after funding.  Through their purchases of the loans, Sallie Mae will incur all financial risk.  Since credit is both drawn and repaid on the date of loan origination, it is anticipated that no indebtedness will be outstanding as of the end of any period and that no interest expense will be incurred.

                An eligible Title IV loan is a Stafford Loan to a Walden graduate or professional student with payment guaranteed by a non-profit entity and reinsured by the Secretary of Education.  Walden has agreed, among other things, during the terms of the agreement not to a) own any Title IV loans or (b) originate, disburse or market Title IV loans as an eligible lender trustee with any other lender.  Walden makes representations and warranties regarding ownership, enforceability and guaranty of the loans, and additional customary representations and warranties.

                The term of the agreements will expire on June 30, 2008, but will automatically renew for up to four successive one-year terms unless Walden or Wells Fargo notifies Sallie Mae at least 60 days before June 30, 2008, or the expiration of any successive term.  The agreements include terms and conditions, allowing Sallie Mae to suspend its lending and

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purchase obligations under certain circumstances.  In addition, each party may terminate the agreements under certain circumstances before the expiration.

Item 6.    Exhibits

(a)   Exhibits filed with this report:

Exhibit Number	Description
10.01	Revolving Financing Agreement dated June 1, 2006 among Walden University, Inc., Wells Fargo Bank, National Association and Sallie Mae, Inc. (a)
10.02	Exportss Agreement of June 1, 2006 among Sallie Mae, Inc., SLM Education Credit Finance Corporation, Walden University, Inc. and Wells Fargo Bank, National Association (a)
31(i).01	Certification of Douglas L. Becker pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (a)
31(i).02	Certification of Rosemarie Mecca pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (a)
32.01	Certification of Douglas L. Becker pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b)
32.02	Certification of Rosemarie Mecca pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b)

*Incorporated by reference
(a)Filed herewith
(b)Furnished herewith

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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, thereunto duly authorized, on August 4, 2006.

LAUREATE EDUCATION, INC.
(Registrant)
By:	/s/ Rosemarie Mecca
	Rosemarie Mecca
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

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EX-10.1

Exhibit 10.01

REVOLVING FINANCING AGREEMENT

(SAL w/ ELT)

REVOLVING FINANCING AGREEMENT, dated as of July 1, 2006, among WALDEN UNIVERSITY, INC, whose principal office is located at 1001 Fleet Street, Baltimore, MD 21202 (herein called the “Borrower”), WELLS FARGO BANK, NATIONAL ASSOCIATION, solely in its capacity as eligible lender trustee for the Borrower (herein called the “Trustee”), with a corporate trust office located at 7077 Bonneval Road, Suite 400, Jacksonville, FL 32216, and SALLIE MAE, INC., whose principal office is located at 12061 Bluemont Way, Reston, VA 20190 (together with its successors and assigns, herein called “Sallie Mae”).

RECITALS

WHEREAS, the Borrower has requested advances from Sallie Mae in an aggregate amount of up to $100,000,000, which amount will be used by the Borrower in conducting its student lending activities; and

WHEREAS, Sallie Mae desires to encourage the Borrower’s lending activities by providing advances on the terms and conditions hereinafter set forth;

NOW THEREFORE, in consideration of the premises and the promises hereinafter set forth, the Borrower and Sallie Mae agree as follows:

SECTION 1. DEFINITIONS

For purposes hereof—:

1.1“Act” means Part B of Title IV of the Higher Education Act of 1965, as amended (20 U.S.C. Section 1071 et seq.), and the regulations promulgated thereunder.

1.2“Advance” or “Advances” means, respectively, any and all of the loans provided for in Section 3 of this Agreement, and any renewals or extensions thereof.

1.3“Agreement” means this Revolving Financing Agreement providing for Advances to the Borrower upon the terms and conditions specified herein.

1.4“Assignment” means an assignment by the Borrower and the Trustee to Sallie Mae in the form of Annex D-2 hereto, covering the Security, duly executed and completed, together with any supplemental assignments from time to time delivered pursuant to this Agreement.

1.5“Borrower” means Walden University, Inc. and its permitted successors and assigns.

1.6“Borrowing Date” means any Business Day during the Borrowing Period; provided, however, that unless otherwise agreed by Sallie Mae, there shall be no more than one Borrowing Date in any calendar week.

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1.7“Borrowing Period” means the period beginning on the date of this Agreement and ending on the Maturity Date.

1.8“Business Day” means any day (i) on which commercial banks located in New York, NY are not required or authorized to remain closed, (ii) that is not a Saturday, Sunday, or legal holiday, (iii) that is a day of the year on which the New York Stock Exchange is not closed, and (iv) that is a day of the year on which Sallie Mae is not closed.

1.9“Commitment” means the obligation of Sallie Mae to make Advances to the Borrower in the amounts provided in Section 3 hereof.

1.10“Compliance Certificate” means a certificate in the form of Annex C hereto, duly completed in accordance with its terms and the applicable requirements of this Agreement, and signed by an authorized officer of the Borrower.

1.11“Default” means a default specified in Section 9 hereof.

1.12“ECFC” means SLM Education Credit Finance Corporation and its successors and assigns.

1.13“Eligible Insurer” means a State or non-profit private institution or organization with which the Secretary has an agreement under Section 428(b) of the Act, that is deemed acceptable by Sallie Mae.

1.14“Eligible Loan” means an Insured Loan that bears interest at the highest rate permitted under the Act for that loan at the time the loan was made, and in respect of which no payment of principal or interest is at the time overdue for more than thirty (30) days, and which is serviced by Sallie Mae, in its capacity as Servicer.

1.15“ExportSS Agreement” means the ExportSS® Agreement dated July 1, 2006, among ECFC, Sallie Mae, the Borrower, and the Trustee, or any replacement, extension, or renewal thereof, as amended from time to time, that provides, among other items, for the sale to ECFC of all of the Insured Loans that are financed, in whole or in part, with the proceeds of any Advance.

1.16“FFELP Loan” means an education loan made under the Act.

1.17“Financials” mean, collectively, balance sheets of the Borrower and the related statements of earnings or receipts and of source and application of funds, together with the notes thereto, prepared in accordance with generally accepted accounting principles, consistently applied, with (A) with respect to the annual statements, opinions thereon of independent certified public accountants, and (B) with respect to quarterly statements, certifications from the financial officers of the Borrower responsible for the preparation of the Financials, to the effect that the Financials have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, and fairly present the financial condition of the Borrower as at their date and the results of its operations for the period then ended.

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1.18“Insured Loan” means a student loan made after the date of this Agreement under the Act (i) in connection with attendance by a student at a graduate or professional school that is part of Walden University, Inc., (ii) that is insured by an Eligible Insurer to the maximum extent provided for under the Act, and (iii) that is reinsured by the Secretary as to principal and interest to the extent provided in the Act.

1.19“LARS form” means the “Lender’s Request for Payment of Interest and Special Allowance” that is filed with the Department of Education (previously known as ED Form 799), or any replacement thereof or substitution therefor.

1.20“Maturity Date” means the later of (i) May 31, 2009, or (ii) the date of the last scheduled sale of Eligible Loans under the ExportSS Agreement.

1.21“Note” shall mean the promissory note evidencing the Advances to be made under Section 3 hereof.

1.22“Obligation” or “Obligations” means, collectively, the principal of and interest on the Advances and all other amounts from time to time owed by the Borrower to Sallie Mae or ECFC, whether or not arising under this Agreement or thereafter incurred.

1.23“Request Register” means a form sent by Sallie Mae, in its capacity as Servicer, to the Borrower that details the pending disbursements of Insured Loans for a specific disbursement date.

1.24“Sallie Mae” means Sallie Mae, Inc. and its successors and assigns.

1.25“Secretary” means the United States Secretary of Education, or his successor or representative, acting under the Act.

1.26“Security” shall have its meaning as defined in Section 8 of this Agreement.

1.27“Servicer” means a servicing agent designated by the Borrower to originate and service the Insured Loans that is approved by Sallie Mae in accordance with the provisions of Section 8 hereof.

1.28“Student Note” means, with respect to any Insured Loan that is at the time included in the Security, collectively: (1) each and every promissory note executed and delivered by the student borrower to evidence such loans or any portion thereof, and (2) each and every certificate of insurance or other instrument issued to evidence the insurance of such loan or any portion thereof (A) by the Secretary pursuant to the Act or (B) by an Eligible Insurer or instrumentality or official thereof.

1.29“Trustee” means Wells Fargo Bank, National Association, solely in its capacity as eligible lender trustee for the Borrower, and any person or entity serving as a replacement or substituted trustee.

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SECTION 2. REPRESENTATIONS AND COVENANTS OF THE BORROWER

A. The Borrower hereby represents, covenants, and warrants to Sallie Mae that:

(1)           The Financials for the calendar year ending on December 31, 2005 and the quarterly period ending on March 31, 2006, respectively, are complete and correct and fairly present the results of the Borrower’s operations for the periods ending on said dates, and are in conformity with generally accepted accounting principles applied on a consistent basis. The Borrower has no material contingent liabilities, liabilities for taxes, or unusual forward or long-term commitments not disclosed by, or reserved against, in said Financials or the notes thereto, and at the present time there are no material unrealized anticipated losses from any unfavorable commitments of the Borrower.  Since March 31, 2006, there has been no material adverse change in the financial condition of the Borrower from that shown by said Financials as at that date.

(2)           The Borrower is a for profit corporation duly chartered, validly existing and in good standing under the laws of the State of Florida, and is duly qualified to transact operations in all places where such qualification is necessary; and the Borrower has the necessary power to enter into and perform this Agreement and the Assignment and to borrow hereunder.

(3)           There are no suits, proceedings, or other matters pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its property before any court or by or before any governmental authority, which, if adversely determined, would have a material adverse effect on the financial condition or operations of the Borrower, or its ability to make and perform this Agreement or the Note. The Borrower has advised Sallie Mae of all material pending investigations and examinations of the Borrower by regulatory or other governmental authorities, other than financial audits and other similar examinations conducted by oversight authorities on a regular basis with respect to other institutions similarly situated. Borrower agrees to advise Sallie Mae promptly in the event the Borrower becomes aware that any such suits, proceedings, investigations, or examinations are instituted while the Agreement or any Advances that may be made thereunder are outstanding.

(4)           The Borrower has advised Sallie Mae of all pending negotiations, discussions, agreements, and contracts relating to the consolidation, merger, sale, or conveyance of Borrower or any material part of its assets, or the sale or conveyance of any controlling interest in Borrower, and, so long as the Agreement remains outstanding, agrees to advise Sallie Mae promptly of any such negotiations, discussions, agreements and contracts that may arise from time to time.

(5)           The making and performance of this Agreement have been duly authorized by all necessary action and will not contravene any provision of law or of the Borrower’s governing documents or of any indenture or other agreement or instrument to which the Borrower is a party or by which the Borrower or its property may be bound or affected.  Any approvals, if necessary, of any regulatory authority and/or holders of the Borrower’s income capital certificates have been obtained.

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(6)           No Default has occurred on the date of this Agreement or will occur by reason of the making of any Advance or the granting of the Security therefor.

(7)           The Borrower does not, and will not, discriminate on the basis of race, sex, color, creed, or national origin.

(8)           The Trustee does not, and will not, require that, as a condition to the receipt of a loan intended to be an Insured Loan, the respective student borrower or his family maintain a business relationship with the Trustee, except that this representation shall not apply with respect to any loan made by a credit union, savings and loan association, mutual savings bank, institution of higher education or by any other borrower with less than $75,000,000 in deposits.

(9)           The Borrower has advised Sallie Mae of any current limitations imposed by the Secretary or an Eligible Insurer as to the amount or number of Insured Loans the Borrower or the Trustee may make from time to time. The Borrower agrees promptly to advise Sallie Mae in the event any such limitations are imposed.

(10)         The Borrower agrees to advise Sallie Mae promptly in writing of any material change in its operations, management, or financial condition.

B.            With respect to each of the items now or hereafter included in the Security, the Borrower hereby represents, covenants and warrants:

(1)           So long as any Obligations remain outstanding, the Borrower at all times will be the sole beneficial owner of the Security and no lien, charge, encumbrance or other security interest will at any time exist upon the Security (other than interests of the Secretary or an Eligible Insurer in connection with the insurance of Insured Loans, or the lien of Sallie Mae or ECFC).

(2)           The Borrower has, and will continue to have, the full right and authority to pledge the Security (or to cause the Trustee to pledge legal title to the Security) pursuant to the Assignment and to consummate the other transactions contemplated herein.

(3)           The Borrower has exercised, and so long as any Advance remains outstanding will exercise, due diligence and reasonable care in the administration, servicing and collecting of Insured Loans from time to time included in the Security; provided, however, that for all of the Insured Loans that are originated and serviced by Sallie Mae, in its capacity as Servicer, Borrower shall be deemed in compliance with this requirement.

(4)           All Insured Loans from time to time delivered to Sallie Mae will be duly insured (i) by the Secretary under the Act or (ii) by an Eligible Insurer and reinsured by the Secretary, and will be entitled to the benefits of such insurance and of any special allowances and/or supplemental payments available to loans of such character under or pursuant to the Act or any applicable state legislation. The Borrower will not take or omit to take any action that would, under the Act, any applicable state legislation, regulations

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promulgated thereunder, or rules or decisions of the Secretary or of any Eligible Insurer or any instrumentality or official thereof, jeopardize such insurance or other benefits.

(5)           The rights of the Trustee to any and all benefits of insurance and to any special allowances and/or supplemental payments available in respect of Insured Loans included in the Security that are insured by an Eligible Insurer may be transferred to Sallie Mae pursuant to applicable legislation, regulations, rulings, or decisions, and Borrower shall give the necessary notice (or shall cause the Trustee to give the necessary notice) to Eligible Insurers or other authorities and take such other actions as may be necessary to transfer and perfect and otherwise preserve Sallie Mae’s rights under the Agreement to such insurance benefits, special allowances and/or supplemental payments.

SECTION 3. FINANCING COMMITMENT

Sallie Mae agrees, subject to and upon the terms of this Agreement, to make Advances to the Borrower from time to time as requested on the Borrowing Dates, but not later than the Borrowing Period, in an aggregate amount at any one time outstanding of up to ONE HUNDRED MILLION AND 00/100 DOLLARS ($100,000,000).  The total of all such Advances shall not exceed an aggregate principal amount at any one time outstanding equal to the amount for which Security has been pledged pursuant to and in accordance with the minimum collateral levels of Section 8.A hereof. Additionally, following the expiration of the Commitment Period set forth in the ExportSS Agreement, each Advance on any particular Borrowing Date shall be limited to an amount equal to the aggregate amounts that are to be disbursed on such Borrowing Date as subsequent disbursements on Eligible Loans that already had first disbursements made prior to the end of such Commitment Period.

The following provisions shall apply to Advances under this Section 3:

A.   Form of Note. The Advances shall be evidenced by a Note in the form of Annex A hereto having a stated principal amount not to exceed One Hundred Million and 00/100 Dollars ($100,000,000). The Note shall be dated as of July 1, 2006, and shall be payable to Sallie Mae or order on or before the Maturity Date.

B.   Interest. Interest shall be paid on the aggregate principal balance of the Advances outstanding at the end of each day during the period commencing on the date of the Note and ending on the date said principal balance outstanding is paid in full at a rate per annum, to the extent permitted by law, that shall be determined as to each such day by adding a specified percentage (the “Margin”) to the weighted average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H-15 (or its successor) for such 3-month period (computed on the basis of actual days elapsed and a year of 365 or 366 days, as appropriate).  The Margin shall be fifty one-hundredths percent (0.50%) per annum from the date of this Agreement until all Obligations are paid in full

For purposes hereof, the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates shall be determined by (A) multiplying the 3-month commercial paper (financial) rate by the actual number of days in the year (365 ordinarily, but

6

366 if February 29 falls within the year), and then dividing the result in (A) by (B) the result of the following two calculations: (i) multiplying the 3-month commercial paper (financial) rate by 90, and (ii) subtracting the product determined in clause (i) from 360. The resulting rate shall then be rounded to five (5) decimal places. For any day that is a Saturday, Sunday, or business holiday, the rate shall be determined by using the rate on the immediately preceding Business Day.

Interest on the Advances shall be accrued and shall be due and payable on the first Business Day following the last day of each month, except that the final interest payment on the Advances shall be due and payable on the same day as the principal thereof.

C.   Payment, etc. All payments of principal and interest in respect of the Advance or Advances and other charges made under this Agreement shall be made in lawful money of the United States in immediately available funds to the designated agent of Sallie Mae.  Interest on the Advances and other charges shall be calculated on the basis of actual days elapsed and a year of 365 days or 366 days, as applicable. If any principal of or interest on the Advances falls due on a Saturday, Sunday, or legal holiday at the place of payment, then such due date shall be extended to the next succeeding full Business Day at such place, and interest, in the case of a principal payment, shall be payable in respect of such extension.

Borrower agrees, until all Obligations have been fully repaid, to cause the Trustee to direct the Secretary, and any person or entity acting on behalf of the Secretary, to make all payments that would otherwise be paid to the Trustee or the Borrower pursuant to the LARS form, to an account designated by Sallie Mae in lieu of making such payments to the Trustee or the Borrower. To the extent Sallie Mae receives payment from the Secretary with respect to any particular calendar quarter (or part thereof) reflected on such LARS form before Borrower pays interest that is then owed on the Advances, and provided no affiliate of Sallie Mae has purchased a participation interest in the Insured Loans, Sallie Mae will apply such LARS form payment against the interest payment that is due and payable. If the LARS form payment received from the Secretary exceeds the amount that Sallie Mae applies against the interest payment owed by the Borrower, Sallie Mae will promptly refund the amount of the excess to the Borrower by electronic transfer of funds to Borrower’s designated account. If the LARS form payment received from the Secretary is insufficient to pay the interest payment that is owed by the Borrower, the Borrower will remain obligated to make such interest payment when due.

D.   Prepayments. The Borrower (i) may, at its option, prepay the Advances, in whole or in part and without penalty, at any time, and (ii) shall be required, from time to time, to prepay portions of the Advance as required by Sections 3.F and 3.G below. Except for prepayments with the proceeds of refunds or cancellations of Insured Loans, or the sale of Insured Loans by the Borrower to ECFC, any prepayment made shall be in the minimum amount, of Ten Thousand Dollars ($10,000.00) or in multiples thereof. Any principal amount so prepaid shall be added to the unutilized commitment remaining hereunder and maybe re-borrowed.

In addition to the above-described prepayment provision, the Borrower is also subject to the mandatory prepayment provisions contained herein, including, but not limited to, Sections 3.F, 3.G, 8.A.(2), 11.E, 11.F and 11.G hereof.

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E.   Additional Payments. Overdue principal in respect of the Advances shall bear interest at a rate per annum two percent (2%) above the rate in effect thereon at the time the same becomes overdue. Overdue interest in respect of the Advances, at the time it becomes overdue, shall be added to the principal amount of the Advances and shall bear interest at the same rate as overdue principal.

F.   Loan Sale Proceeds. All proceeds of sales of Insured Loans under the ExportSS Agreement will be applied as follows:

(i) the portion of the proceeds of such sales that represents the Principal Balance (as defined in the ExportSS Agreement) of the Insured Loans that are sold will be applied to prepay the principal portion of the Advance outstanding under this Agreement, and

(ii) the portion of the proceeds of such sales that represents premiums, accrued interest, or other amounts that are payable in connection with such sales will be applied to repay any amounts outstanding under this Agreement or the ExportSS Agreement that are payable and overdue, and any excess will be paid to the Borrower by electronic funds transfer.

G.   Mandatory Loan Sales. In addition to all other rights of Sallie Mae described herein (including, but not limited to, the rights more fully described in Sections 8 and 9 hereof), in the event of any payment Default by the Borrower under Section 9.B hereof, the Borrower hereby agrees to promptly sell Insured Loans to ECFC in an amount sufficient to cover such payment Default.  Any such loan sale shall be made in accordance with the terms of the ExportSS Agreement.

SECTION 4. CONDITIONS PRECEDENT.

The obligation of Sallie Mae to enter into this Agreement, and to make any Advance hereunder, shall be subject to compliance, in all material respects, with each of the following conditions:

(1) All legal matters incident to the making of this Agreement or the making of such Advance shall be approved by counsel to Sallie Mae.

(2) Sallie Mae shall have received, in form and substance satisfactory to Sallie Mae and its counsel, the following:

(a) A Note, in the form of Annex A hereto.

(b) A certificate of the secretary or other appropriate officer of the Borrower substantially in the form of Annex B hereto.

(c) Assignment of the Security in the form of Annex D-2 hereto.

(d) The Financials referred to in Section 2.A hereof.

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(e) With respect to any Insured Loans included in the Security, counterparts of one or more financing statements (UCC-1), signed (if required) by the Borrower and the Trustee, in such number as Sallie Mae shall request, in which the Borrower and the Trustee are designated as “Debtor” and Sallie Mae as “Secured Party,” covering the collateral more fully described on Annex E hereto.

(f) An opinion of counsel to the Borrower, substantially in the form of Annex G hereto.

(g) If Sallie Mae is not the sole Servicer of the Insured Loans, a Custodian Agreement among Sallie Mae, the Servicer, and the Borrower, that provides for the Servicer to hold the Insured Loans and all documentation relating to the Insured Loans as custodian and agent for Sallie Mae.

SECTION 5. COMMITMENT FEE

[INTENTIONALLY OMITTED]

SECTION 6. MANNER OF BORROWING

Sallie Mae, in its capacity as Servicer of the Insured Loans, will send a Request Register to the Borrower at least one Business Day prior to the date the funds for the individual Insured Loan disbursements shown on the Request Register are scheduled to be received by the school. The Borrower hereby authorizes Sallie Mae to make an Advance to the Borrower in the amount shown on such Request Register. Sallie Mae agrees, subject to the remaining terms of this Agreement, to make such Advance to the Borrower, in most cases (except where the school’s process requires an alternate schedule) no later than 2:00 p.m. Central time at least one Business Day prior to the date such Insured Loan disbursements are scheduled to be received by the school.

Additionally, if Sallie Mae is not the sole Servicer of the Insured Loans, then the Borrower shall also be required to submit to Sallie Mae, on the same day that the Borrower receives the Request Register, a Compliance Certificate in the form of Annex C hereto, dated as of the date of such Advance, that discloses that the Security is in compliance with Section 8.A.(2) hereof.

SECTION 7. PARTICULAR COVENANTS OF THE BORROWER

From the date hereof and until the Maturity Date and the performance of all other obligations of the Borrower under this Agreement, the Borrower agrees that:

A. Investment of Proceeds. Advances made hereunder shall only be used for the purpose of funding originations of Insured Loans under the ExportSS Agreement.

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B. Financial Statements and Other Information. The Borrower shall furnish to Sallie Mae:

(1)           As soon as possible and in no event more than ninety (90) days after the end of each fiscal year of the Borrower, Financials as at the end of and for such year.

(2)           As soon as possible and in no event more than forty-five (45) days after the end of each quarterly accounting period of the Borrower, Financials as at the end of and for such period.

(3)           Promptly upon Sallie Mae’s request, such other information regarding the Borrower’s financial condition and affairs, and regarding the Security or Insured Loans owned by the Borrower, as Sallie Mae may reasonably request.

(4)           Promptly after the commencement thereof, notice of any action, suit or proceeding before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, involving the Borrower that might have a material adverse effect upon the financial condition of the Borrower or on the Borrower’s ability to perform its obligations under this Agreement.

(5)           Within five (5) business days following the effective date of any change in name or address of the Borrower, or the name or address of the Trustee, written notice of such change to the addresses provided in Section 10.

C.   Maintenance of Existence; Conduct of Operations. The Borrower will preserve and maintain its corporate existence and all of its rights, privileges, and franchises necessary or desirable in the normal conduct of its operations, and the Borrower will conduct its operations in an efficient and regular manner.

D.   Compliance with Applicable Laws. The Borrower will comply with the requirements of all applicable laws, rules, regulations, and orders of any governmental authority, a breach of which would materially adversely affect the operations or credit of the Borrower, except where contested in good faith and proper proceedings.

E.   Compliance Certificate. If any of the Insured Loans are originated or serviced by a Servicer other than Sallie Mae, then within ten (10) days after the end of each calendar quarter, the Borrower shall furnish to Sallie Mae a Compliance Certificate, completed and executed as of the last day of such quarter by an authorized official of the Borrower; provided, however, that if an Advance has been disbursed within thirty (30) days prior to the end of such quarter, this requirement shall be waived with respect to such period.

F.   Collateral Listing. If any of the Insured Loans are originated or serviced by a Servicer other than Sallie Mae, then on the date this Agreement is executed by the parties hereto and within forty-five (45) days after the end of each calendar year, the Borrower shall provide Sallie Mae with a current listing of the Insured Loans included in the Security showing (i) the outstanding principal balance of and accrued interest on each Insured Loan, and (ii) a current delinquency aging of the Insured Loans included in the Security.

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G.   Contact With Student Borrowers. So long as any Insured Loan shall be included in the Security, at least once within each twelve month period the Borrower shall be in contact with the respective student borrower.  Any of the following shall be deemed to constitute contact: (i) verification of current address and receipt of an acknowledgement of liability; (ii) receipt of a payment of principal and/or interest, (iii) disbursement of an additional student loan; or (iv) a status verification conducted by an Eligible Insurer.

H.   Servicer Operations Report. If any of the Insured Loans are originated or serviced by a Servicer other than Sallie Mae, then Borrower shall furnish to Sallie Mae, within fifteen (15) days after the end of each calendar quarter, a written report prepared by the Servicer in the form of Annex F hereto showing the claims and delinquency status of Insured Loans included in the Security.

I.   Updated Secretary’s Certificate. Within ten (10) days of the addition of any individual to the authorized signers listed on the Borrower’s secretary’s certificate delivered pursuant to Section 4.A(2)(b) hereof, the Borrower shall furnish to Sallie Mae an updated secretary’s certificate, providing the name, title, and sample signature of the additional person(s) authorized to execute documents on the Borrower’s behalf.

J.   Sale of Insured Loans. Borrower and the Trustee acknowledge that, under and pursuant to the terms of the ExportSS Agreement, all Insured Loans that are financed, in whole or in part, with the proceeds of any Advance, are required to be offered for sale to ECFC, irrespective of where or by whom such loans are originated or serviced.

K.   Sovereign Immunity. The Borrower waives whatever rights it may have to claim against Sallie Mae immunity afforded to a sovereign entity from suit and legal process (whether in aid of jurisdiction, prejudgment attachment, or execution on a judgment) to the fullest extent permitted by law.

L.   Other Requirements. Within ten (10) days following a written request from Sallie Mae, the Borrower will furnish Sallie Mae with:

(1) such opinions of counsel to the Borrower as Sallie Mae may reasonably request as to (a) the status of Sallie Mae’s security interest in the Insured Loans that have been assigned and transferred to Sallie Mae as Security for the Advances hereunder as a prior first lien on such Insured Loans; and (b) such other matters incident to the transactions hereby contemplated as Sallie Mae or its counsel may reasonably request; and

(2) such other documents, agreements, and information as Sallie Mae may reasonably request, including additional Assignments.

SECTION 8. SECURITY

A.            (1) The Security for the Advances and all other Obligations of the Borrower to Sallie Mae shall consist of all FFELP Loans from time to time beneficially owned by the Borrower and legally owned by the Trustee as may from time to time be pledged to Sallie

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Mae, and all other property as set forth and defined as Security in the Assignment. Unless otherwise agreed by Sallie Mae in writing, every FFELP Loan that is legally or beneficially owned by the Borrower (or legally owned by the Trustee) shall be pledged to Sallie Mae and included in the Security at all times prior to sale to ECFC.

(2)           The aggregate unpaid principal balance of Eligible Loans included in the Security divided by 1.0 shall at all times be equal to or exceed the amount of the unpaid principal balance of the Note. In the event all or any portion of the Security shall mature, shall be paid or retired, or shall otherwise be reduced in amount prior to the Maturity Date, the Borrower shall promptly, and in any event upon the demand of Sallie Mae within two days of a request therefor, pledge to Sallie Mae (or cause the Trustee to pledge to Sallie Mae), and grant to Sallie Mae (or cause the Trustee to grant to Sallie Mae) a security interest in, such additional Security, in such amounts as may be necessary or as may be requested by Sallie Mae, so that the amount of the Security shall be equal to or greater than the amount initially required by this Section 8.A(2), provided, however, that in the event additional Eligible Loans are not available to the Borrower or the Trustee for inclusion in the Security, the Borrower shall pay to Sallie Mae for application to the principal of the Advance an amount sufficient to reduce the principal balance of the Advance such that the percentage of Eligible Loans pledged shall be at least equal to the amount required under this Section 8.A(2). An Insured Loan shall become ineligible for purposes of the computation made above at the time it becomes overdue in respect of the payment of principal or interest for more than thirty (30) days. Such Insured Loans, however, shall continue to be pledged and assigned to Sallie Mae and shall be included within the Security for the Advance.

B. The following provisions shall apply to the Security and the holding, servicing, administration, and disposition thereof:

(1)           If any of the Insured Loans are originated or serviced by a Servicer other than Sallie Mae, then (a) the Insured Loans forming the Security under the Agreement shall be physically segregated from all other property of the Borrower and marked or otherwise designated to disclose the security interest of Sallie Mae therein, and (b) the Insured Loans that are financed, in whole or in part, with the proceeds of any Advance shall be either (i) physically segregated from the Insured Loans of the Borrower that are not so financed, or (ii) marked or otherwise designated to the reasonable satisfaction of Sallie Mae as having been financed with the proceeds of an Advance.  In the event the Student Notes relating to the Insured Loans are in the form of master promissory notes, the Borrower shall provide for the delivery to Sallie Mae of certified copies of such master promissory notes if such copies are needed to prove the existence of (or otherwise to assist in the collection of) such Insured Loans.

(2)           The Borrower shall, at its own expense, (or shall cause the Servicer to) administer, service, and collect all Insured Loans from time to time included in the Security, and maintain appropriate books and records in respect thereof, whether or not Sallie Mae shall exercise any of its rights hereunder (and the foregoing requirement shall be deemed satisfied if Sallie Mae is the sole Servicer for the Loans); provided, however, that Sallie Mae or its designated agent, upon ten (10) days’ prior written notice to the Borrower, may assume, at the expense of the Borrower, the administration, servicing, and collection of the Insured Loans included in the Security if such actions are necessary to preserve the value of the Security and Sallie Mae’s rights therein. With the prior written approval of Sallie Mae, which may be

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withheld in Sallie Mae’s sole discretion, the Borrower and the Trustee may delegate to another, upon terms satisfactory to Sallie Mae, the functions of administering, servicing, and collecting such Insured Loans, but Borrower acknowledges that in no event will Sallie Mae grant such approval for the Borrower and the Trustee to delegate such servicing functions to any entity (other than an affiliate of Sallie Mae) with respect to the Insured Loans that are part of the Security that were financed with the proceeds of any Advance.

(3)   Without the prior written consent of Sallie Mae, the Borrower shall not maintain any of its books and records with respect to Insured Loans included in the Security away from the Borrower’s premises in Baltimore, MD, or at Sallie Mae’s premises, except in the event of an emergency, which shall include fire and flood. In the event of an emergency, Borrower shall notify Sallie Mae as soon as possible.

(4)   The Borrower shall at all times prior to the Maturity Date maintain Eligible Loans in the Security in an amount equal to or exceeding the amount specified in Section 8.A.(2) hereof. An Insured Loan shall become ineligible for purposes of the above computation at the time it becomes overdue in respect of the payment of principal or interest for more than thirty (30) days. Such Insured Loans, however, shall continue to be pledged and assigned to Sallie Mae and shall be included within the Security.

(5)   Without the prior written consent of Sallie Mae, neither the Borrower nor the Trustee shall file or permit to be filed in any jurisdiction any financing statement or like instrument with respect to the Security or any part thereof in which Sallie Mae is not named as the sole secured party.

(6)   Sallie Mae reserves the right, at any time, to file in appropriate offices the financing statements referred to in Section 4(2)(e) hereof, and the Borrower and the Trustee each hereby appoints Sallie Mae its attomey-in-fact to execute in the Borrower’s and the Trustee’s name all such financing statements, as well as amendments, renewals, and modifications thereof, and to file such documents in the appropriate offices.

(7)   The Borrower and the Trustee shall, upon the demand of Sallie Mae,

(a)   give, execute, deliver, file, and/or record any notice, statement, instrument, document, agreement, or other papers that may be necessary or desirable in the sole judgment of Sallie Mae, in order to create, preserve, perfect, or validate any security interest granted pursuant to this Agreement or to enable Sallie Mae to exercise and enforce its rights hereunder with respect to such security interest; and

(b)   at any reasonable time and from time to time, permit Sallie Mae or any agents or representatives to examine and make copies of the records and books of account related to the Security and the transactions contemplated by this Agreement, to visit the Borrower’s and the Trustee’s properties and to discuss the Borrower’s and the Trustee’s affairs, finances, and accounts with any of the Borrower’s or the Trustee’s officers and independent accountants and to discuss the Borrower’s student loan program and the Insured Loans included in the Security with any Eligible Insurer.

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(8)   From time to time upon the demand of Sallie Mae, the Borrower and the Trustee shall:

(a)   endorse the Student Notes contained In the Security and deliver the same to Sallie Mae or its Agent for safekeeping and/or prepare and furnish to Sallie Mae such instruments of assignment and transfer in such form and substance as may be specified by Sallie Mae in its demand;

(b)   keep and otherwise maintain the Borrower’s and the Trustee’s books and records relating to the Insured Loans and Student Notes included in the Security in such manner as Sallie Mae may require;

(c)   prepare and furnish to Sallie Mae such records, lists, schedules, and other information relating to the Insured Loans and Student Notes included in the Security, including such information as may be contained in computerized databases maintained by the Borrower or its agents, as may be requested by Sallie Mae from time to time; and

(d)   take such additional actions as may be necessary or useful to facilitate the administration, servicing, and collection of the Insured Loans included in the Security in the event Sallie Mae exercises its rights under Section 8.B(2) hereof.

(9)   Sallie Mae may, in its discretion (but shall not be obliged to) with the consent of the Borrower and the Trustee (which consent may not unreasonably be withheld) in its name or in the name of the Borrower and the Trustee or otherwise, demand, sue for, collect, or receive any money or property at any time receivable on account of or in exchange for any of the Security, and Sallie Mae may make any compromise or settlement deemed desirable with respect to any of the Security and may extend the time of payment, arrange for payment in installments, otherwise modify the terms of, or release any of the Security, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of, the Borrower or the Trustee. The Borrower and the Trustee hereby authorize Sallie Mae, either in its own name or in the name of the Borrower or the Trustee, to file all claims for reimbursement under the certificate of insurance assigned to Sallie Mae hereunder and to receive the proceeds therefrom.

(10)   Upon Default in the payment when due of any principal of or interest on any Advance or other Obligation, including any liability arising under Sections 3.E and 9 hereof,

(a)   Sallie Mae shall have the rights and remedies with respect to the Security of a secured party under the Uniform Commercial Code as in effect at the time of the Default; and

(b)   with respect to the Security, upon ten (10) days’ prior written notice to the Borrower and the Trustee, Sallie Mae may sell or cause to be sold, at such time or places as Sallie Mae in its discretion shall decide, and for cash or on credit or for the future delivery (without thereby assuming any credit risk), all or any of the Security, including the Borrower’s and the Trustee’s rights and interest in the

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Student Notes forming a part of the Security, at public or private sale (including, without limitation, a sale to ECFC pursuant to the terms of the ExportSS Agreement), without demand of performance or notice of intention to sell or of time or place of sale (except such notice as is required above or by applicable statute that cannot be waived), and Sallie Mae or anyone else may be the purchaser of any or all of the Security so sold and thereafter hold the same absolutely free from any claim or right of whatsoever kind of the Borrower and the Trustee, any such demand and notice of rights being hereby expressly waived and released by the Borrower and the Trustee. The proceeds of each such sale under this Section 8.B(10) shall be applied in accordance with Section 8.B(11) hereof. If the proceeds of the sale, collection, or other realization of or upon the Security are insufficient to cover the expenses of such realization and the payment in full of the Obligations, the Borrower shall remain liable for any deficiency.

(11)   Unless Sallie Mae and the Borrower otherwise agree, Sallie Mae shall apply all amounts received by it in respect of the Security under Section 8.B(9) or Section 8.B(10), as follows: first, to pay the expenses of Sallie Mae in connection with collecting such amounts; second, to the payment of the Obligations, first to interest, second to principal, and third to any remaining Obligations; and third, any balance remaining after the payment in full of the Obligations shall be released to the Borrower, or its successor and assigns.

(12)   If Sallie Mae so requests, whether or not a Default exists, the Borrower and the Trustee shall forthwith pay to Sallie Mae at its offices all amounts received by the Borrower or the Trustee upon or in respect of any Security, appropriately advising Sallie Mae as to the source of such funds.

SECTION 9. DEFAULTS; SUSPENSION OF COMMITMENT

Defaults

If any of the following defaults shall occur, namely:

A.   Any representation or warranty in this Agreement or in any certificate or writing furnished to Sallie Mae pursuant hereto shall prove to have been incorrect in any material respect or shall be breached in any material respect; or

B.   Default in the payment when due of any principal of or interest on any Advance or other Obligation, including any payment that may be required under Section 3.E hereof; or

C.   The Borrower or the Trustee shall fail to perform any of the covenants or undertakings in Section 7 of this Agreement or any other provision of this Agreement; or

D.   The Borrower or the Trustee shall (i) apply for or consent to the appointment of a conservator, receiver, trustee, liquidator, or the like for itself or its property; (ii) be unable, or admit in writing its inability, to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors; (iv) be adjudicated as bankrupt or insolvent; (v) if the Borrower or the

15

Trustee is a financial institution, be seized, taken over, or otherwise subjected to the decision-making control of or by its regulatory authorities; or (vi) file a voluntary petition in bankruptcy or a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any insolvency law or an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization, or insolvency proceedings, or corporate action shall be taken by it for the purpose of effecting any of the foregoing; or

E.   An order, judgment, or decree shall be entered without the application, approval, or consent of the Borrower or the Trustee by any court or governmental agency of competent jurisdiction, approving a petition seeking reorganization of the Borrower or the Trustee or appointing a conservator, receiver, trustee, liquidator, or the like for the Borrower or the Trustee or for all or a substantial part of either of their assets and such order, judgment, or decree shall continue unstayed or in effect for any period of thirty (30) consecutive days, or an involuntary petition shall have been filed against the Borrower or the Trustee in bankruptcy or seeking reorganization under the Bankruptcy Act and the same shall not have been dismissed within sixty (60) days; or

F.   Sallie Mae’s rights and prospects of repayment of any current or future Advances hereunder are, in Sallie Mae’s reasonable judgment, in any way prejudiced or rendered insecure

THEN, in any such case, Sallie Mae may by written notice to the Borrower and the Trustee terminate the Commitment and/or, if any Advance or Advances are then outstanding, declare the principal of and interest on any such Advance or Advances to be forthwith due and payable, whereupon the same shall become forthwith due and payable, without protest, presentment, or demand, all of which are expressly waived by the Borrower and the Trustee.

Suspension of Commitment

If, in the absence of a Default, Sallie Mae in its reasonable judgment determines that there has occurred a material adverse change in the financial condition of the Borrower, the Trustee, or with respect to the management of the Borrower or the Trustee, or in the Borrower’s ability to administer its student loan program, or in the quality of the Security, with the result that Sallie Mae’s rights or prospects of repayment of any current or future Advance are prejudiced, Sallie Mae, by written notice to the Borrower and the Trustee, may suspend the Commitment and Sallie Mae shall not have the obligation to make additional Advances until Sallie Mae in its reasonable judgment is satisfied that the condition(s) that caused the determination has (have) been remedied.

SECTION 10. NOTICES

All notices, requests, demands, and other communications herein shall be in writing, and, except as otherwise specifically provided in this Agreement, shall be deemed to have been duly given if delivered or mailed, first class, postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

A.   If to Sallie Mae, at 12061 Bluemont Way, Reston, VA 20190, Attention:

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Financing Administration and Loan Documentation, with copies to Senior Vice President, Financial Institution Sales, Sallie Mae, Inc., 11100 USA Parkway, Fishers, IN 46037. Copies of notices of name or address changes of the Borrower shall also be sent to Andrew G. Wachtel, Sallie Mae, Inc., 12061 Bluemont Way, Reston, VA 20190; Fax Number: 703-984-5979.

B.  If to the Borrower, at 1001 Fleet Street, Baltimore, MD 21202, Attention: Robert Zentz, General Counsel.

C.  If to the Trustee, at 7077 Bonneval Road, Suite 400, Jacksonville, FL 32216, Attention: Tricia Heintz, Vice President.

SECTION 11. MISCELLANEOUS

A.   Waivers, Etc. No failure on the part of Sallie Mae to exercise, and no delay in exercising, any right hereunder will operate as a waiver thereof; nor will any single or partial exercise or waiver of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

B.   Expenses. The Borrower will pay:

(1)  all taxes, if any, upon documents or transactions pursuant to this Agreement; and

(2)  costs of collection (including without limitation all reasonable counsel fees) in the event of any Default hereunder.

C.   Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together will constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart.

D.   Law Governing. This Agreement and the Note are being delivered in and shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia, without giving effect to any choice of law or conflict of law provisions or principles (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of any laws of any jurisdiction other than the Commonwealth of Virginia. All parties hereby irrevocably and unconditionally submit to the jurisdiction of any state court sitting in Fairfax County, Virginia, and the Federal District Court sitting in the City of Alexandria, Virginia, over any suit, action, or proceeding arising out of or relating to this Agreement and the Note. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue in any such court and any claim that such court is an inconvenient forum.

E.   Mandatory Prepayment and Termination of Commitment. If for any reason the ExportSS Agreement (or ECFC’s obligation to purchase Insured Loans thereunder) is terminated by either party thereto prior to the Maturity Date of this Financing Agreement, then the Borrower shall, within three (3) Business Days of such termination, pay all Obligations outstanding under

17

this Agreement, and, notwithstanding any other provisions contained herein to the contrary, Sallie Mae’s Commitment to make any further Advances hereunder shall be terminated.

F.   Right to Terminate. Anything contained in this Agreement to the contrary notwithstanding, at anytime prior to the Maturity Date, either party hereto may terminate this Agreement upon sixty (60) days’ prior written notice to the other party only in the event that such party is permitted to terminate the ExportSS Agreement at such time. The Borrower shall, on the effective date of such termination, pay all Obligations outstanding under this Agreement, and Sallie Mae’s Commitment to make any further Advances hereunder shall be terminated.

G.   Termination of Agreement. Sallie Mae (or the Borrower with respect to subparagraph (a) of this paragraph) may, but shall not be obligated to, terminate this Agreement upon thirty (30) days’ prior written notice to the other parties if:

(a) for any reason the Secretary alleges in writing (either formally or informally) that: (i) Sallie Mae’s providing financing to the Borrower under the terms of this Agreement, or (ii) all or any part of any other agreement, contract, indenture, or other instrument among the Borrower, the Trustee, and Sallie Mae or among the Borrower, the Trustee, and ECFC, is in violation of the Act (including, without limitation, the “prohibited inducements” guidelines issued by the Secretary), or (iii) Sallie Mae should be re-characterized as the “lender” of the Insured Loans; or

(b) any offset, holder, or other fee is imposed on Sallie Mae with respect to Insured Loans beneficially owned by the Borrower and legally owned by the Trustee that are financed by Sallie Mae, if such fee is imposed for the time period that the Borrower or the Trustee still owned the Insured Loans.

The Borrower shall, on the effective date of such termination, pay all Obligations outstanding under this Agreement, and, notwithstanding any other provisions contained herein to the contrary, Sallie Mae’s Commitment to make any further Advances hereunder shall be terminated.

H.   Assignment. This Agreement shall be assignable by Sallie Mae. Sallie Mae agrees to give the Borrower and the Trustee at least sixty (60) days’ prior written notice of an assignment of the duties, rights, and obligations of Sallie Mae under the Agreement. This Agreement is not assignable by the Borrower or the Trustee, except (i) in the circumstance of the replacement or resignation of the Trustee and the appointment of a substitute trustee for the Borrower, or (ii) in the circumstance where the Borrower assigns or transfers its rights under this Agreement to a non-profit entity in compliance with the provisions and limitations of the Higher Education Act; provided, however, that following any such assignment, the Borrower will remain liable for all obligations of the Borrower that are set forth in this Agreement.

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

SALLIE MAE, INC.				WALDEN UNIVERSITY, INC.
By:	/s/ Jerry Maher			By:	/s/ Richard Patro
Name:			Jerry Maher	Name:			Richard Patro
Title:		Senior Vice President		Title:		CFO, Walden University

WELLS FARGO BANK, NATIONAL

ASSOCIATION, solely in its capacity as
Eligible Lender Trustee for Walden University,
Inc.

By:	/s/ Tricia Heintz
Name:			Tricia Heintz
Title:		Vice President

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ANNEX A

PROMISSORY NOTE

Reston, Virginia
$100,000,000	July 1, 2006

FOR VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay to the order of Sallie Mae, Inc. (“Sallie Mae”), at the offices of its designated agent, on the later of (i) May 31, 2009 or (ii) the date of the last scheduled sale of Eligible Loans under the ExportSS® Agreement (the “Maturity Date”), in lawful money of the United States, the principal sum of One Hundred Million and 00/100 Dollars ($100,000,000.00), or such lesser principal sum as shall equal the balance outstanding of the Advances made by Sallie Mae to the Borrower from time to time under a Revolving Financing Agreement dated July 1, 2006 (the “Financing Agreement”), and to pay interest on the aggregate principal balance of the Advances outstanding at the end of each day during the period commencing on the date hereof and ending on the date said principal balance outstanding is paid in full at a rate per annum, to the extent permitted by law, that shall be determined as to each such day by adding a specified percentage (the “Margin”) to the weighted average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H-15 (or its successor) for such 3-rnonth period (computed on the basis of actual days elapsed and a year of 365 or 366 days, as appropriate). The Margin shall be fifty one-hundredths percent (0.50%) per annum from the date of this Note until all Obligations are paid in full.

For purposes hereof, the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates shall be determined by (A) multiplying the 3-month commercial paper (financial) rate by the actual number of days in the year (365 ordinarily, but 366 if February 29 falls within the year), and then dividing the result in (A) by (B) the result of the following two calculations: (i) multiplying the 3-month commercial paper (financial) rate by 90, and (ii) subtracting the product determined in clause (i) from 360.  The resulting rate shall then be rounded to five (5) decimal places. For any day that is a Saturday, Sunday, or business holiday, the rate shall be determined by using the rate on the immediately preceding Business Day.

Interest hereunder shall be accrued and shall be due and payable on the first Business Day following the last day of each month, except that the final interest payment hereunder shall be due and payable on the same day as the principal hereunder.

All payments of principal and interest hereunder shall be made in lawful money of the United States in immediately available funds to the designated agent of Sallie Mae. Interest hereunder shall be calculated on the basis of actual days elapsed and a year of 365 days or 366 days, as applicable. If any principal of or interest on the Advances falls due on a Saturday, Sunday, or legal holiday at the place of payment, then such due date shall be extended to the next succeeding full Business Day at such place, and interest, in the case of a principal payment, shall be payable in respect of such extension.

This Note evidences Advances made pursuant to the above-mentioned Financing

1

Agreement between the Borrower and Sallie Mae, providing for the Advances, the acceleration of the maturity of such Advances, and for the prepayment thereof, all on the terms set forth in said Financing Agreement. Unless otherwise defined, capitalized terms used herein shall have the meanings ascribed to them in the Financing Agreement.

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly authorized representative.

	WALDEN UNIVERSITY, INC.
	By:
	Name:
	Title:
[Corporate Seal]

2

ANNEX B

BORROWER’S
SECRETARY’S CERTIFICATE

I,                                                                            , Secretary of                                                                 & nbsp;     , a                                  corporation organized under the laws of the State of                                      (the “Borrower”), hereby certify to Sallie Mae, Inc. that:

1.   Attached hereto as Exhibits 1 and 2 are true copies of the By-Laws and Articles of Incorporation of the Borrower as in effect on the date hereof.

2.   Attached hereto as Exhibit 3 is a true copy of certain resolutions duly adopted by the        [Committee] of the Board of Directors of the Borrower at a meeting duly called and held on                    , at which a quorum was present and acting throughout.  Said resolutions are still in full force and effect and have not been amended, superseded, or revoked.

3.   The persons named below are at the date hereof the duly elected, qualified, and acting officers of the Borrower holding the offices indicated, and the signature following each name is the genuine signature of the person named:

Name Title Signature

WITNESS my hand and the seal of the Borrower this      day of                         , 20    .

	, Secretary
(SEAL)

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EXHIBIT 3
to
SECRETARY’S CERTIFICATE

RESOLVED, that [either] the                            [or/and]                                      of                                        be and each of them, acting singly, hereby is authorized, in the name and on behalf of                                              , this                               day of     , 20   , to execute a Revolving Financing Agreement with Sallie Mae, Inc. (“Sallie Mae”) in the form that has been submitted to this meeting and that shall be marked by the Secretary for identification and filed among the records of this Corporation.

FURTHER RESOLVED, that [either] the                            [or/and]                         of                      be and each of them, acting singly, hereby is authorized in the name and on behalf of                          , from time to. time to borrow from Sallie Mae up to an aggregate amount of $               and to sign and deliver promissory notes of             evidencing such borrowing and assignments and other instruments relative to collateral security therefor, all as provided in said Revolving Financing Agreement.

FURTHER RESOLVED, that all above-named officers of                     be and they hereby are each authorized on behalf of             to execute all such instruments and to perform all such other acts as may be appropriate for the purpose of carrying out the foregoing resolutions and effecting said Revolving Financing Agreement.

	Certified as True and Correct.
	Secretary
[Corporate Seal]

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ANNEX B-1

TRUSTEE’S
SECRETARY’S CERTIFICATE

I,                                             , Secretary of                                                    (acting solely in its capacity as eligible lender trustee for [INSERT BORROWER]), a corporation organized under the laws of the State of                                          (in such capacity, the “Trustee”), hereby certify to Sallie Mae, Inc. that:

1.   Attached hereto as Exhibits 1 and 2 are true copies of the By-Laws and Articles of Incorporation of the Trustee as in effect on the date hereof.

2.   Attached hereto as Exhibit 3 is a true copy of certain resolutions duly adopted by the                      [Committee] of the Board of Directors of the Trustee at a meeting duly called and held on                                  , at which a quorum was present and acting throughout. Said resolutions are still in full force and effect and have not been amended, superseded, or revoked.

3.   The persons named below are at the date hereof the duly elected, qualified, and acting officers of the Trustee holding the offices indicated, and the signature following each name is the genuine signature of the person named:

Name Title Signature

WITNESS my hand and the seal of theTrustee this        day of                          , 20    .

	, Secretary
(SEAL)

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EXHIBIT 3
to
SECRETARY’S CERTIFICATE

RESOLVED, that [either] the                                                 [or/and]                                       of                                       be and each of them, acting singly, hereby is authorized, in the name and on behalf of                                            (acting solely in its capacity as eligible lender trustee for [INSERT BORROWER]) (in such capacity, “Trustee”), this day            of                            , 20    , to execute a Revolving Financing Agreement with Sallie Mae, Inc. (“Sallie Mae”) in the form that has been submitted to this meeting and that shall be marked by the Secretary for identification and filed among the records of this Corporation.

FURTHER RESOLVED, that [either] the                                             [or/and]                                                            of                                    be and each of them, acting singly, hereby is authorized in the name and on behalf of the Trustee, from time to time to sign and deliver assignments and other instruments relating to granting a security interest in the student loans referenced in the Revolving Financing Agreement, all as provided in said Revolving Financing Agreement.

FURTHER RESOLVED, that all above-named officers of the Trustee be and they hereby are each authorized on behalf of the Trustee to execute all such instruments and to perform all such other acts as may be appropriate for the purpose of carrying out the foregoing resolutions and effecting said Revolving Financing Agreement.

	Certified as True and Correct.
	Secretary
[Corporate Seal]

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ANNEX C

BORROWER
COMPLIANCE CERTIFICATE
(as of                                      , 20    )

The undersigned,                                                         , hereby certifies to Sallie Mae, Inc. (“Sallie Mae”) that on and as of the date hereof, the information below set out is correct and has been prepared in accordance with the applicable provisions of a certain Revolving Financing Agreement dated                                  (the “Agreement”) among [BORROWER], [TRUSTEE], and Sallie Mae:

COLLATERAL COMPLIANCE:

A. Principal Balance of Advances outstanding: $                                                   .

B. Aggregate unpaid principal balance of Eligible Loans owned by Borrower and pledged to Sallie Mae as of the date hereof: $                                                 .

C.	B	=	$	.
	1.0

Amount of “C” must equal or exceed amount of “A”.

Amount of “B” excludes $                                                       in Insured Loans in respect of which the payment of principal or interest is at the time overdue for more than thirty (30) days.

Unless otherwise defined, all terms herein are used as defined in the Agreement.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed by an authorized officer this                    day of                    , 20       .

[BORROWER]	Please forward certificate to:
By:	Sallie Mae, Inc.
	1002 Arthur Drive
Name:	Lynn Haven, FL 32444
	Attention:	Compliance Analyst
Title:		Financial Reconciliation

ANNEX D-1

[INTENTIONALLY OMITTED]

ANNEX D-2

ASSIGNMENT AND SECURITY AGREEMENT

THIS ASSIGNMENT AND SECURITY AGREEMENT dated as of July 1, 2006, is made pursuant to a Revolving Financing Agreement dated July 1, 2006 (the “Agreement”) among Walden University, Inc. (the “Borrower”), Sallie Mae, Inc. (“Sallie Mae”), and Wells Fargo Bank, National Association, solely in its capacity as Trustee for the Borrower under the terms of that certain Eligible Lender Trust Agreement dated as of June 15, 2006, between the Borrower and the undersigned (the “Trustee”). Terms that are defined in the Agreement shall have their defined meanings when used herein.

As collateral security for the due and punctual payment of the Advances made or to be made under the above Agreement in accordance with the terms thereof, and all other Obligations of the Borrower or the Trustee to Sallie Mae, whether now or in the future existing, the Trustee and the Borrower hereby grant to Sallie Mae, its successors and assigns a security interest in, and pledge to Sallie Mae, all upon the terms more fully set forth in the Agreement, the below-described personal property owned by the Trustee or the Borrower, whether now or hereafter existing or now owned by the Trustee or the Borrower or hereafter acquired, wherever located (all such property being in this instrument called the “Security”), namely:

(i) All education loans from time to time legally owned by the Trustee and beneficially owned by the Borrower that were or are hereafter made pursuant to the Higher Education Act of 1965, as amended (“Loans”), along with all documentation related thereto and all rights of the Trustee and the Borrower with respect to such Loans, including all payments and rights to receive payment with respect thereto, which Loans may be identified in the records maintained by Sallie Mae, Inc. or its successor, or by any other servicer of such Loans, as being legally owned by the Trustee and beneficially owned by the Borrower;

(ii) All guarantee or insurance payments with respect to the Loans and all interest earned on such Loans or on such payments, along with all documentation related thereto and all rights of the Trustee and the Borrower with respect to any such guarantee or insurance payments;

(iii) All grants, contributions, or payments that may be received from any department, agency, or instrumentality of the United States with respect to the Loans, including without limitation any supplemental payments and other benefits payable in respect of such Loans under applicable federal or state law, regulations, or rulings or decisions of the Secretary of Education or of any guarantor, or any instrumentality or official thereof;

(iv) All rights of the Trustee and the Borrower in and to any origination or servicing agreements relating to any Loans;

(v) Any instruments, documents, or chattel paper (as defined in the Uniform Commercial Code) from time to time delivered to Sallie Mae in pledge in accordance with the Agreement;

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ANNEX E

[Alternate for UCC-1 When Eligible Lender Trustee is Involved]

Description of Collateral to Be Used in Completing Form UCC-1

(i) All education loans from time to time legally or beneficially owned by the Debtor that were or are hereafter made pursuant to the Higher Education Act of 1965, as amended (“Loans”), along with all documentation related thereto and all rights of the Debtor with respect to such Loans, including all payments and rights to receive payment with respect thereto, which Loans may be identified in the records maintained by Sallie Mae, Inc. or its successor, or by any other servicer of such Loans, as being legally or beneficially owned by the Debtor;

(ii) All guarantee or insurance payments with respect to the Loans and all interest earned on such Loans or on such payments, along with all documentation related thereto and all rights of the Debtor with respect to any such guarantee or insurance payments;

(iii) All grants, contributions, or payments that may be received from any department, agency, or instrumentality of the United States with respect to the Loans, including without limitation any supplemental payments and other benefits payable in respect of such Loans under applicable federal or state law, regulations, or rulings or decisions of the Secretary of Education or of any guarantor, or any instrumentality or official thereof;

(iv) All rights of the Debtor in and to any origination or servicing agreements relating to any Loans;

(v) Any instruments, documents, or chattel paper (as defined in the Uniform Commercial Code) from time to time delivered to the secured party in pledge in accordance with the Revolving Financing Agreement dated as of                          20     , among Walden University, Inc., Wells Fargo Bank, National Association, solely in its capacity as eligible lender trustee for Walden University, Inc., and the secured party;

(vi) Any and all depository or other accounts into which the secured party deposits the proceeds of Advances made under the Financing Agreement; and

(vii) Any and all proceeds, and proceeds of proceeds, of all of the foregoing (including any proceeds of insurance or guarantees).

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ANNEX F

SERVICER OPERATIONS REPORT
INSTITUTIONAL FINANCE DEPARTMENT

Borrower:

Period Ending:

Date Completed:

Completed By:

I. Default Claim Activity:

a. Number filed greater than 270 days delinquent:

II. Rejected Claim Activity:

a.   Number of new rejects in month:

b.   Number of rejects cured/resolved in month:

c.   Number of rejects outstanding at end of month:

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ANNEX G

Opinion of Counsel to Borrower

Sallie Mae, Inc.
12061 Bluemont Way
Reston, VA 20190

Attention: Legal Department

We have acted as legal counsel to                                                  (the “Borrower”) in connection with that certain Revolving Financing Agreement (together with all documents to be executed in connection therewith, hereafter the “Financing Agreement”) dated as of                                   , among the Borrower, [INSERT TRUSTEE], solely in its capacity as eligible lender trustee for the Borrower, and you (“Sallie Mae”). Terms defined in the Financing Agreement shall have the same meanings when used in this opinion. In giving this opinion we have examined copies of the Financing Agreement signed by the Borrower, originals or copies certified to our satisfaction of all corporate records of the Borrower, and such other documents, records, and other matters in our opinion appropriate or necessary to enable us to render our opinion.

Subject to the qualifications mentioned below, we are of the opinion that;

(1)   The Borrower is a                                    corporation, duly incorporated, validly existing, and in good standing under the laws of the State of                              , and is duly qualified to transact operations in all places where such qualification is necessary. The Borrower has the necessary power and legal authority to enter into and perform its obligations under the Financing Agreement and any instrument or agreement required thereunder, and to borrow under the Financing Agreement.

(2)   All action necessary for the due authorization, execution, delivery and performance of the Financing Agreement by the Borrower and any instrument or agreement required under the Financing Agreement has been duly taken. When executed by Sallie Mae, the Financing Agreement shall be the legal, valid and binding agreements of the Borrower enforceable against it in accordance with their terms, and any instrument or agreement required under the Financing Agreement has been so authorized and, when executed and delivered, shall be similarly valid, binding, and enforceable.

(3)   The execution, delivery and performance by the Borrower of the Financing Agreement and of any instrument or other agreement required thereunder do not and will not:

(i) require any consent or approval of the Borrower’s shareholders; or

(ii) violate any provision of any law, regulation, order, judgment, determination or award presently in effect having applicability to the Borrower or to the Borrower’s charter or by-laws; or

(iii) result in breach of, or constitute a default under, any outstanding deed, agreement, lease, or other instrument to which the Borrower is a party or by which it or any of its assets may be bound or affected.

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(4)   The Borrower and the Trustee have the full right and legal authority to grant a security interest in the Security to be pledged pursuant to the Financing Agreement.  Upon the making of an Advance, the security interest of Sallie Mae in the Security shall be a perfected, enforceable, prior, and first security interest therein free from all other liens, charges, encumbrances, and security interests of any kind.

(5)   The making and performance of the Financing Agreement and any instrument or other agreement required thereunder and the creation of a security interest in favor of Sallie Mae do not require the authorization, approval, or consent of any governmental authority.

(6)   There are no actions, suits, or proceedings pending or, to our knowledge, threatened against or affecting the Borrower or any of the assets of the Borrower before any court or governmental department, board, agency or instrumentality.

The qualifications to which, this opinion is subject are as follows:

(A)   This opinion is limited to the law of                                    and the law of the United States as in effect on the date of this opinion. No opinion is expressed as to the laws of any other jurisdiction.

(B)   We assume the Financing Agreement has been duly authorized by Sallie Mae and will be duly executed and delivered by Sallie Mae in accordance with such authorization.

(C)   Our opinion as to the binding effect of the obligations of the Borrower under the Financing Agreement and any instrument or other agreement required thereunder is subject to bankruptcy, insolvency, liquidation, and similar laws generally affecting creditors’ rights.

(D)   Our opinion is subject, to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Very truly yours,

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EX-10.2

Exhibit 10.02

EXPORTSS®  AGREEMENT

of

JULY 1, 2006

AMONG

SALLIE MAE, INC.

12061 Bluemont Way

Reston, VA  20190

SLM EDUCATION CREDIT FINANCE CORPORATION

20 Hemingway Drive

East Providence, RI  02915

WALDEN UNIVERSITY, INC.

1001 Fleet Street

Baltimore, MD 21202

AND

WELLS FARGO BANK, NATIONAL ASSOCIATION

(solely in its capacity as Eligible Lender Trustee

for Walden University, Inc.)

7077 Bonneval Road, Suite 400

Jacksonville, FL  32216

Our Agreement

This is an Agreement among Sallie Mae, Inc. (“Sallie Mae”), SLM Education Credit Finance Corporation (“ECFC”), Wells Fargo Bank, National Association, solely in its capacity as Eligible Lender Trustee for Walden University, Inc. (together with its successors and assigns, “Trustee”), and Walden University, Inc. (“School”). Sallie Mae and ECFC are sometimes referred to together as the “SLM Entities.” The Agreement defines how Sallie Mae will provide services to originate and service loans on behalf of the Trustee, and the conditions under which ECFC or its designee will purchase them. Terms whose first occurrences are in italics are defined in Section 24.

TABLE OF CONTENTS

PART I LOAN ORIGINATION AND LOAN SERVICING
SECTION 1	Loan Origination
SECTION 2	INTENTIONALLY OMITTED
SECTION 3	Sallie Mae’s Servicing Responsibilities
SECTION 4	Parties’ Additional Responsibilities for Loan Origination and Servicing
SECTION 5	Compensation to Sallie Mae
SECTION 6	Right of Inspection
SECTION 7	Allocation of Liabilities
SECTION 8	Relationship of Parties
PART II LOAN SALES
SECTION 9	Sales Generally
SECTION 10	Participation in Loans; Payment of Purchase Price Payment Amount
SECTION 11	Additional Obligations of the Parties
SECTION 12	Sales Conditions and Procedures
SECTION 13	Post-Sale Obligations of the Parties
SECTION 14	Rejection of Loans
SECTION 15	The School’s Repurchase Obligation
PART III GENERAL PROVISIONS
SECTION 16	Representations and Warranties of the Trustee and the School
SECTION 17	Representations and Warranties of the SLM Entities
SECTION 18	Payment of Expenses and Taxes
SECTION 19	Communications and Notices
SECTION 20	Legislative Changes
SECTION 21	Termination
SECTION 22	Privacy Provisions
SECTION 23	Other Provisions
SECTION 24	Definitions
SECTION 25	Trustee Provisions
ATTACHMENTS
ATTACHMENT AA		E-Sign Documentation Requirements
ATTACHMENT A		Schedule of Fees
ATTACHMENT B		Officer’s Certificate of Trustee
ATTACHMENT B-l		Officer’s Certificate of School
ATTACHMENT C		Bill of Sale
ATTACHMENT D		Representations and Warranties With Respect to Loans
ATTACHMENT E-l		Blanket Endorsement
ATTACHMENT E-2		Power of Attorney
ATTACHMENT F		Master Participation Certificate
ATTACHMENT G		Performance Guarantee

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PART I - LOAN ORIGINATION AND LOAN SERVICING

SECTION 1          LOAN ORIGINATION

Sallie Mae will process student loan applications and originate student loans on behalf of the Trustee and the School according to the requirements of the Higher Education Act of 1965 as amended (the Act) and any related Regulations. Sallie Mae will continue this origination process until termination of such obligation under Section 21. In addition, all parties agree to the following:

Applications to be Processed

Sallie Mae will only be required to process completed applications from graduate and professional school students who attend Walden University, Inc.

Procedures for Processing Applications

Sallie Mae will review all applications sent to it on behalf of the Trustee and the School for completeness and the requirements the Guarantor has specified. Sallie Mae will send properly completed applications to the Guarantor for approval, unless the Guarantor has waived this requirement through the issuance of a certificate of blanket guaranty. If an application is not completed properly, Sallie Mae will try to contact the applicant by telephone or in writing to complete it properly, using its standard procedures.

If the application is not corrected or resubmitted properly within 90 days after the end of the loan period, Sallie Mae will terminate the application on its system.

Disbursing Loans

Sallie Mae will disburse Loan proceeds when an application is approved by the Guarantor, unless the Guarantor has authorized earlier disbursement of proceeds through a certificate of blanket guaranty.

One business day prior to each scheduled disbursement date, Sallie Mae will report to the School, by means of a request register, the Loans that that are to be disbursed on

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the particular disbursement date. Funds will be advanced to the School pursuant to the terms of the Financing Agreement. Sallie Mae will then draw funds for these Loans from the School’s designated funding bank account, and will transmit funds to the School’s designated financial aid account by EFT in accordance with the requirements of the Guarantor or Disbursement Agent.  Insurance premiums, if any, on a Loan will also be obtained from the School’s designated funding bank account and will be transmitted to the Guarantor.  The School hereby grants Sallie Mae a power of attorney to initiate a debit entry to its funding bank account in order to fund all loan disbursements and other payments that Sallie Mae makes on behalf of the Trustee, and the School agrees to sign a confirming written authorization in a form reasonably provided by Sallie Mae.  Refunded insurance premiums that Sallie Mae receives will be credited to a bank account maintained by Sallie Mae, for further credit to the School (or to the holder of the applicable Participation Interests, as appropriate).

Sallie Mae will provide the School with detailed reconciliation information to support all draws that it makes on the School’s bank account.

If Sallie Mae learns that a Disbursement Agent requires that the Trustee enter into agreements with it, Sallie Mae will notify the School.  The School agrees to cause the Trustee to enter into such required agreements if reasonable and to give Sallie Mae copies when signed.  If the School learns that the School has become ineligible for EFT disbursements, or if any of the agreements either party has entered into with any Guarantor or Disbursement Agent has been terminated, such party must notify Sallie Mae in writing immediately. If any party wants Sallie Mae to stop EFT disbursements to the School or to change the method of origination, such party also must notify Sallie Mae in writing.  Sallie Mae will process such change as promptly as possible.

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The School is responsible for paying all fees charged by a Disbursement Agent in connection with disbursement of Loan proceeds by EFT.

Sallie Mae will send a disbursement roster to the School containing the information required by the Act and Guarantor, and will also send the Trustee, if it so requests, a copy of the portion of the disbursement roster that lists information for the Trustee’s Borrowers.  If the Trustee or the School wants Sallie Mae to send the disbursement roster by overnight delivery method, Sallie Mae may charge the School for the cost of such delivery.  In accordance with the Act and Regulations, the School will be responsible for obtaining the Borrower’s authorization for the release of Loan proceeds.

For Loans that the School wants to be originated or disbursed using services offered by a Disbursement Agent, Sallie Mae will inform the School whether it is capable of using such Disbursement Agent’s services and which of the duties and responsibilities that Sallie Mae would normally perform will instead be performed by such Disbursement Agent.  The Trustee and the School acknowledge that Sallie Mae may use as the disbursement date for such Loans the date that funds were provided (or were scheduled to be provided) to the Disbursement Agent and that Sallie Mae will treat such Loans for all purposes as having been disbursed by EFT, unless either (i) the Guarantor or the Secretary otherwise directs or (ii) Sallie Mae concludes that the Act or Regulations otherwise require.  The Trustee and the School acknowledge that the services offered by a Disbursement Agent may alter or diminish Sallie Mae’s origination, administrative, and servicing duties and responsibilities under this Agreement, in which event Sallie Mae will have no responsibility or liability for performing the services that are to be performed by such Disbursement Agent.  If a Guarantor notifies Sallie Mae that such Guarantor will be taking over any or all of

3

the origination or disbursement services that Sallie Mae would normally perform (including, without limitation, retention of the promissory notes), Sallie Mae may allow the Guarantor to perform such services, in which case Sallie Mae will no longer have responsibility or liability for such services.

Use of Internet-Based Origination and Disbursement Services

The Trustee and the School hereby authorize Sallie Mae to process Loan applications through Sallie Mae’s Internet-based loan origination and disbursement service, and to originate such student loans through such Internet-based loan origination and disbursement service on behalf of the Trustee. Sallie Mae will continue to originate Loan applications that it receives through such method until the earlier of (i) the date Sallie Mae stops offering Internet-based origination services to schools and lenders, (ii) the date Part I of the Agreement is terminated, or (iii) a date that is 60 days after Sallie Mae receives written notice from the Trustee or the School directing Sallie Mae to stop originating through such Internet-based disbursement service.  Any such termination shall only be applicable with respect to loans that Sallie Mae has not yet begun to process as of the effective date of such termination.  The Trustee and the School acknowledge that all features and functions of Sallie Mae’s Internet-based origination and disbursement service are the property of Sallie Mae and/or its affiliates, and each waives any claim of ownership with respect thereto.  Both the Trustee and the School agree to take appropriate security measures to protect the security of passwords, to monitor its staff, including but not limited to those persons designated as the primary and secondary contacts, for unauthorized use of such product, and to restrict passwords and access to such product to the appropriate staff. Both the Trustee and the School agree that use of such product shall be limited to authorized employees and that in no event shall they take action to permit a third

4

party to use such product.

SALLIE MAE’S INTERNET-BASED ORIGINATION SERVICE INCLUDES FUNCTIONS AND INFORMATION THAT ARE SUBJECT TO CHANGE WITHOUT NOTICE. SALLIE MAE WANTS THE FUNCTIONS AND INFORMATION TO BE AS UP-TO-DATE AND ACCURATE AS POSSIBLE, BUT SALLIE MAE CANNOT GUARANTEE, AND SALLIE MAE EXPRESSLY DOES NOT WARRANT, THAT THE INFORMATION ANY USER MAY OBTAIN PROM SALLIE MAE’S INTERNET SITE IS ERROR-FREE OR THAT THE USER’S ACCESS TO SUCH INTERNET SITE WILL BE UNINTERRUPTED, OR THAT MATERIAL ACCESSIBLE FROM THIS SITE IS FREE OF VIRUSES.

Additional Provisions Regarding E-Signed Loans

The Trustee and the School agree promptly to provide Sallie Mae with copies of all agreements between either of them and any entities relating to E-sign processes offered by other entities.

With respect to all applications for Loans that are E-Signed through E-Sign processes other than Sallie Mae’s, Sallie Mae shall have no responsibility for performing the application review or other obligations set forth in the “Applications to be Processed” or “Procedures for Processing Applications” provisions of this Section 1.   Both the Trustee and the School acknowledge that the entity offering such E-Sign process may elect to retain the promissory notes relating to E-Signed Loans, in which case Sallie Mae will have no responsibility for obtaining or retaining such promissory notes. Additionally, Sallie Mae’s obligations with respect to disbursement of such Loans, as set forth in the “Disbursing Loans” provisions of this Section 1, and ECFC’S obligations to purchase such Loans, are modified to provide that Sallie Mae may decline to disburse and/or service such E-Signed Loans, and ECFC may decline to purchase such E-Signed Loans {and Participation Interests in such Loans) unless (i) the Trustee or the School provides Sallie Mae with the information and documentation set forth in Attachment AA hereto and {ii} Sallie Mae confirms that disbursing and/or servicing such E-Signed Loans will not require any system changes, additional costs, or manual processes on Sallie Mae’s behalf.  The School hereby agrees to cause the entity offering such E-Sign process to deliver the information and documentation set forth in Attachment AA to

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Sallie Mae prior to disbursement and/or servicing of such Loans, and at any time thereafter promptly upon Sallie Mae’s or ECFC’s request.  The Trustee and the School also agree that if Sallie Mae does consent to disburse and/or service such E-Signed Loans, or if ECFC does consent to purchase such E-Signed Loans (and Participation Interests in such Loans), neither of such parties is thereby acknowledging or opining as to the sufficiency of any such documentation or as to the E-Sign process itself, nor is ECFC waiving any of its rights to reject or to require repurchase of such E-Signed Loans pursuant to the other provisions of this Agreement.  The Trustee and the School further acknowledge that any such consent to disburse, service, and/or purchase E-Signed Loans (or Participation Interests therein) will be limited to specific schools designated in writing by Sallie Mae and ECFC.

For Loans originated using the Sallie Mae E-Sign process, Sallie Mae will remain responsible to comply with the Act, Regulations, and applicable federal law in originating and servicing the Trustee’s Loans, and Sallie Mae will remain liable, upon the terms set forth in Section 7 of this Agreement, for its violations of such laws and regulations. Additionally, the Loans that are originated through the Sallie Mae E-Sign process will remain Eligible Loans if (i) they fail to satisfy the criteria set forth in that definition due to Sallie Mae’s failure to originate or service such Loans in accordance with the Act, Regulations, or applicable federal law, or (ii) they are determined by a court to be legally unenforceable based solely on the failure of the Sallie Mae E-Sign process to comply with the requirements of the Act or the Electronic Signatures in Global and National Commerce Act.  In no event, however, will Sallie Mae or ECFC be liable due to fraud or forgery by the individual who manually or electronically signed the promissory note, or if such individual is not the actual Borrower of the Loan.

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Advances

Sallie Mae may advance funds on the School’s behalf if sufficient funds are not in the School’s funding bank account on the day Sallie Mae attempts to draw from such account. The Trustee and the School agree that such advances will benefit their student loan program, and the School agrees to repay the entire amount of such advances, when Sallie Mae requests repayment.  Unless the failure to have sufficient funds in the funding bank account is due to an error by Sallie Mae under this Agreement or under the Financing Agreement, Sallie Mae may charge the School interest at the Prime Rate on the amounts advanced.

Loan Cancellation

If a Loan or a disbursement is cancelled, Sallie Mae will attempt to obtain the return of the disbursed funds for each Cancelled Loan of which it knows so that Sallie Mae can process a cancellation.  If Loan funds are returned by the School or by a Guarantor directly to the Trustee or the School, or if either the Trustee or the School learns that the Loan should be cancelled, such party must notify Sallie Mae so that Sallie Mae can process a cancellation.

Subcontracts

The Trustee and the School each acknowledges that Sallie Mae may subcontract with third parties to perform some or all of the origination and/or servicing activities that Sallie Mae is to perform under this Agreement. Notwithstanding any such subcontracting, Sallie Mae will remain liable, to the extent set forth in this Agreement, for all such origination and/or servicing activities that are performed by subcontractors employed by Sallie Mae.

Effect of Termination

When Sallie Mae’s origination obligations are terminated under Section 21, Sallie Mae will no longer have an obligation to process additional applications and disburse Loans, but Sallie Mae will continue to process applications in its possession at that time. If this Agreement is terminated because of an Insolvency Event, Sallie Mae may cease processing applications and disbursing all

7

Loans immediately.  See Section 21 for additional effects of termination.

SECTION 2          INTENTIONALLY OMITTED

SECTION 3          SALLIE MAE’S SERVICING RESPONSIBILITIES

Sallie Mae will service all of the Loans Sallie Mae originated for the Trustee until each Loan is either purchased or rejected for purchase under Part II of this Agreement.

Sallie Mae’s servicing and origination responsibilities will begin immediately after Sallie Mae receives a signed copy of this Agreement from the Trustee and the School. If it is a renewal, these responsibilities begin on the Effective Date.  Sallie Mae’s responsibilities will be limited to the following:

Compliance

Sallie Mae will service all Loans in accordance with the Act and Regulations.

Inquiries and Reports

Sallie Mae will respond promptly to any inquiries from the Borrower, the Guarantor, the Secretary, or the Borrower’s School regarding Loans Sallie Mae is servicing hereunder. Sallie Mae will also file, or prepare for the School to file, all reports, claims, and billing statements for those Loans required by the Guarantor or the Secretary. Sallie Mae will prepare and file the Trustee’s LARS Form 799 on its behalf. Sallie Mae will make available to the School and the Trustee copies of these reports, claims and billing statements at their request. However, the School will be responsible for paying Sallie Mae’s then-standard fee to receive a copy of the annual Lender Audit Report on Management’s Assertions on Compliance with Specified Federal Education Loan Program Requirements (“Lender Audit”) that is required by the Secretary.

Sallie Mae will also provide the School with Sallie Mae’s standard reports for lenders generated by Sallie Mae’s system. Sallie Mae

8

may impose a fee for providing non-standard reports the School or the Trustee may request.

Loan Payments

Sallie Mae will process all Loan payments from the Borrowers, the Guarantor, and the Secretary that Sallie Mae receives.  Sallie Mae will deposit these payments and transfer funds to ECFC’s bank account (as the owner of the Participation Interests in the Loans).

SECTION 4          SCHOOL’S ADDITIONAL RESPONSIBILITIES FOR LOAN ORIGINATION AND SERVICING

Application Packages

The School agrees to prepare and distribute application packages in a form reasonably acceptable to Sallie Mae that complies with the Act and the Regulations.

Forwarding Communications and Payments

If the School or the Trustee receives any communications or payments on a Loan that Sallie Mae is servicing for either of them, such party agrees to forward the communication or the payment to Sallie Mae within 5 business days.

Power of Attorney

By signing this Agreement, the Trustee and the School each grants Sallie Mae the authority to act as its agent and attorney-in-fact for originating or servicing Loans. Sallie Mae’s powers under this provision do not include the right to waive strict compliance with the terms of the Loan by the Borrower.  The Trustee and the School each agrees to execute a specific power-of-attorney if required by the Guarantor or the Secretary.

Inquiries

The Trustee and the School each agrees to cooperate with Sallie Mae, as necessary, to respond promptly to inquiries concerning Loans.

Guarantor Agreements

The Trustee and the School each agrees to furnish Sallie Mae with copies of all agreements between such party and the Guarantor that affect the Loans that Sallie Mae originates or services hereunder.

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Changes Necessitated by the Trustee or the School

The School agrees to pay Sallie Mae’s reasonable charges for implementing any systems or procedural changes that Sallie Mae may agree to undertake that are necessitated by the Trustee’s or the School’s participation in any program that requires non-standard origination or servicing activities on Sallie Mae’s part.  Before undertaking any such changes, however, for which Sallie Mae intends to invoice the School, Sallie Mae will provide the School with an estimate of the charges, and Sallie Mae will not proceed with the changes until the School agrees to the charges.

Limitation on Education Lending Activities

The School agrees that during the entire Commitment Period, neither it nor any parent, subsidiary, or affiliate, will (i) own any education loan made to a graduate student made under the Act in any manner, whether legally or beneficially or as an eligible lender trustee for a third party, other than through ownership of legal title in the name of the Trustee for the benefit of the School, or (ii) originate, disburse, or market education loans that are to be made to graduate students under the Act as an eligible lender trustee for a third party, or through any other marketing arrangements or other structure, or consent to the use of the School’s name by other entities for the purpose of marketing education loans that are to be made to graduate students under the Act.

SECTION 5          COMPENSATION TO SALLIE MAE

Basic fees

Upon receipt of a monthly itemized bill from Sallie Mae, the School agrees to pay Sallie Mae the fees listed in Attachment A until the end of the Commitment Period.

Fees After the Commitment Period

After the end of the Commitment Period, the School will remit to Sallie Mae, on a monthly basis, origination and servicing fees which will be at a rate equal to the fees charged immediately prior to the end of the

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Commitment Period. Sallie Mae also retains the right to increase such fees on each anniversary of the expiration of the Commitment Period by 5% of the then-applicable fees.

Linkage Fees

Sallie Mae will advise the School prior to using any electronic linkage with a Guarantor for which a fee is charged.  If the School or the Trustee elects to use this linkage, the School will reimburse Sallie Mae for any fees Sallie Mae incurs for use of that linkage on the School’s behalf.

Late Fee

If any bill is not paid within 30 days, the School agrees to pay a late fee of 1.5% for each month or part of a month it is late with its payment.

SECTION 6         RIGHT OF INSPECTION

The Trustee and the School, or any governmental agency having authority over either such party’s business, may examine or audit Sallie Mae’s books and records for origination and servicing of the Loans.  To the extent feasible, the party requesting such examination agrees to give Sallie Mae at least 10 business days’ notice of such examination or audit, it being agreed that if fewer than 10 business days’ notice is given, Sallie Mae may not be able to schedule the availability of the necessary personnel to enable the audit to be performed in the most efficient manner.  Additionally, the party requesting such audit agrees to schedule it during normal business hours, and to reimburse Sallie Mae in an amount Sallie Mae reasonably determines with respect to the costs of Sallie Mae’s personnel, computer equipment, and facilities.

SECTION 7          ALLOCATION OF LIABILITIES

Standard of Conduct

All parties agree to perform their respective obligations in Part I of this Agreement without negligence.

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Limits on Sallie Mae’s and ECFC’s Liability

A Loan is still an Eligible Loan if it fails to meet the criteria for an Eligible Loan solely because of an act or omission by Sallie Mae in originating or servicing the Loan that constitutes a breach of Sallie Mae’s obligations under this Agreement.

In addition to ECFC’s agreement to buy each such Loan, the maximum money damages Sallie Mae and/or ECFC will pay to the Trustee or the School due to any breach of Part I or Part II of this Agreement will be 0.5% of the total Principal Balance of all Loans serviced under this Agreement as of the date of the breach.

In no event will Sallie Mae or ECFC have liability for any of the following:

•              damages arising from violations of state law;

•              indirect, consequential, exemplary, special, or punitive damages;

•              losses arising from electronic data transmission problems in connection with either such party’s actions on behalf of the Trustee or the School;

•              the Guarantor’s or Disbursement Agent’s failure to perform;

•              any wrongful act or omission of the Trustee, the School, their employees or agents, or any other person or entity or its employees or agents (other than an SLM Entity or its employees or agents), such as the failure of such person or entity to comply with requirements of a Guarantor or the Secretary;

•              any failure of any third party to maintain an audit trail of funds or records proving proper disbursement or proper crediting of the Borrower’s account;

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•              incorrect information from schools or Borrowers; or

•              any errors, breaches or delays that arise from acts of God, equipment or similar failure or other circumstances beyond Sallie Mae’s or ECFC’s control.

No provision of this Agreement will alter or limit any joint or several liability any party may have to the Secretary pursuant to 34 C.F.R. 682.413.

SECTION 8          RELATIONSHIP OF PARTIES

Sallie Mae is an independent contractor acting as agent for the Trustee and the School only for the services specifically described in this Agreement.  This Agreement is not a joint venture or partnership between or among the Trustee, the School, Sallie Mae, and/or ECFC.

PART II - LOAN SALES

SECTION 9          SALES GENERALLY

Future Required Sales

The Trustee and the School agree to sell to ECFC on the following schedule all Eligible Loans owned by or for the benefit of the School during the Commitment Period:

Loan Type	Selection Criteria for Next Sale Date	Sale Date Frequency*
Stafford Loans	All within 60-90 days
Monthly	of full disbursement
Retroactive	All	Monthly
Separation Loan
(all Loan Types)

*The sale date will be specified by ECFC.

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The Trustee and the School also agree to offer to ECFC on this sales schedule, even after the Commitment Period has ended, (i) any Eligible Loans that were originated or serviced at any time by Sallie Mae or its affiliates, (ii) any Eligible Loans that were financed in whole or in part by Sallie Mae or any of its affiliates, and (iii) all Serial Loans. Subject to the remaining terms of this Agreement, ECFC agrees to buy the Eligible Loans that are offered.

Simultaneous Sales of Associated Stafford Loans

Without regard to the sales schedule, all Unsubsidized Stafford Loans and subsidized Stafford Loans of the same Borrower made on the same loan application shall be offered for sale to ECFC at the same time.

Procedures for Required Loan Sales

At least ten business days before the next scheduled sale date, Sallie Mae will send the School a list of Loans that Sallie Mae is servicing hereunder that are to be included in the next scheduled sale.  Unless Sallie Mae is notified otherwise in writing within 5 business days of receiving such list, the Trustee and the School will have authorized the sale of those Loans.

Master Promissory Note Provisions

If any Loans that are to be sold under this Agreement were made under a Master Promissory Note, the Trustee or the School will indicate on the Bill of Sale whether or not the sale of such Loans includes or excludes an assignment of the right to offer future Loans under such Master Promissory Note.  If the Trustee reserves to itself the right to offer future Loans, such right is not assignable except to (i) the surviving entity following a merger or acquisition of the Trustee or (ii) the purchaser of any such future loans (but ECFC does not waive any obligation of the Trustee or the School to sell ECFC Loans under the Agreement).  Unless ECFC otherwise agrees in writing, the Trustee or the School will deliver to ECFC the original of the Master Promissory Note at the time of sale in accordance with the provisions of this Agreement.  If the original of the Master Promissory Note is not delivered at the time

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of sale, then the Trustee or the School will require the holder of the Master Promissory Note to indicate by entry on its books and records that the owner of the Loans is ECFC.

SECTION 10        PARTICIPATION IN LOANS; PAYMENT OF PURCHASE PRICE PAYMENT AMOUNT

Settlement of Purchase Price Payment Amount

ECFC will follow these steps to pay the School the Purchase Price Payment Amount for the Loans:

Conveyance of Participation Interests

The Trustee and the School hereby offer, and ECFC hereby accepts, on the terms set forth in this Section 10, an undivided 100.00% Participation Interest in each disbursement of Loans satisfying the following criteria: (i) they must otherwise qualify as Eligible Loans (but for their failure to be fully disbursed), (ii) they must be originated and serviced by Sallie Mae, and be obligated to be sold to ECFC, under this Agreement, (iii) they must be originated in the Trustee’s name as trustee for the School, and (iv) they must be made in connection with attendance at an educational institution for which the Institutional Default Rate is less than 25%.

The conveyance of the Participation Interest in each such disbursement shall be effective on the date of disbursement.  As a result, all parties recognize that ECFC is entitled to all beneficial rights with respect to each such disbursement effective on the date of disbursement.

The parties agree that the sale of the Participation Interests constitutes a sale of all beneficial rights in the disbursements of the Participated Loans.  Accordingly, ECFC shall be entitled to receive all refunds, cancellations, Special Allowance payments, and interest payments relating to such Participated Loans.

ECFC shall pay the Disbursement Payment to the School on the date the particular disbursement of each such Loan is made. If, however, there are Advances outstanding under

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the Financing Agreement, ECFC will instead make the Disbursement Payments to Sallie Mae on the same day on which the purchase of the Participation Interests is effective, so that the outstanding Advances under the Financing Agreement are repaid on behalf of the School on such date.

Sallie Mae shall maintain an updated Master List, which will be available for the Trustee’s and the School’s inspection and will be deemed an exhibit to the Master Participation Certificate, of disbursements and Loans with respect to which ECFC has purchased a Participation Interest. Sallie Mae shall have no obligation to review any documents, records, or books with respect to the Loans prior to purchase of the Participation Interests.

Notwithstanding any other language set forth in Section 9 of the Agreement, and notwithstanding the expiration of the Commitment Period, the Trustee and the School each expressly agrees that such party will remain obligated to sell to ECFC all Loans (and Participation Interests in all subsequent disbursements of such Loans) in which ECFC has purchased a Participation Interest.  In return, ECFC will be obligated to purchase Participation Interests in all disbursements of all such Loans that satisfy the Eligible Loan criteria, for the Disbursement Payments (and Purchase Price Payment Amount) described herein.

The parties agree that the Purchase Price Payment Amount is repayable to ECFC in every circumstance in which a repurchase is required under the terms of this Agreement.

Monthly Payment of the Purchase Price Payment Amount

As promptly as possible following the end of each calendar month during which ECFC purchased a Participation Interest in Loans hereunder, Sallie Mae will determine the amount by which (i) the Purchase Price Payment Amount with respect to all disbursements in which ECFC purchased a Participation Interest in the prior month,

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exceeds (ii) the aggregate original Principal Balance of the same disbursements.  ECFC will pay the School this amount, after first deducting (i) the Purchase Price Payment Amount attributable to any Participation Interests that ECFC previously purchased from the School relating to Cancelled Loans (to the extent such amounts were not already reconciled in any prior month), and (ii) any other amounts you owe ECFC, provided such other amounts have been previously disclosed to you, and ECFC will pay you the Purchase Price net of such amounts. The parties recognize that as a result of this reconciliation process, ECFC will retain any and all payments the Secretary makes to the Trustee or the School on the LARS Form 799.

LARS Form 799 Preparation and Filing

Sallie Mae will complete the Trustee’s LARS Form 799 for the OE number it uses to originate Loans pursuant to this Agreement, and Sallie Mae will file it on behalf of the Trustee and the School. At the time a respective LARS Form 799 filing is sent to the Secretary, Sallie Mae will provide the Trustee and the School with a copy.

All such LARS Form 799 filings shall reflect that payments by the Secretary are to be made to Sallie Mae, as the servicer, and the Trustee and the School each hereby directs Sallie Mae to forward such payments, in turn, to ECFC.  ECFC will be entitled to retain all such LARS Form 799 payments from the Secretary that accrue from the date of disbursement with respect to the Loans, and with respect to all Loans in which ECFC purchases a Participation Interest, ECFC will be responsible for paying all amounts owed pursuant to LARS Form 799 with respect to such Loans, including without limitation (i) the Secretary’s Lender Fee, (ii) any portion of the origination fee that is chargeable to the Borrower by a lender under section 438 (c) of the Act (and any similar provision of the Act that is hereafter enacted) but that is waived by the School (on its own or through the Trustee), and (iii) any other fee that is charged to the School or the Trustee by the

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Secretary on LARS Form 799.

If either of the Trustee or the School was originating loans prior to the Effective Date, such party acknowledges that ECFC is not responsible for the payment of any of the fees or charges associated with such prior loans, and such party agrees that if ECFC pays or is charged such amounts pursuant to any such LARS Form 799 filing, such party will repay such amounts to ECFC promptly following receipt of an invoice.

Serial Loans After the Expiration of The Commitment Period

The Trustee and the School each hereby reaffirms its obligation to sell ECFC, on the terms (including Sales Schedule and purchase terms) set forth in this Agreement, and even after the Commitment Period expires, all Serial Loans that such party makes (either legally or beneficially).  In return for such continuing obligation to sell, ECFC agrees to continue to purchase Participation Interests in, and to pay the School the Purchase Price Payment Amounts set forth in this Agreement with respect to, Serial Loans made after the Commitment Period ends.  With respect to all Serial Loans that are originated or serviced by a servicer other than Sallie Mae, the School agrees to provide all information that is reasonably necessary (i) to effect the purchase of the Participation Interests in such Serial Loans and (ii) to properly allocate earnings and payments with respect to such Serial Loans.

Representations and Warranties of the Trustee and the School on Sale of Participation Interests

Upon the sale of Participation Interests to ECFC, the Trustee will be deemed to make the identical representations and warranties that it makes upon the sale of Loans to ECFC, all as set forth in Attachment D to this Agreement, except that the Trustee will not be deemed in breach of the warranty of title (either upon sale of the Participation Interests or upon sale of the legal title to the Loans) solely because it has encumbered title to the Loans by previously selling to ECFC a Participation Interest in such Loans. The Trustee and the School also make the following additional covenants,

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representations, and warranties upon the sale of the Participation Interests:

(1)           The Trustee will retain legal title of record to each Participated Loan (and all promissory notes) in trust for ECFC (to the extent of ECFC’s Participation Interest in such Loans) until the conveyance to ECFC of legal title to such Loan, and the Trustee or the School shall retain, or cause the servicer(s) to retain, the Loan files with respect to such Loans in trust only for the purposes of making subsequent disbursements, if any, on such Loans, and servicing and supervising the servicing of each Loan.

(2)           The School will fund and otherwise make the second and all requested subsequent disbursements on all Participated Loans. In the event the School fails to make any such subsequent disbursements on Participated Loans, ECFC may advance to the School the funds necessary to make such subsequent disbursements, in which case such sums will be treated as advances pursuant to the “Advances” provisions of Section 1 of this Agreement (and will be repayable as such, with interest as provided in such Section).

(3)           The School will continue to have all Participated Loans serviced in compliance with the Act and Regulations until conveyance to ECFC of legal title to such Loans, in accordance with their normal practices with respect to loans owned for their own account, and will not modify the terms of any Loan or any guarantee with respect to any Participated Loans.

(4)           The Trustee and the School shall receive and hold in trust for ECFC’s benefit, to the extent of ECFC’s Participation Interests, all funds that the Trustee or the School receives on or in connection with each such Participated Loan (whether through Borrower payments or LARS Form 799 payments from the Secretary), as well as all other rights arising out of the Participated Loans. The Trustee and the School hereby direct ECFC

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and Sallie Mae to pay directly to ECFC the share of all such funds received with respect to such Participated Loans, and the Trustee and the School hereby grant ECFC and Sallie Mae a limited power of attorney for the purpose of taking all actions necessary to effectuate the foregoing. If the Trustee or the School receives such funds, such party will promptly remit to Sallie Mae ECFC’s share of all funds received with respect to such Participated Loans.

(5)           The School shall maintain books and records for the Participated Loans that shall be clearly marked to reflect ECFC’s ownership of the Participation Interests in the Participated Loans.

(6)           The School will, in compliance with the Act and Regulations, cause to be performed such other customary duties, furnished such other reports, and executed such other documents in connection with the Participated Loans as Sallie Mae from time to time may reasonably require.

All parties agree that the representations and warranties set forth in this Section 10 shall survive the sale of the Participation Interests to ECFC and the subsequent conveyance to ECFC of legal title to the Participated Loans.

Security Interest in Participated Loans

(1)  The Trustee and the School hereby grant ECFC a security interest in all of their right, title, and interest in, to, and under (i) each Participated Loan (including each of the Loan documents evidencing or providing for such Participated Loan and any guarantee, collateral, or other similar support therefor), and (ii) all proceeds thereof (collectively, the “Collateral”) as collateral security for their obligations to ECFC under this Section 10 (including, without limitation, the costs and expenses of any realization on the Collateral).  ECFC agrees that the lien on and security interest in each Participated Loan and the Collateral shall be subordinate in all respects to the

20

lien and security interest of Sallie Mae in each such Participated Loan pursuant to the Financing Agreement.

(2)           The Trustee and the School each agrees that, prior to or concurrently with the effectiveness of the first sale and purchase of a Participation Interest under this Agreement, such party will permit ECFC to file, at the cost and expense of the School, such financing statements and other notices of security interest in such offices as ECFC requests to perfect its security interest in the Participated Loans.  If requested, the Trustee and the School each agrees to execute all such financing statements and other notices of security interest as ECFC reasonably requests.

(3)           Without ECFC’s prior written consent, neither the Trustee nor the School will grant any security interest in, or file or suffer to be on file in any jurisdiction any financing statement or other notice of security interest with respect to, any Participated Loan or the Collateral, except those in ECFC’s or Sallie Mae’s favor.

(4)           Subject to the provisions of subparagraph (1) above, if the School or the Trustee defaults in the payment or performance when due of any of such party’s obligations to ECFC under this Section 10, ECFC shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code as in effect in the applicable jurisdiction, and such additional rights and remedies to which a secured party is entitled under the law in effect in the jurisdiction where any such rights and remedies may be asserted.

(5)           Upon the School’s repurchase of all of ECFC’s Participation Interests in any particular Participated Loan that is required to be repurchased pursuant to the terms of Section 15 of this Agreement, the security interest granted in such Participated Loan

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pursuant to this Section 10 shall automatically terminate, and ECFC shall execute and deliver such termination statements and other notices and releases of security interest with respect to such Participated Loan as the Trustee or the School shall reasonable request.

Release of Prior Liens

As a part of the process of obtaining the full execution of this Agreement, the School shall obtain the consent of each of its respective lenders to provisions by which each lender (i) expressly consents to the sales to ECFC of Participation Interests in Loans pursuant to the terms of this Agreement, as it may be amended from time to time, without the necessity of obtaining from such lender any further releases of such Loans, and (ii) agrees that its lien in and to each Loan in which ECFC purchases a Participation Interest shall be deemed released upon the sale of such Participation Interest to ECFC and the payment by ECFC pursuant to the terms of this Agreement, without any further action or filing by such lender.

Failure to Sell or Purchase Loans or Participation Interests in Accordance With Terms of Agreement

If (i) the Trustee or the School does not timely sell ECFC Participation Interests in subsequent disbursements of any Loan in which ECFC has already purchased a Participation Interest (and with respect to which ECFC has properly offered to purchase the Participation Interests in the subsequent disbursements of such Loan), or (ii) the Trustee or the School fails to make such subsequent disbursements, or (iii) the Trustee or the School does not timely convey to ECFC legal title to any particular Loan in which ECFC has purchased the Participation Interests, then the Trustee and the School agree that in addition to ECFC’s right under Section 15 to require repurchase of the Participation Interests that ECFC already purchased, the School will remain liable to ECFC for all damages and costs, including reasonable attorneys’ fees, incurred in remedying such breach by the Trustee or the School.  Repurchase of such Participation Interests does not excuse any such breach by the Trustee or the School, and ECFC expressly

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retains all of ECFC’s remedies at law and in equity.

If ECFC fails to purchase Eligible Loans (or Participation Interests in subsequent disbursements of Eligible Loans) with respect to which ECFC has previously purchased a Participation Interest, then ECFC shall be in breach of this Agreement.  As the remedy for such breach, ECFC shall be required to (i) purchase such Eligible Loans (or Participation Interests in subsequent disbursements of Eligible Loans) on the terms set forth in this Section 10, and (ii) pay to the Trustee and the School all damages and costs, including reasonable attorneys’ fees, incurred in remedying such breach by ECFC. The School or Trustee shall be able to enter into alternative arrangements for the sale of such Loans in order to mitigate any failure or inability on the part of ECFC to purchase the Loans.

Method of Payment

All payments due from any party will be made by wire transfer of immediately available funds to the appropriate party.

SECTION 11       ADDITIONAL OBLIGATIONS OF THE PARTIES

Officer’s Certificate and Opinion of Counsel

When the Trustee and the School sign and submit this Agreement, each agrees to include an officer’s certificate in the forms provided in Attachment B and Attachment B-l, as applicable.

Serial Loans

The School agrees to use its best efforts to make (or to cause the Trustee to make) Serial Loans and to sell them to ECFC on the terms (including sales schedule and Purchase Price Payment Amounts) set forth in this Agreement. This requirement will continue to apply after the Commitment Period has ended.

No Modification of Guarantor Agreements

The Trustee and the School agree not to modify or amend any agreements with the Guarantor that would affect the Loans or the insurance on the Loans in any way without ECFC’s prior written consent. ECFC’s consent is not necessary if the amendment or

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modification is required by the Act or the Regulations.

Sales to Third Parties

The Trustee and the School agree not to sell any Eligible Loan to any third party during the Commitment Period.  After the Commitment Period, such parties agree not to sell to any third party any Eligible Loan that (A) was originated or serviced at any time by Sallie Mae or its affiliates, or (B) is a Serial Loan, or (C) is a Loan with respect to which ECFC has purchased a Participation Interest, unless (i) such Loans were offered for sale to ECFC on the terms set forth in this Agreement, (ii) ECFC has been given a period of 30 days to review such offer, and (iii) ECFC has elected not to buy such Loans. Under the Future Required Sales provisions of Section 9 above, ECFC only has the right to elect not to buy such Eligible Loans in accordance with Section 14 of this Agreement.

SECTION 12        SALES CONDITIONS AND PROCEDURES

The following conditions and procedures must be fulfilled in all material respects or ECFC will have no obligation to complete a sale:

Compliance

The Trustee and the School each must have fulfilled its respective obligations under this Agreement.

Accuracy of Representations and Warranties

All of the representations and warranties made by the Trustee and the School under Section 16 and Attachment D of this Agreement must be true.

Delivery of Loans

If not already in Sallie Mae’s possession, the School agrees to deliver to Sallie Mae the notes and other documentation for Loans offered for sale on a schedule and in a manner Sallie Mae reasonably requests. Except for Loans that are processed and originated wholly by Sallie Mae on behalf of the Trustee and the School, the School agrees to bear the risk of loss for the Loans until Sallie Mae receives them.  Sallie Mae will provide the School with a written receipt for delivery.

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Sallie Mae will make a microfilm or computer-imaging record of the documents it receives. The Trustee and the School agree that this record will be the final authority used to resolve any dispute over questions about whether a specific document was received by Sallie Mae unless contrary proof acceptable to Sallie Mae is provided. Sallie Mae will provide a copy of the record to the Trustee or the School upon request.

Servicing Responsibility

The party servicing the Loans subject to sale will continue to do so until the Cutoff Date. The party servicing the Loans subject to sale will provide Sallie Mae with all necessary Account information on these Loans as of the Cutoff Date in the form and on the schedule Sallie Mae reasonably establishes. The School agrees to ensure that any third party servicer will comply with these requirements.

Bill of Sale

The School and the Trustee will deliver 2 signed copies of a Bill of Sale in the form of Attachment C for each portfolio of Loans prior to the date of sale. This Bill of Sale will include a list of the Loans ECFC has agreed to buy.  The list will have been prepared by the party servicing the Loans. ECFC will complete its sections of the Bill of Sale and sign it as of the date of sale.

Endorsement of Loans

The Trustee and the School agree to assign their entire interest in the Loans covered by the Bill of Sale to ECFC. This assignment will typically take one of these two forms:

(1)           a blanket endorsement in the form of Attachment E-l; or

(2)           a power of attorney granted to ECFC in the form of Attachment E-2.

If required by the Guarantor or the Secretary, an authorized officer of each company may have to endorse each note.

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Updated Officer’s Certificate and Opinion of Counsel

Upon the request of Sallie Mae or ECFC, each of the Trustee and the School agrees to supply a new officer’s certificate (Attachment B or Attachment B-l) or a new opinion of counsel covering matters relating to such party’s corporate authority or the enforceability of this Agreement or the sale documents.

SECTION 13        POST-SALE OBLIGATIONS OP THE PARTIES

After the sale of Loans, the Trustee and the School will be responsible for the following:

Borrower Notification

The Trustee and the School agree to cooperate with Sallie Mae and take any steps necessary to ensure that the Borrower is properly notified of the sale of his or her Loan, if required by the Act and Regulations.

Forwarding Communications and Payments

If either the Trustee or the School receives any communications or payments with respect to a Loan that was sold to ECFC, such party agrees to forward the communication or payment to Sallie Mae within 5 business days.

Assistance in Resolving Account Issues

The Trustee and the School agree to provide any assistance to Sallie Mae as Sallie Mae reasonably requests to resolve any questions or issues raised by the Borrower, the Guarantor or the Secretary concerning any Loans ECFC has purchased hereunder.

SECTION 14        REJECTION OF LOANS

Grounds for Rejections

ECFC may refuse to buy a Loan (or a Participation Interest in a Loan) under any one of four conditions:

(1)           the Loan does not meet the criteria for being an Eligible Loan in a material respect or is a Cancelled Loan;

(2)           a representation or warranty made with respect to a Loan is untrue in a material respect;

(3)the Loan was E-Signed using a process other than Sallie Mae’s E-Sign process, and there are reasonable grounds to question the sufficiency of such E-Sign process, the documentation for such E-Sign

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process, or the documentation for or enforceability of such E-Signed Loans; or

(4)           The Trustee or the School is in breach of any part of this Agreement in a material respect.

A Loan is still an Eligible Loan if it fails to meet eligibility criteria because of an act or omission, by Sallie Mae in originating or servicing the Loan for which Sallie Mae and/or ECFC is liable under Section 7.

Procedures for Return of Rejected Loans

ECFC’s and Sallie Mae’s only responsibility with respect to rejected Loans is to return them to the Trustee or the School, as requested.  Sallie Mae will return them following these steps:

Step 1

Sallie Mae will package the Loan documents;

Step 2

ECFC will re-endorse the note back to the Trustee, if necessary; and

Step 3

Sallie Mae will return the note and all related documents that it received by registered mail or overnight delivery service.

Neither Sallie Mae nor ECFC will be liable to the Trustee or the School for any losses incurred on rejected Loans except for losses arising from Sallie Mae’s or ECFC’s gross negligence or willful misconduct in the handling or safekeeping of the Loans.

SECTION 15        THE SCHOOL’S REPURCHASE OBLIGATION

Grounds for Repurchase

The School agrees to cause the Trustee, on behalf of the School, to repurchase (i) Loans that, in a material respect, are not Eligible Loans as of the date of sale no matter when the ineligibility is discovered, (ii) Loans that are Cancelled Loans at the time of sale or become Cancelled Loans after sale to ECFC, (iii) Loans (and/or Participation Interests) with respect to which ECFC has purchased a Participation Interest, and either (1) the

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Trustee fails to sell ECFC the Participation Interests in the subsequent disbursements, or (2) the Trustee fails to make the subsequent disbursements, and (iv) Loans that were E-Signed using any E-Sign process other than Sallie Mae’s if (a) the Trustee and the School fail to provide the information or documentation set forth in Attachment AA as and when requested or (b) there are reasonable grounds to question the sufficiency of such E-Sign process, the documentation for such E-Sign process, or the documentation for or enforceability of such E-Signed Loans.

In addition, if any of the foregoing circumstances exists with respect to a Loan prior to the date legal title to the Loan is conveyed, such circumstance shall entitle ECFC to require repurchase of the Participation Interest(s) in the affected Loan(s).

The only exception is if a Loan is not an Eligible Loan because of an act or omission that Sallie Mae made while originating or servicing the Loan for which Sallie Mae and/or ECFC is liable under Section 7.

In addition to the foregoing repurchase events, the Trustee and the School agree that the obligation to repurchase a Loan is automatic if one of the following events occurs as a result of any act, omission, or circumstance existing before ECFC owns the Loans (unless the event arises solely from an act or omission Sallie Mae made in originating or servicing the Loan for which Sallie Mae or ECFC is liable under Section 7), or as a result of any action or omission by the Trustee or the School after the sale:

•a claim for all or part of a guaranty payment is rejected by the Guarantor or the Secretary and Sallie Mae has failed, despite diligent efforts, to get the Guarantor or the Secretary to reverse that rejection;

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•              under the Act or Regulations, a claim may not be filed on the Loan;

•the information provided at the time of sale concerning the Borrower’s enrollment status or separation date was inaccurate or inconsistent with the Guarantor’s records in a material respect;

•the Borrower refuses to pay the Loan by claiming a legal defense (other than infancy) and a preponderance of the evidence indicates that the Loan is not legally enforceable; or

•any representation or warranty with respect to the Loan is inaccurate in a material respect.

The occurrence of such an event is conclusive proof of such repurchase obligation.

All repurchases will be made within thirty days following a request for such repurchase.

Repurchase Price

The repurchase price will be calculated as follows on the date of repurchase:

Repurchase Price =

Principal Balance that ECFC used in calculating the Purchase Price Payment Amount that ECFC paid for such Loans (or Participation Interests, as applicable), times the original Purchase Price Payment Amount percentage for such Loans (or Participation Interests, as applicable)

Minus

any payments of principal that ECFC received on such Loans

Plus

accrued interest owed by Borrowers on specific Loans as of the date of repurchase (including interest that was capitalized after ECFC bought such Loans or Participation Interests, as applicable)

Plus

amounts ECFC must pay the Secretary

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Plus

reasonable expenses ECFC incurred as a direct result of the repurchase

Plus

any Special Allowances or interest benefits ECFC would have received from the Secretary had any specific Loan been an Eligible Loan throughout the period ECFC owned it or a Participation Interest in such Loan.

Payment of the repurchase price to ECFC does not limit any other remedy ECFC may have or liability the Trustee or the School may have under this Agreement.

Neither Sallie Mae nor ECFC will be liable for any losses the Trustee or the School incurs on repurchased Loans except for losses arising from Sallie Mae’s or ECFC’s gross negligence or willful misconduct in the handling or safekeeping of the Loans.

Post-Sale Reconciliation When Loan Information is Incorrect

If ECFC learns that the actual Principal Balance of any Loan or Participation Interest that ECFC purchased hereunder differed from the Principal Balance that ECFC used to calculate the Purchase Price Payment Amount or any Disbursement Payment (even if ECFC learns of such fact after the sale), and if such difference was not already accounted for when ECFC paid the Purchase Price Payment Amount in any prior month, then the parties shall reconcile that difference.  In such event, either ECFC will pay the Trustee, or the School agrees to cause the Trustee to repay ECFC, as appropriate, an amount equal to the Purchase Price Payment Amount calculated solely on the amount by which such actual Principal Balance differed from the Principal Balance on which ECFC originally calculated the Purchase Price Payment Amount or the Disbursement Payment.  Similarly, if ECFC learns that the interest accrued on any Loan or Participation Interest that ECFC purchased hereunder differed from the accrued interest that ECFC used to calculate the Purchase Price Payment Amount (even if ECFC learns of such fact after the sale), then ECFC agrees to pay the Trustee, or the School agrees to cause the Trustee to repay ECFC, as

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appropriate, a sum equal to the amount by which such accrued interest differed from the accrued interest on which ECFC calculated the Purchase Price Payment Amount.  If the Trustee or the School owes funds to ECFC and the Borrower or the Trustee (or the School, in its capacity as a school) already repaid the amount of the deficiency in the Principal Balance, then ECFC will apply such repayment as a credit against the amount owed to ECFC For Cancelled Loans and Loans with respect to which the School returns any portion of a disbursement, even if ECFC has been repaid the full Principal Balance, the School still must cause the Trustee to pay ECFC the Disbursement Payment (if received by it) and the Purchase Price Payment Amount that ECFC paid for the portion of the Loan (or Participation Interest) that is cancelled or returned.

PART III - GENERAL PROVISIONS

SECTION 16        REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE AND THE SCHOOL

Representations Made by the Trustee

By signing this Agreement and with respect to each Loan sold to ECFC or serviced by Sallie Mae, the Trustee represents and warrants (as of the date hereof and as of the date of each sale of Loans) that the following statements are true:

The Trustee is a national banking association duly created under the National Banking Act, and is an eligible lender or other qualified holder of student loans under the Act and Regulations.

The Trustee is the sole owner of legal title to the Loans, free and clear of any liens, claims or encumbrances of any nature.

The Trustee has taken all legal and corporate action to permit it to enter into and perform all of the obligations in this Agreement, including the sale of Loans to ECFC and the repurchase of Loans.

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There is nothing in this Agreement that will violate any provision of law or any contract by which it is bound.

The Trustee does not discriminate on the basis of race, sex, color, creed or national origin. Further, the Trustee does not require the Borrower to maintain a bank account or other business relationship with it to qualify for the Loan, except that the Trustee may require an account or other business relationship if it is a credit union, savings and loan association, mutual savings bank, institution of higher education or a depository institution with less than $75 million in deposits.

Representations Made by the School

By signing this Agreement, the School represents and warrants that the following statements are true:

Walden University, Inc. is a for profit corporation duly created and in good standing under the laws of the State of Florida.

The School has taken all legal and corporate action to permit it to enter into and perform all of its obligations in this Agreement, including the sale of beneficial ownership of the Loans to ECFC and the repurchase of Loans.

There is nothing in this Agreement that will violate any provision of law or any contract by which it is bound.

The School does not discriminate on the basis of race, sex, color, creed or national origin.

Representations With Respect to the Loans and Participation Interests

The School agrees to make each of the representations and warranties in Attachment D for each Loan or Participation Interest sold to ECFC, each as of the date of sale.

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SECTION 17REPRESENTATIONS AND WARRANTIES OF THE SLM ENTITIES

Representations and Warranties of Sallie Mae

Sallie Mae represents and warrants that each of the following is true:

Sallie Mae is a corporation duly created and in good standing under the laws of the State of Delaware.

Sallie Mae has taken all legal and corporate action necessary to permit it to enter into and perform all of its obligations in this Agreement.

There is nothing in this Agreement that will violate any provision of law or any contract by which Sallie Mae is bound.

Representations and Warranties of ECFC

ECFC represents and warrants that each of the following is true:

ECFC is a corporation duly created and in good standing under the laws of the State of Delaware and is an eligible lender or other qualified holder of student loans under the Act and Regulations.

ECFC has taken all legal and corporate action necessary to permit it to enter into and perform all of its obligations in this Agreement.

There is nothing in this Agreement that will violate any provision of law or any contract by which ECFC is bound.

SECTION 18PAYMENT OF EXPENSES AND TAXES

Each party will pay its own expenses arising from or related to this Agreement unless the Agreement specifies otherwise.  The School agrees to pay any transfer or other taxes and any filing or recordation fees that are due upon the sale of Loans or Participation Interests.

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SECTION 19COMMUNICATIONS AND NOTICES

Each party will send all written communications, notices and other correspondence to each other party at the following addresses:

If to Sallie Mae, to:
Sallie Mae, Inc.
11100 USA Parkway
Fishers, IN  46037
Attention:	Senior Vice President
	Financial Institution Sales

with copies to:

Sallie Mae, Inc.

12061 Bluemont Way

Reston, VA  20190

Attention:   General Counsel

Sallie Mae, Inc.

12061 Bluemont Way

Reston, VA  20190

Attention:   Andrew G. Wachtel

If to ECFC, to:

20 Hemingway Drive

East Providence, RI  02915

Attention:   President

If to the School, to:

1001 Fleet Street

Baltimore, MD  21202

Attention:   Robert Zentz, General Counsel

If to the Trustee, to:

Wells Fargo Bank, National Association

(solely in its capacity as Eligible Lender

Trustee for Walden University, Inc.)

7077 Bonneval Road, Suite 400

Jacksonville, FL  32216

Notices to either Sallie Mae or ECFC must be sent to both such parties.  Any party can

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receive information somewhere else or have it received by someone else by notifying the other parties of the change of address in writing.  All parties agree that all communications will be deemed validly given if sent by registered mail, overnight delivery, or receipt-confirmed facsimile.

SECTION 20LEGISLATIVE CHANGES

If changes in the Act, Regulations, or other law make Loans ineligible or impose any new material adverse economic impact on Sallie Mae or ECFC, Sallie Mae may refuse to originate and/or service, and ECFC may refuse to purchase, such Loans under this Agreement, Each of such parties has the option to waive this right.

If changes in the Act, Regulations, or other law produce any material positive economic impact on us or impose any material adverse economic impact on the School, then, upon the School’s request, we both agree to negotiate in good faith a new Purchase Price.  In the event concurrence cannot be reached on a new Purchase Price, then upon giving us 60 days prior written notice, the School may terminate this Agreement subject to the effects of termination as set forth in Section 21.

SECTION 21TERMINATION

Methods of Termination

In addition to the method of termination of the “Commitment Period” as defined in Section 24 of this Agreement, this Agreement can be terminated in the following ways:

Together all parties can mutually agree in writing to terminate all or any part of this Agreement.

Sallie Mae will give the Trustee and the School 60 days’ written notice if either of such parties breaches any of its obligations in this Agreement.  If such breach is not cured in all material respects by the end of the 60 days, then Sallie Mae may terminate

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its origination and/or servicing responsibilities, and ECFC may terminate its purchase responsibilities, under this Agreement.

The Trustee or the School will give Sallie Mae or ECFC 60 days’ written notice if either of such parties breaches in any material respect any of its obligations in this Agreement.  If such breach is not cured in all material respects by the end of the 60 days, then the Trustee and the School may terminate their Loan sale obligations under this Agreement; provided, however, that in such event the Trustee and the School will remain obligated to sell to ECFC all Loans that Sallie Mae processed, originated, or serviced on their behalf, as well as all Loans in which ECFC had purchased a Participation Interest.  In the event of such termination, Sallie Mae will have no further obligation to originate or service Loans hereunder, and will have no obligation to make any further Advances under the Financing Agreement.

The Trustee and the School may terminate Sallie Mae’s origination services by giving Sallie Mae 60 days’ written notice. [Termination of origination services under Part I will not affect the rights and obligations of any party under the other parts of the Agreement.]

Sallie Mae may terminate its origination and/or servicing responsibilities, and ECFC may terminate its purchase responsibilities, under this Agreement immediately if an Insolvency Event occurs.

Sallie Mae may terminate its origination and/or servicing responsibilities, and ECFC may terminate its purchase responsibilities, under this Agreement upon 30 days’ written notice to the Trustee and the School if for any reason the Secretary alleges in writing (either formally or informally) (a) that Sallie Mae or ECFC should be re-characterized as the “lender” of the Loans or (b) that any

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of the following are in violation of the Act or Regulations (including, without limitation, the “prohibited inducements” guidelines issued by the Secretary): (i) Sallie Mae’s agreement to perform origination and servicing functions on behalf of the Trustee or the School, (ii) ECFC’s agreement to purchase Loans or Participation Interests under this Agreement, or (iii) all or any part of any other agreement, contract, indenture, or other instrument between or among the School, the Trustee, Sallie Mae and/or ECFC, or between the Trustee, the School, and one of Sallie Mae’s affiliates. If Sallie Mae terminates both the origination and the servicing functions, then ECFC will, within 30 days following the effective date of the termination, purchase all of the Eligible Loans that Sallie Mae originated or is servicing under this Agreement (in which case the Trustee and the School agree to sell such Loans at such time).  If Sallie Mae terminates only the origination services, then either (1) Sallie Mae will continue to service the Loans that Sallie Mae originated or is servicing hereunder until such Loans are purchased by ECFC under the normal sales schedule set forth in Section 9, or (2) ECFC will purchase all of the Eligible Loans that Sallie Mae has originated or is servicing under this Agreement within 30 days following the effective date of the termination of such origination services (in which case the Trustee and the School agree to sell such Loans at such time).  All sales pursuant to this paragraph will be subject to the remaining terms of this Agreement.

Unless previously terminated, and without any notice or action required, Sallie Mae’s obligation to accept delivery of Loans from you for servicing will terminate at the end of the Commitment Period. However, Sallie Mae will continue beyond such date to originate and disburse Loans on your behalf on the terms in this Agreement until either you or Sallie Mae provides the other with 60 days’ written notice of termination of such origination services.  Additionally, any

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Loans already serviced on Sallie Mae’s system as of the date of termination will continue to be serviced until they are removed from Sallie Mae’s system by the School or the Trustee or are sold to ECFC or rejected by ECFC.

Effect of Termination

Upon termination of all or any part of this Agreement, any fees or other amounts owed under this Agreement (or the part being terminated in the case of a partial termination) will become immediately due and payable.  Following termination (except in the case of termination by the Trustee or the School for cause), those parts of this Agreement that, by their terms, extend beyond the end of the Commitment Period (including, but not limited to, the obligation to sell and purchase certain Loans) shall remain in full force and effect; provided, however, that even in the case of termination by the Trustee or the School for cause, the Trustee and the School will remain obligated to sell to ECFC all Loans that Sallie Mae processed, originated, or serviced on their behalf, as well as all Loans in which ECFC had purchased a Participation Interest.

SECTION 22PRIVACY PROVISIONS

With respect to information that is “non-public personal information” (as defined in the GLB Regulations) that is disclosed or provided by the School (or on its behalf) to Sallie Mae in connection with this Agreement, Sallie Mae agrees, subject to the terms hereof and the limitations of liability set forth herein, that in performing its obligations under this Agreement it shall comply with all reuse, redisclosure, or other customer information handling, processing, security, and protection requirements that are specifically required of a non-affiliated third-party processor or servicer (or subcontractor) under the GLB Regulations and other applicable federal consumer privacy laws, rules, and regulations. Without limiting the foregoing, Sallie Mae agrees that:

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(i) Sallie Mae is prohibited from disclosing or using any “nonpublic personal information” (as defined in the GLB Regulations) disclosed or provided by the School or on the School’s behalf to Sallie Mae, except solely to carry out the purposes for which it was disclosed, including use under an exception contained in 12 CFR sections 40.14 or 40.15 or 16 CFR sections 313.14 or 313.15, as applicable, of the GLB Regulations in the ordinary course of business to carry out those purposes; and

(ii) Sallie Mae has implemented and will maintain an information security program designed to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information, Final Rule (12 CFR Part 30, Appendix B) and the Federal Trade Commission’s Standards for Safeguarding Customer Information (16 CFR Part 314).

SECTION 23OTHER PROVISIONS

Survival of Covenants

All covenants of this Agreement remain in effect during the servicing and after the sale andpurchase of Loans and Participation Interests in Loans, and any successor or assign of ECFC is entitled to rely on the covenants, agreements, representations and warranties the Trustee and the School have made in this Agreement.  The Trustee’s and the School’s obligation to repurchase Loans and Participation Interests, and their other obligations under Section 7, Section 9, Section 10, Section 13, Section 15, and Section 21, remain in effect before and after any termination of the Agreement in whole or part.

Assignment

Neither the Trustee nor the School may assign or transfer any of its rights or obligations under this Agreement to any other party without the prior written consent of Sallie Mae and ECFC, except as provided in this paragraph.  ECFC may assign its purchase

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rights and obligations only to one or more wholly-owned subsidiaries of its parent, SLM Corporation.  The School may assign or transfer its rights under this Agreement to a non-profit entity in compliance with the provisions and limitations of the Higher Education Act; provided, however, that following any such assignment, the School will remain liable for all obligations of the School that are set forth in this Agreement.

Entire Agreement

This document is the entire agreement among the Trustee, the School, ECFC, and Sallie Mae with respect to the origination, servicing, and purchase of Loans. Except as otherwise set forth herein, any previous agreements, documents or undertakings on the matters covered in this Agreement are invalid.  This Agreement may only be modified or amended by a written agreement signed by all parties, and, when it is, the Agreement as amended will become the operative Agreement.

Waiver

A written waiver is required for any party to waive a performance obligation of any other party.  The waiver of performance of an obligation shall waive that single performance but no future performances.

Governing Law

This Agreement is governed by and shall be construed in accordance with the laws of the Commonwealth of Virginia, without giving effect to any choice of law or conflict of law provisions or principles (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of any laws of any jurisdiction other than the Commonwealth of Virginia.

Performance Guarantee

At or prior to the full execution of this Agreement, Sallie Mae agrees to deliver to the School and the Trustee a Performance Guarantee in the form of Attachment G by which SLM Corporation guarantees the performance by Sallie Mae and ECFC of their respective obligations under this Agreement.

Covenant Regarding

The School agrees that without Sallie Mae’s written consent it will not, and will cause

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Consolidation Loans

the Trustee not to, endorse or promote in any manner any Consolidation Loan product offered by any person or entity.  Nothing in this Agreement, however, precludes the School from providing general information on Consolidation Loans to Borrowers, including information on the types of borrower benefits generally offered by lenders.  The School further agrees that in the event any Loan that is sold to ECFC hereunder is consolidated through any entity whose Consolidation Loan product is endorsed or promoted in any manner by the Trustee or the School or any entity that is either affiliated with the Trustee or the School or that shares a name with the School (such as an alumni association), the School shall promptly repay to ECFC the following:

(1)the total of the Purchase Price Payment Amounts paid by ECFC with respect to such Loan, after adding to such amounts the items listed in clauses (i), (ii), and (iii) of the definition of “Purchase Price Payment Amount” that were previously subtracted, minus

(2)the original Principal Balance of such Loan.

Exclusivity

The School agrees that during the Commitment Period, unless this Agreement is terminated, the School will not make loans as a lender under the FFELP, and all loans made under the Act by any trust arrangement in which the School or any entity related to the School (such as through personnel, directors, trustees, ownership, or through benefiting from such structure) is beneficial owner will be covered by (and will be sold to ECFC pursuant to) the terms of this Agreement.

SECTION 24DEFINITIONS

Account

means all Loans of one Borrower of the same Loan type. Unsubsidized Stafford Loans and subsidized Stafford Loans are considered to be Loans of the same type.

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Act

refers to Title IV, Part B of The Higher Education Act of 1965, as amended.

Agreement

refers to this ExportSS Agreement including attachments and amendments.

Bill of Sale

means a bill of sale substantially in the form of Attachment C to this Agreement.

Borrower

means the obligor on a Loan.

Cancelled Loan

means a Loan for which either (1) the check for the first disbursement is not presented for payment within 120 days, or (2) the first disbursement has been repaid in full within 120 days, or (3) the proceeds of the first disbursement are not released to the Borrower on or before one hundred twenty (120) days after disbursement.

Commitment Period

means the period of time between the effective date and June 30, 2008 (or such earlier date on which this agreement is terminated pursuant to section 21) (the “Initial Term”). Unless the School or the Trustee notifies Sallie Mae, or Sallie Mae notifies the School or Trustee, at least 60 days before the end of the Initial Term hereunder (or the extended term, if applicable), then the Commitment Period shall automatically renew for each of no more than four (4) successive one (l) year terms, unless the School or Trustee notifies Sallie Mae, or Sallie Mae notifies the School or Trustee, of its intention not to renew at least 60 days before the end of each successive one year term.

Cutoff Date

means the date of the Bill of Sale for all Loans that are not in repayment status.  For Loans in repayment status, the Cutoff Date is established by Sallie Mae or ECFC.

Disbursement Agent

means the Guarantor or other entity that is to perform some part of the origination or disbursement process.

Disbursement Payment

means with respect to each disbursement of Eligible Loans, an amount equal to 100% of

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the aggregate Principal Balance that is actually disbursed to the Borrower.  This sum is calculated as of the date of purchase of a Participation Interest.

E-Sign or E-Signed

means the process by which a Loan is signed by the Borrower electronically.

Effective Date

means the date written at the top of the cover page of this Agreement.

EFT

means electronic funds transfer.

Eligible Loan

means, unless waived in writing by ECFC, a Loan that meets the criteria listed below. Note that a loan is still an Eligible Loan if it fails to meet these criteria solely because of an act or omission by Sallie Mae in originating or servicing the Loan for which Sallie Mae is liable under Section 7.

The Loan is a fully disbursed Stafford Loan made in connection with graduate or professional school educational studies at Walden University, Inc.  It is guaranteed by the Guarantor and, unless waived in writing by ECFC, is reinsured by the Secretary on terms at least as favorable as those in effect on the Effective Date.

Except as reduced by Sallie Mae’s proprietary Borrower benefits, the Loan bears the maximum interest race permitted by the Act and the interest is either:

(1)payable on a current basis by the Secretary or the Borrower, or

(2)deferred subject to capitalization as frequently as permitted by the Act and Regulations.

The Loan must also meet these additional criteria (unless specifically waived in writing by ECFC):

•it is not more than 11 days delinquent (principal or interest) and, unless it is a Serial Loan, has a Principal

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Balance of at least $250 as of the Cutoff Date;

•it is in grace, deferment or in-school status as of the date of the Bill of Sale (except as otherwise set forth in the definition of Retroactive Separation Loan);

•unless ECFC waives this provision, at least 30 days remain until the beginning of the repayment period (except as otherwise set forth in the definition of Retroactive Separation Loan);

•it is supported by all documentation, and in a format, reasonably required by Sallie Mae or ECFC;

•it is made to an eligible Borrower for Loans of that type under the Act; and

•no forbearance agreement is in effect with respect to the Loan and at least 12 months remain until the Loan is scheduled to be paid in full.

Finally, unless (i) waived in writing by ECFC or (ii) reduced by Sallie Mae’s proprietary Borrower benefits, the sum of (1) the interest payable by the Secretary or the Borrower, plus (2) the Special Allowance payable by the Secretary, must be at least equal to the maximum sum of the same items that is permitted by Sections 427A(j), 427A(k), 438(b) (2) (G), 438 (b) (2) (H), and 438(b) (2) (I) of the Act (or, if higher, the maximum sum of these items that was permitted by the Act as in effect on the disbursement date for a Loan of the same Loan type that was disbursed on the disbursement date).

Financing Agreement

means that certain Revolving Financing Agreement among Sallie Mae, the Trustee, and the School dated the Effective Date.

GLB Regulations

means the Joint Banking Agencies’ Privacy of Consumer Financial Information, Final Rule

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(12 CFR Parts 40, 216, 332 and 573) or the Federal Trade Commission’s Privacy of Consumer Financial Information, Final Rule (16 CFR Part 313), as applicable, implementing Title V of the Gramm-Leach-Bliley Act, Public Law 106-102, as amended.

Guarantor

means a state or private non-profit agency responsible for providing the guarantee for Loans that is reasonably acceptable to ECFC.

Insolvency Event

means any of the following:

If the Trustee or the School becomes financially insolvent no matter how the insolvency is evidenced.

If a petition is filed under Title 11 of the U.S. Code (or any similar law) by or against the Trustee or the School.

If a court or agency with the authority appoints a trustee, receiver, conservator or the like for the Trustee or the School.

Institutional Default Rate

means the most recently published default rate calculated by the Department of Education for a given educational institution.

LARS Form 799

means the Lender’s Request for Payment of Interest and Special Allowance, formerly OE Form 799.

Loan

means a student loan made under the Act (and related documents) that is to be originated, serviced or offered for sale under this Agreement.

Master List

means the updated list maintained by Sallie Mae, which will be available for inspection by the Trustee and the School and will be deemed an exhibit to the Master Participation Certificate, of disbursements and Loans with respect to which ECFC has purchased a Participation Interest.

Master Participation

means the Master Participation Certificate to be executed hereunder evidencing the

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Certificate

conveyance to ECFC of the Participation Interests, in the form of Attachment F to this Agreement.

Master Promissory Note

means a form promissory note that allows Borrowers to receive, in addition to initial loans, additional loans for the same or subsequent periods of enrollment.

Participated Loan

means each Loan with respect to which ECFC purchases a Participation Interest in a disbursement thereof.

Participation Interest

means, with respect to each Loan, the 100.00% participation interest in each disbursement of such Loan that is to be purchased by ECFC pursuant to the terms of this Agreement.

Prime Rate

means for each business day, the rate displayed on Telerate page 125 (or successor page) as the Prime Rate for such day.  If for any business day no such rate is displayed on Telerate, the Prime Rate will be the highest rate listed as the Prime Rate in the “Money Rates” section of the Eastern Edition of The Wall Street Journal published on such date, or if no longer published or not listed in such publication, such substitute source that Sallie Mae chooses.  The Prime Rate for any day that is not a business day will be the Prime Rate as determined above on the immediately preceding business day.

Principal Balance

means the original principal amount of a Loan, plus any capitalized interest that is insured by the Guarantor, less principal payments received and amounts that may not be insured such as late charges.

Purchase Price Payment Amount

means an amount equal to the following, calculated using only the amounts of the disbursements made in the month for which the Purchase Price Payment Amount is being calculated:

For Stafford Loans, 107.00% of the aggregate Principal Balance of such Stafford Loans, minus (i) the Secretary’s Lender Fee, minus (ii) any portion of the origination fee

46

that is chargeable to the Borrower by a lender under section 438(c) of the Act (and any similar provision of the Act that is hereafter enacted) but that is waived by the Trustee or the School, minus (iii) any other fee that is charged to the lender by the Secretary on LARS Form 799.

ECFC hereby commits to pay the 1% federal default fee that is payable under section 428(b)(1)(H)(ii) and section 428H(h) of the Act for all Eligible Loans made hereunder that are guaranteed during the first year of the Commitment Period (and that are guaranteed during subsequent years of the Commitment Period, unless ECFC gives notice pursuant to the next sentence) by a Guarantor that satisfies both of the following: (i) the Guarantor does not pay the fee itself, and (ii) ECFC or its affiliate pays such fee for Stafford loans made by Sallie Mae-owned brands that are guaranteed by such Guarantor. Notwithstanding any other provision of this Agreement, if, by March 31 of any year of the Commitment Period, ECFC notifies the School or Trustee that ECFC (1) will not pay such fee as part of the terms offered to customers obtaining Stafford loans made by Sallie Mae-owned brands that are guaranteed during the succeeding July 1-June 30 year(s) of the Commitment Period, and (2) will not pay such fee for Eligible Loans made hereunder that are guaranteed during such succeeding July 1-June 30 year(s) of the Commitment Period, then, solely for purposes of Eligible Loans made hereunder that are guaranteed during such, succeeding July 1-June 30 year(s), Purchase Price Payment Amount shall have the meaning set forth in the preceding paragraph, except that “107.80%” shall be substituted for “107%”.

Purchaser

means SLM Education Credit Finance Corporation or such other subsidiary of SLM Corporation as may be designated in writing by ECFC.

Regulation

means any rule, regulation, instruction or procedure issued by the Secretary under the

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Act or by the Guarantor.

Retroactive Separation Loan

refers to an Eligible Loan that is in repayment status because the Borrower has left school prior to the anticipated date.  A Retroactive Separation Loan is an Eligible Loan only if (i) within fourteen (14) days after the School or the Trustee receives the notice that the Borrower is no longer a full-time student, ECFC is notified of the receipt of the notice and that the sale of the Loan is requested, and (ii) that Loan is delivered to ECFC within thirty (30) days after receipt of the notice -

Secretary

means the United States Secretary of Education, or any successor, or any representative of the foregoing.

Secretary's Lender Fee

means the amount that the Secretary is authorized to withhold (with respect to each disbursement of a Loan) from the Trustee’s or the School’s interest payments pursuant to the provisions of Section 438(d) of the Act (and any similar provision of the Act that is hereafter enacted).  The parties acknowledge that as of the date of this Agreement, this authorized deduction is equal to 0.50% of the Principal Balance of each such Loan.

Serial Loan

means an additional Eligible Loan made to the same Borrower who has a Loan of the same type already owned by or required to be sold by the Trustee to ECFC or any of its affiliates, subsidiaries, or predecessors.  Unsubsidized and subsidized Stafford loans are considered to be the same Loan type.

Special Allowance

means the amount the Secretary pays the holder of a Loan as authorized and calculated under Section 438 of the Act.

Stafford Loan

means:

(A) a Loan for which the interest rate is governed by Section 427A(a), Section 427A(d), Section 427A(e), Section 427A(f), Section 427A(g), Section 427A(j) (1), Section 427A(j) (2), Section 427A(k) (l), or Section

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427A(k) (2) of the Act.  The Loans described in this paragraph (A) are referred to as “subsidized Stafford Loans.”

(B) A Stafford Loan made under Section 428H of the Act bearing an interest rate governed by the sections of the Act listed in (A) immediately above.  These Loans are referred to as “Unsubsidized Stafford Loans.”

Total Loans First Disbursed

means the total number of Loans that Sallie Mae originated for the Trustee or the School for which the first disbursements were made during the applicable period.

Trust Agreement

means that certain Eligible Lender Trust Agreement dated as of July 1, 2006, between the School and the Trustee, or any replacement, extension, or renewal thereof, as amended from time to time, that among other things, establishes or evidences the eligible lender trustee relationship between the Trustee, the legal title holder of Loans, and the School, the beneficial owner of the Loans.

Trust Estate

means the entire portfolio of student loans and all other properties and assets held in trust by the Trustee under the terms of the Trust Agreement.

SECTION 25Trustee Provisions

Trustee Provisions

The SLM Entities acknowledge that Wells Fargo Bank, National Association, has entered into this Agreement solely in its capacity as Trustee for the School, and not in its individual capacity. The representations, warranties, and covenants of the Trustee herein or in connection with sales of Loans to be made hereunder (other than any representations, warranties, and covenants relating to the Trustee’s creation, existence, eligible lender status, corporate action, no-cross defaults, and nondiscrimination) are made solely at the direction of the School, without independent investigation by the Trustee, and the Trustee has undertaken only those duties required of

49

it under the Trust Agreement.  Accordingly, except with respect to representations, warranties, and covenants relating to the Trustee’s creation, existence, eligible lender status, corporate action, no-cross defaults, and nondiscrimination, all recourse and remedies ECFC may have hereunder shall be available only against the School and the assets of the Trust Estate, and not against the Trustee in its individual capacity.

EXECUTION OF THIS AGREEMENT

By signing below, the authorized representatives of Sallie Mae, ECFC, the Trustee, and the School accept this Agreement as a legal contract as of the Effective Date on page 1.

WALDEN UNIVERSITY, INC.

SIGNATURE:		/s/ Richard Patro
PRINTED NAME:			Richard Patro
TITLE:	CFO

WELLS FARGO BANK, NATIONAL ASSOCIATION,

solely in its capacity as Eligible Lender Trustee for Walden University, Inc.

SIGNATURE:

PRINTED NAME:

TITLE:

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SALLIE MAE, INC.

SIGNATURE:		/s/ Jerry Maher
PRINTED NAME:			Jerry Maher
TITLE:	Senior Vice President

SLM EDUCATION CREDIT FINANCE CORPORATION

By:  Sallie Mae, Inc., Authorized Agent

SIGNATURE:		/s/ Jerry Maher
PRINTED NAME:			Jerry Maher
TITLE:	Senior Vice President

51

ATTACHMENT AA

Sallie Mae Documentation Requirements for
Loans Executed By E-Sign Processes

The following is required of any lender delivering to SLM Corporation or any of its subsidiaries or affiliates (“Sallie Mae”), whether for disbursement, servicing, or purchase, Loans that were E-Signed using any E-Sign process, unless the Loans were originated and disbursed by Sallie Mae using Sallie Mae’s proprietary E-Sign process.

1.List of E-Signed Loans – the lender must identify which Loans were executed electronically. If Loans were originated using more than one E-Sign process, the lender must identify which Loans were executed using each process. The lender should contact Sallie Mae for assistance in revising transmittal forms and/or file formats in an acceptable manner.

2.Copy of Promissory Note – the lender must produce (or cause the entity whose E-Sign process was utilized to execute the promissory note to produce) a copy of the note at any time free of charge upon reasonable request of the Borrower or holder, whether before or after sale, and regardless of how much time has elapsed following the sale.

3.Process Documentation – the lender must provide documentation on for each unique E-Sign process used to execute Loans in the portfolio. If the lender, or its origination servicer, used more than one process, or if the process has been modified since the oldest E-Signed Loan in the portfolio was executed, then each process must be documented. Process documentation must contain the following, in addition to any other materials reasonably requested by the Borrower or the holder:

(i)A description of the steps followed by a borrower to execute the promissory note (such as a flowchart);

(ii)A copy of each screen as it would have appeared to the borrower when he/she was presented with the terms and conditions of the Loan and consented to execute the note electronically;

(iii)A description of the field edits and other security measures used to ensure integrity of the data submitted to the originator electronically; and

(iv)A description of how the executed promissory note has been preserved to ensure that it has not been altered after it was executed.

(v)All other documentary and technical evidence reasonably requested by the Borrower, the purchaser, or the holder to support the validity of the E-Sign process used by the Borrower, or the authenticity of a particular electronic signature or record, including without limitation, if requested, affidavits and/or witness testimony to support the electronic records.

If the lender has used more than one process, each process document must identify which Loans were executed by which process.   If the lender has provided process documentation in connection with a prior sale or transfer, reference to the prior documentation is sufficient.

The lender must produce (or cause the entity whose E-Sign process was utilized to execute the promissory note to produce) the foregoing materials and documentation at any time free of charge upon reasonable request of the Borrower, purchaser, or holder, whether before or after sale, and regardless of how much time has elapsed following the sale. Failure to provide the materials and/or documentation in a form satisfactory to the applicable Guarantor and satisfactory to the Secretary, and otherwise sufficient to prove the enforceability of the Loan(s), may lead to rejection of the Loan(s) or required repurchase of the Loan(s) pursuant to the provisions of this Agreement.

ATTACHMENT A

SCHEDULE OF FEES

1.             Origination Fee: $ 5.00 for each Stafford Loan Sallie Mae originates for the Trustee. For Loans originated through Sallie Mae’s Internet-based origination and disbursement service (in lieu of the foregoing fees): $ 5.00 for each Stafford Loan Sallie Mae originates for the Trustee.  Sallie Mae will also charge an additional $2.00 per application for paper application processing.  These fees are payable even if the Loan is cancelled.  In calculating these fees, a subsidized Stafford Loan and an Unsubsidized Stafford Loan will be counted as a single Loan only if they are received in a single loan file.

2.Servicing Fee:  $0.00 per Stafford Account per month starting on the date of the first disbursement (or conversion to Sallie Mae’s servicing system).  Sallie Mae will charge an additional fee of $0.20 per Account per month for any Account containing one or more Unsubsidized Stafford Loans.

3.Deconversion Fee:  $ 25.00 for each Loan the Trustee or the School removes from Sallie Mae’s servicing system.  The Deconversion Fee must be paid before the Loan may be removed from Sallie Mae’s servicing system.  Subsidized Stafford Loans and Unsubsidized Stafford Loans will be counted as two Loans in calculating the Deconversion Fee.

OFFICER’S CERTIFICATE OF TRUSTEE

Re:ExportSS Agreement dated July 1, 2006, among Wells Fargo Bank, National Association, solely in its capacity as Eligible Lender Trustee for Walden University, Inc., Walden University, Inc., Seller, Sallie Mae, Inc., and SLM Education Credit Finance Corporation.

I, of Wells Fargo Bank, National Association, solely in capacity as Eligible Lender Trustee for Walden University, Inc. (the “Trustee”), hereby certify to Sallie Mae, Inc. (Sallie Mae”), and SLM Education Credit Finance Corporation (“ECFC”) that:

ONE OF THE OFFICERS LISTED IN THIS SECTION HAS SIGNED THE AGREEMENT AND THE PERSON(S) NAMED BELOW ARE, AS OF THE DATE OF THIS CERTIFICATE, THE REPRESENTATIVES OF THE TRUSTEE DULY AUTHORIZED TO EXECUTE AGREEMENTS REGARDING THE ORIGINATION, SERVICING, AND SALE OF STUDENT LOANS, HOLD THE CORPORATE OFFICES INDICATED NEXT TO THEIR NAMES, THE SIGNATURES FOLLOWING THEIR NAMES ARE THEIR GENUINE SIGNATURES, AND ONE OF THEM HAS DULY EXECUTED THE AGREEMENT:

NAME	TITLE	SIGNATURE
TRICIA HEINTZ	VICE PRESIDENT	/s/ Tricia Heintz
GEORGE W. BEMISTER	VICE PRESIDENT	/s/ George W. Bemister

By:	/s/ Andrew La Fear
	(An officer who did not sign the Agreement and is not listed in the box above)
Name:				ANDREW La FEAR
Title:			VICE PRESIDENT
Date:		7/1/06

OFFICER’S CERTIFICATE OF SCHOOL

Re:ExportSS Agreement dated July 1, 2006, among Walls Fargo Bank, National Association, solely in its capacity as Eligible Lender Trustee for Walden University, Inc., Waldan University, Inc., Seller, Sallie Mae, Inc., and SLM Education Credit Finance Corporation.

I, of Walden University, Inc. (the “School”), hereby certify to Sallie Mae, Inc. (“Sallie Mae”), and SLM Education Credit Finance Corporation (“ECFC”) that:

ONE OF THE OFFICERS LISTED IN THIS SECTION HAS SIGNED THE AGREEMENT AND THE PERSON(S) NAMED BELOW ARE, AS OF THE DATE OF THIS CERTIFICATE, THE REPRESENTATIVES OF THE SCHOOL DULY AUTHORIZED TO EXECUTE AGREEMENTS REGARDING THE ORIGINATION, SERVICING, AND SALE OF STUDENT LOANS, HOLD THE CORPORATE OFFICES INDICATED NEXT TO THEIR NAMES, THE SIGNATURES FOLLOWING THEIR NAMES ARE THEIR GENUINE SIGNATURES, AND ONE OF THEM HAS DULY EXECUTED THE AGREEMENT:

NAME	TITLE	SIGNATURE
Paula R. Singer	Chairman and Chief Executive Officer	/s/ Paula R. Singer
Richard J. Patro	VP -  Finance/Treasurer	/s/ Richard J. Patro

By:	/s/ Deborah L. Zimic
	(An officer who did not sign the Agreement and is not listed in the box above)
Name:				Deborah L. Zimic
Title:			Secretary
Date:		6/30/06

ATTACHMENT C

BILL OF SALE

Re:ExportSS® Agreement dated July 1, 2006 (the “Agreement”)

The undersigned Seller sells and assigns to SLM Education Credit Finance Corporation (“ECFC”) and its successors and assigns all of Seller’s rights, title, and insurance interest in the portfolio of Loans described below as being accepted for purchase by ECFC, as listed on the attached schedule. This sale is for value received and is in accordance with the terms and conditions of the Agreement.

The Seller makes (for the benefit of ECFC) the representations and warranties set forth in the Agreement as of the date of this Bill of Sale.  The Seller authorizes ECFC to use a copy of this document as the only official notification to the Guarantor of assignment of the Loans to ECFC on the date of purchase.

If any of the Loans were made under a master promissory note, this sale excludes an assignment of Seller’s right to offer future loans under such Master Promissory Note. This right to offer future loans is not assignable by Seller except to (i) the surviving entity following a merger or acquisition of Seller or (ii) the purchaser of any such future loans (but ECFC does not waive any obligation of the Seller to sell Loans under the Agreement).  Seller warrants that if it does not deliver the original Master Promissory Note to ECFC at the time of sale, Seller will deliver it to ECFC to the extent it is needed for enforcement or claim-filing purposes.

Portfolio offered for sale by Seller:

Accounts   *Principal $

Portfolio accepted for purchase by ECFC:

Accounts  *Principal $

SELLER		ECFC
Wells Fargo Bank, National Association, solely in its capacity as eligible lender trustee for Walden University, Inc.		SLM Education Credit Finance Corporation c/o Sallie Mae, Inc. 12061 Bluemont Way
		Reston, VA 20190
By:		ATTN: Customer Service Department
	Signature of Authorized Representative of Trustee
		By:		Sallie Mae, Inc., Authorized Agent
NAME
AND		By:
TITLE:			Signature of Authorized Signatory
The undersigned, as beneficiary under the Trust Agreement dated as of               20    , between, the undersigned and the above Trustee, joins in this Bill of Sale for the purpose of consenting to the sale of the Loans to ECFC.		NAME AND
		TITLE:
		DATE OF PURCHASE:
WALDEN UNIVERSITY, INC.
By:
Name:
Title:

NOTE: Boxed areas are for completion by ECFC

*Based on estimated calculations, which may be adjusted upward or downward based on final reconciliations

ATTACHMENT D

REPRESENTATIONS AND WARRANTIES OF THE SCHOOL WITH RESPECT TO LOANS

The School states that the following statements are true with respect to each Loan sold hereunder to ECFC or its designee (“Purchaser”).  However, if any representation or warranty made herein is untrue due to an act or omission by Sallie Mae in originating or servicing the Loan for which Sallie Mae is liable under Section 7 of this Agreement, the School will not be deemed in breach of such representation and warranty with respect to such Loan. The warranties are:

1.The Trustee is the sole owner of legal title to the Loans, and the School is the sole owner of beneficial title to the Loans, free and clear of any liens, claims or encumbrances of any nature; and such parties are free to transfer, and have transferred, title to the Loans to the Purchaser.

2.The Loans are Eligible Loans that have been originated, including payment of all applicable origination fees, and serviced in accordance with all applicable laws and Regulations.  All information provided to the Purchaser concerning the Loans is true.

3.The Loans are legal, valid and binding obligations of the respective Borrowers and are subject to no defenses (except the defense of infancy). Except for Sallie Mae’s service-marked Borrower benefit programs, the Trustee or the School either has already paid for, or will provide funds to the Purchaser to pay for, all rebates or other Borrower benefits that were promised to the Borrowers.

4.Any origination or servicing activities with respect to the Loans by any party other than Sallie Mae have been done with due diligence and in accordance with the Act and Regulations.

5.The Loans are registered with the Guarantor under the ownership number the Trustee has provided to the Purchaser, the Loans are fully insured by the Guarantor, and the Trustee has transferred the insurance on the Loans to the Purchaser.  All insurance premiums due the Guarantor have been paid.

6.Any payments received by the Trustee or the School on the Loans have been allocated to principal and interest on a simple interest basis.

7.All Loans of each Borrower subject to sale at this time are being offered for sale as part of the same transaction.

8.The Trustee has not selected the Loans on the basis of any identifying characteristics of the Borrowers, such as educational institutions attended, age, sex, race, creed, national origin or place of residence.

9.If a Loan was not originated by or on behalf of the Trustee, the Trustee is a legitimate “holder” of the Loan and the Loan was transferred to the Trustee in full compliance with the Act and Regulations.

10.If the sale of any Loan made under a Master Promissory Note includes an assignment of the right to offer future loans under such Master Promissory Note, (i) the Trustee has not assigned and will not assign such right to any other party, and (ii) the Borrower has not revoked the Trustee’s right to make future loans under such Master Promissory Note.  If neither the Trustee nor the School delivers the original Master Promissory Note to the Purchaser, the Trustee or the School will deliver it to the Purchaser to the extent it is needed for enforcement or claim-filing purposes.

ATTACHMENT E-l

BLANKET ENDORSEMENT

By signing this endorsement, the undersigned endorses the attached Promissory Note.  This note is one of the Promissory Notes described in the Bill of Sale executed in favor of SLM Education Credit Finance Corporation (“ECFC”). If the Promissory Note is a Master Promissory Note, the undersigned endorses such Master Promissory Note only to the extent it evidences particular loans that are described in such Bill of Sale.  Except as stated in the previous sentence, or as provided in the ExportSS® Agreement dated July 1, 2006 among the Trustee, Walden University, Inc., Sallie Mae, Inc., and ECFC, this is an unrestricted endorsement and without recourse.

This endorsement may be effected by attaching either this endorsement or a facsimile to each of the Notes.

Trustee:

By:

Name:

Title:

ATTACHMENT E-2

POWER OF ATTORNEY

                                                                                                                        , solely in its capacity as eligible lender trustee for Walden University, Inc. (“Trustee”) authorizes SLM Education Credit Finance Corporation (“ECFC”) or                                                                                                       (“Servicer”), as its attorney-in-fact, to endorse Promissory Notes sold under the ExportSS® Agreement among the Trustee, Walden University, Inc. (“School”), Sallie Mae, Inc., and ECFC dated                                              , 20    , in the following form:

All right, title and interest of                                                                                                                                           , solely in its capacity as eligible lender trustee for Walden University, Inc. (“Trustee”) is assigned to SLM Education Credit Finance Corporation (“ECFC”) without recourse except as provided in the ExportSS® Agreement among the Trustee, Walden University, Inc. (“School”), Sallie Mae, Inc., and ECFC dated July l, 2006.  If the Promissory Note is a Master Promissory Note, this endorsement is valid only to the extent it evidences particular loans that are described in a Bill of Sale from the Trustee and the School to ECFC.

By:
	On behalf of and as attorney-in-fact for
	the Trustee

Further, the endorsement by ECFC or the Servicer on behalf of and as attorney-in-fact for the Trustee shall transfer to ECFC all right, title and interest of the Trustee in the Promissory Notes (subject to the above limitation if the notes are Master Promissory Notes) consistent with the terms of the ExportSS® Agreement dated                  , 20    .

For purpose of endorsement of these Promissory Notes, a facsimile of this authorization may be used in place of the original.

Dated                        , 20    .

Trustee:

By:

Name:

Title:

MASTER PARTICIPATION CERTIFICATE

Date:  July 1, 2006

This Participation Certificate evidences the sale by Wells Fargo Bank, National Association, solely in its capacity as Eligible Lender Trustee for Walden University, Inc., (“Trustee”) and Walden University, Inc. (“School”) to SLM Education Credit Finance Corporation of Participation Interests in each disbursement of a Participated Loan, all as identified in the Master List maintained by Sallie Mae, Inc. (“Sallie Mae”), pursuant to the ExportSS® Agreement dated as of July 1, 2006, among Sallie Mae, SLM Education Credit Finance Corporation, the Trustee, and the School (the “ExportSS Agreement”).  Capitalized terms used but not defined herein have the respective meanings assigned to such terms in the ExportSS Agreement.

The Participation Interests evidenced hereby are subject to the provisions of the ExportSS Agreement.

WELLS FARGO BANK, NATIONAL ASSOCIATION, solely in its capacity as eligible lender trustee for Walden University, Inc.
By:	/s/ Tricia Heintz
Name:					TRICIA HEINTZ
Title:			VICE PRESIDENT
WALDEN UNIVERSITY, INC.
By:	/s/ Richard Patro
Name:				RICHARD PATRO
Title:		CFO

PERFORMANCE GUARANTEE

THIS PERFORMANCE GUARANTEE is given and delivered by SLM Corporation, a Delaware corporation (“Parent”) to Walden University, Inc. and Wells Fargo Bank, National Association (together, “Lender”), relating to that certain ExportSS® Agreement dated as of July 1, 2006 (the “Agreement”), by and among Sallie Mae, Inc. (“Sallie Mae”), SLM Education Credit Finance Corporation (“ECFC”), and Lender.

WITNESSETH

That in order to induce Lender to accept (i) ECFC as the contract party under the Agreement for purchases of Loans (as defined in the Agreement), and (ii) Sallie Mae as the contract party under the Agreement for originations, servicing, and all other obligations under the Agreement of the SLM Entities (as defined in the Agreement), it is hereby agreed as follows:

1.Parent, for itself, its successors and assigns, hereby guarantees to Lender, its successors and assigns, the full and faithful performance by ECFC and Sallie Mae and their successors and assigns, of each and every one of the terms, provisions, conditions, obligations, and agreements on the part of ECFC and Sallie Mae to be made, carried out, performed or observed as provided in the Agreement;

2.If, at any time, ECFC or Sallie Mae defaults in the performance of any of the terms, provisions, conditions, obligations, and agreements or in any other matter or thing pertaining to the Agreement, that are to be made, carried out, performed, or observed by ECFC or Sallie Mae, their successors or assigns, Parent will perform, or cause to be so performed, any such terms, provisions, conditions, obligations, and agreements contained in the Agreement;

3.Parent covenants and agrees with Lender, its successors and assigns, that Lender and ECFC or Sallie Mae, as the case may be, may: (i) waive any of the terms, provisions, conditions, obligations and agreements of the Agreement; (ii) modify, amend, or change the Agreement; and (iii) grant extensions of time to ECFC and/or Sallie Mae and their successors and assigns. Such changes or extensions of time may be granted, such waiver and consents may be given, and such modifications and assignments may be made, without notice to or the consent of Parent and without affecting, changing, releasing, or in any way impairing the obligations of the Guarantee hereby given;

4.Parent may be released from this Guarantee only by a written instrument signed by an authorized official of Lender. Parent further covenants and agrees with Lender and its successors and assigns that this Guarantee remains in full force and effect notwithstanding the sale or transfer of ECFC or Sallie Mae. A release from the Guarantee shall be granted to Parent by Lender only upon the approval by Lender of a new Guarantee executed by the corporate entity assuming the relationship of Parent to ECFC or Sallie Mae, as the case may be.

IN WITNESS WHEREOF, Parent(s) has executed this guarantee this 1st day of July, 2006.

SLM CORPORATION
By:	/s/ Jerry Maher
Name:			Jerry Maher
Title:		Senior Vice President

EX-31.(I).01

Exhibit 31.(i).01

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Douglas L. Becker, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Laureate Education, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d — 15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 4, 2006	/s/ Douglas L. Becker
	Douglas L. Becker
	Director, Chairman of the Board and
	Chief Executive Officer

EX-31.(I).02

Exhibit 31.(i).02

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Rosemarie Mecca, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Laureate Education, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d — 15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 4, 2006	/s/ Rosemarie Mecca
	Rosemarie Mecca
	Executive Vice President and
	Chief Financial Officer

EX-32.01

Exhibit 32.01

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Douglas L. Becker, Chairman and Chief Executive Officer (principal executive officer) of Laureate Education, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2006 of the Registrant (the “Report”):

(1)       The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Douglas L. Becker
Name:	Douglas L. Becker
Date:	August 4, 2006

EX-32.02

Exhibit 32.02

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, Rosemarie Mecca, Chief Financial Officer (principal financial officer) of Laureate Education, Inc. (the “Registrant”), certify that to the best of my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 30, 2006 of the Registrant (the “Report”):

(1)       The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Rosemarie Mecca
Name:	Rosemarie Mecca
Date:	August 4, 2006